The last three years have been turbulent, and I could point to numerous events thathave been unprecedented: a global pandemic, record-high inflation, geopolitical events and rising interest rates—all of these macroeconomic issues we have had to navigate. Yet, even with these headwinds, 2022 was another record year of investment activity for us. In addition, we solidified Peachtree's foundation for our next growth phase and continued to expand our investment offerings. I feel confident in saying we are meeting the moment.

Another macroeconomic issue is looming, and that is the prospect of a recession. It is worth noting that no two are alike, and if a downturn does occur, I believe it will be shallow and short-lived.

As a member of the Real Estate Roundtable, which includes executives from the toppublicly held and privately owned real estate ownership, development, lending and management firms in the U.S., we were recently asked about current market conditions and the future outlook in real estate. The consensus among these executives is that while uncertainty remains, there is optimism about future market conditions.

Of note from the survey: "This is not like the Global Financial Crisis of 2008 for a couple of reasons. First, more firms are not overleveraged. Second, firms still have capital to invest; there's just a higher threshold required to invest than in the past few years."

Further, the group also expressed that perceptions and outlooks differ across asset classes, as some sectors remain strong and others show concerns. While any recession has the potential to reduce demand, each sector has its own dynamics.I have sung the praises of hospitality in previous letters and will continue to do so inthis one. The industry's fundamentals remain strong, and the long-term growth trends will outweigh near-term macroeconomic headwinds. The acquisition market for premium-branded hotels, which was slow last year, is improving. Also, higher interest rates are compelling to be a lender as you can achieve equity-like returns. By the sheer number of opportunities we are reviewing, transaction velocity will pick up for us. We are following our sound investment and underwriting decisions and recommendations that served us well these past few years – focus on the underlying asset's investment basis with the right hotel brand in the right submarket with the right drivers of demand. These assets will outperform competitors on average and protect us from downside risk.

The opportunities we are experiencing in hospitality are happening across other sectors, and now we have the in-house capabilities to pivot to these investments. Todate, we have deployed hundreds of millions of dollars in investments beyond hospitality with loan originations and mortgage loan purchases. Our CRE lending group, Stonehill CRE, started at a fortuitous time with volatile market conditions creating a dislocated lending environment.

The current Secured Overnight Financing Rate (SOFR) curve, a broad measure of the cost of borrowing, forecasts rates to remain elevated through the year with rates normalizing in 18-24 months. Short-term disruptions and uncertainty will not stop us from investing in the market and extending credit for the right deals.For example, the CRE group has completed several transactions in the retail sector. The properties are five malls which have sound occupancy levels and debt service coverage ratios with strong sponsors who have solid plans to stabilize cash flow levels, which took a hit during the pandemic.

As quoted in the Commercial Observer, Daniel Siegel, president of Stonehill CRE, described the rationale for these investments: " The one thing that these transactions all have in common is the malls are all trading at 30% of the last trade value. So, all of these are situations where we feel that the headline risk associated with the asset class has become outpaced with the actual cash flow of the assets themselves."

The cyclical nature of commercial real estate is well known, and as an experienced investor, we are well-prepared to take advantage of market disruptions. During an economic downturn, overleveraged owners will need to transact, which presents opportunities for us to acquire properties at a lower cost basis or provide financing. We are prepared for slower GDP growth and continued volatility in asset pricing. Accordingly, we will balance risk and return, with a focus on properties and sectors that can weather economic volatility and stay prepared to take advantage of future opportunities that arise during this period.

I am confident in our ability to find opportunities in all market conditions.Thank you for your confidence in Peachtree and within the partnership. We all remain passionate about reaching our investment objectives together.Greg Friedman

Disruption is not the end of stability; instead, it is the catalyst for innovation, growthand the evolution of industries.

This sentiment was evident during the disruption that rattled traditional financial institutions during the Global Financial Crisis (GFC), causing, among other things, banks to restrict lending.

During the tumultuous aftermath of the crisis, banks recalibrated their lending strategies, leaving a void in the market. This vacuum was swiftly filled by the emergence of private credit, a dynamic sector that embraced innovation to navigate the disruption. This shift provided commercial real estate ownership groups with the flexible and tailored financing solutions they needed to weather the uncertainties of the time.

In the wake of these changes, private credit witnessed exponential growth, with assets under management tripling to approximately $1.5 trillion. This rise underscores the resilience and adaptability of this sector in meeting the evolving needs of borrowers.

Peachtree Group has been an integral player in private credit since the GFC, with our investment strategies evolving as conditions change.With a holistic view of the market, we understand real estate owners' issues and canstructure and close loans that meet owners' complex and unique needs, regardless of the sector.

It has been a period of prosperity on the credit side of Peachtree Group. We have more than doubled credit transactions over the past three years, and there's more opportunity ahead for Peachtree Group to play a meaningful role in the commercial real estate lending landscape.

Current data would indicate that the market is facing a maturity wave that would make the 2015-2017 wave nearly insignificant by comparison. In that timeframe, approximately $1.1 trillion of loans were scheduled to come due amidst a period of relatively low-interest rates. The current projections diverge markedly as an estimated $2.75 trillion of loans are set to mature between this year and 2027. This accounts for nearly half of the $5.67 trillion in outstanding loans, according to data from Trepp.

Predominantly, the banking sector holds the largest share of commercial real estate loans, boasting a combined portfolio valued at roughly $2.86 trillion and will encounter maturing obligations of $1.44 trillion through 2027.Today, banks are under regulatory pressure and need to shore up their balance sheets and liquidity positions, causing significant lending restrictions to commercial real estate. This traditional lender disruption further opens the door for private credit.

With solid liquidity in place, we are optimistic about these future opportunities. While the lending landscape is complex, we are eager to capitalize on the inefficiencies in an elevated interest rate environment. In today's market, we can generate sizable returns without taking equity risk while simultaneously being in a discounted position of 25% to 40% of the current value of the underlying commercial real estate asset.

Although the journey ahead might be challenging, our commitment to sound lending practices, resilience and innovative thinking will play a pivotal role in our success. In the dynamic markets now, we see a myriad of untapped opportunities. We have the team to execute this investment strategy and are always looking ahead to anticipate and pivot to the next trade.  I appreciate your confidence in us. We all remain passionate about reaching our investment objectives together. As always, please don't hesitate to contact me with any questions, comments or concerns.

As we dig into the current state of the commercial real estate industry, one cannot help but recall Charles Dickens' famous line, "It was the best of times, it was the worst of times." This quote, written to depict the stark contrasts of the French Revolution, finds a curious parallel in the dynamic landscape of our industry today. We find ourselves at the crossroads of tremendous opportunities - potentially historic - and unprecedented challenges, where the best and worst of times coexist within the commercial real estate ecosystem.

The Fed's campaign of interest rate hikes to stave off inflation, coupled with slowingeconomic growth, has exposed cracks in the commercial real estate industry. As interest rates went up, required yields went up, putting upward pressure on cap rates – capitalization rates – and once that happened, the fallout was lower propertyvalues, which is still ongoing.

Add the collapse of Silicon Valley Bank, the largest banking failure since 2008, the UBS rescue of Credit Suisse, and then First Republic's collapse has some worrying this will put further pressure on the commercial property industry as banks rein in their lending further. A fact noted in the Wall Street Journal's'Where is the U.S. Economy Headed? Follow the Money' article on May 31, "...Lending conditions for companies, consumers and real-estate developers tightened this spring to levels not seen since the height of the Covid pandemic...".

With roughly $1 trillion of commercial real estate debt maturing before the end of 2024, it may expose the industry and push some assets into default; office assets come to mind as the most troubled.

As dire as this seems, the commercial real estate market is not in the same precarious position it was during the Great Financial Crisis. Despite all the media coverage, I would also add that banks are in better shape than they were 15 years ago. Overall, commercial real estate fundamentals remain sound at the asset level. However, while the assets may be performing to its underwriting, the interest costs – double or triple today – weren't considered. Unfortunately, that is the reality for owners and investors of commercial real estate. The era of low-interest rates is over, as we anticipate higher borrowing costs for the foreseeable future.

The commercial real estate industry is navigating through this period of volatility, which is currently creating substantial investment opportunities for us. By identifying mispriced assets, capitalizing on distressed situations, providing capital at higher yields without last-dollar risk and staying attuned to emerging trends, we are well positioned for long-term success and to deliver value to our investors.We are also benefiting from our focus on the hospitality sector, which isn't seeing the level of property value erosion that the other lower cap rate sectors are experiencing. And, when we do make investments into other sectors, we are doing it on our credit side of the house. They are not lacking opportunities in this market. Peachtree continues to be a leading lender in hospitality and, more recently, in other commercial real estate sectors. The credit unit continues to generate equity-like returns at lower leverage points without taking the last-dollar risk. This ideal scenario benefits us, and we expect to see it through the year.

The other opportunities also being driven by liquidity issues – acquiring assets, buying mortgage notes – are emerging with more on the horizon. We have already made a few strategic investments in these areas, with more undoubtedly to come. In this rapidly changing market, our investment teams – debt and equity - are well-positioned to pivot to those opportunities.

I would be remiss not to mention our hotel development program, which continues to excel, with six hotels opening this year alone and a growing pipeline and ongoing groundbreakings. With growing room demand to record levels and limited new supply, we benefit from this persistent industry imbalance.

The hard work of our asset and property management teams should be noted too. They work diligently to protect your invested capital while striving to generate above-market returns in an evolving market characterized by significant challenges and uncertainties. Their expertise, attention to detail and relentless dedication contribute to the long-term success of our investments.

These current and anticipated opportunities will lead to another productive and potentially historic year for Peachtree.