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Circa 1970s Buckhead Hotel Could Face Financial Peril With New Competition

Atlanta Marriott Buckhead, owned by Pyramid Hotel Group

Could plans for a new upscale Buckhead hotel threaten the financial health of another?

Those concerns were raised by the credit rating agency Morningstar Credit Ratings earlier this week over a more than $50M loan secured by the Marriott Atlanta Buckhead hotel, CoStar reported. Morningstar placed the securitized loan on a watchlist due to a surge in new hotel supply “in an already overcrowded hotel market that could further crimp net cash flow,” Morningstar analysts wrote in the report.

Cash flow was already down more than 18% since the underwriting, Morningstar analysts said. The report itself did not identify Marriott Atlanta Buckhead. CoStar revealed the 349-room property across from Lenox Square was the subject of the report.

“Chief among our concerns is Dream Atlanta, Buckhead, with a planned 2021 opening,” Morningstar analysts said in the brief report.

Atlanta-based Cartel Properties is expected to develop a $100M, 200-room hotel off Roswell Road in Buckhead that will be run by the ultra-luxury Dream Hotel Group brand. This will be New York-based Dream Hotel's first Atlanta location, and will include 90 private residences, a spa and wellness center and five dining and nightlife venues, including a 17K SF rooftop pool bar and lounge.

CoStar reported that the Marriott Atlanta Buckhead loan's three-year interest-only period — which is part of a pool of commercial mortgages securitized by JPMorgan Chase — ends in 2019, and could see service payments go up soon after.

The overall loan matures in 2026 and encompasses nearly 6% of the total CMBS pool value, CoStar reported. The Marriott Atlanta Buckhead, built in 1975, is owned by Pyramid Hotel Group.