Regent, Loudermilk Surrender Thompson Buckhead Hotel To Lender

Atlanta developers Loudermilk Cos. and Regent Partners broke ground on the 201-room Thompson Buckhead hotel in March 2020, raising millions from internet investors through crowdfunding platform CrowdStreet.

Despite somehow opening on schedule and under budget in December 2021, and after capital calls to investors and a cash infusion from Hyatt Hotels Corp., the project never turned a profit. Now it is in the hands of its lender, leaving its investors high and dry.

The developers turned over the equity interest in the 10-story, 156K SF building to Denver-based KSL Capital Partners in March, according to a letter sent to CrowdStreet investors by Loudermilk CEO Robin Loudermilk and Regent President Reid Freeman and obtained by Bisnow. 

Regent and Loudermilk raised $15.4M on CrowdStreet for the project, contributed $7.3M of their own equity and secured a $68.5M construction loan from Goldman Sachs. KSL replaced Goldman as lender in 2023. 

Loudermilk and Freeman listed “myriad” reasons why the venture failed, including the pandemic’s impact on hotels, rising labor costs and interest rates, and a faltering Buckhead hotel submarket.

“This is not the outcome that any of us wanted, and we are disappointed to find ourselves in this position,” they wrote in the letter. “The hotel has consistently failed to perform at the levels necessary to generate positive cash flow. In fact, the hotel only produced ten months of positive cash flow before debt service and never had a single month where it fully covered debt service.”

Loudermilk, Freeman and a CrowdStreet spokesperson didn't respond to messages seeking comment. A KSL spokesperson declined to comment.

The developers announced the project in 2018, on the site of the former State Bank & Trust building at 371 East Paces Ferry Road. At the time, Freeman said the Thompson would fill a gap in the Buckhead hotel market by offering a midpriced stay compared to The St. Regis and Mandarin Oriental luxury hotels, the Atlanta Business Chronicle previously reported. The Mandarin Oriental has since been rebranded as a Waldorf Astoria.

But soon after opening, the Thompson faced problems. In February 2022, the owners funded $2.4M in operational shortfalls and issued a capital call, raising an additional $1.4M from CrowdStreet investors, according to the letter. Over the next nine months, Loudermilk and Freeman said they made $4.8M in additional loans to keep themselves in good standing with Goldman Sachs. 

When the construction loan matured in 2023 and Goldman Sachs declined to extend the maturity, the developers turned to KSL, which “offered a loan with a $5.3M interest reserve covenant that we believed would provide the company with additional runway with the hopes that the market and hotel operations would improve,” the developers wrote.

They also made “significant changes” to staffing and operations, including a new general manager, securing a Delta contract and opening the rooftop restaurant, Tesserae, to the public. But interest rate hikes and a run-up in the 10-year Treasury yield “continued to cause upheaval in the capital markets,” while the property’s fundamentals failed to turn around.

In October 2023, Loudermilk and Regent extended Hyatt’s management agreement, with the hotelier infusing $6M in capital to cover interest payments to KSL.

But by the end of 2024, they had spent all of that money, and KSL refused to extend the loan maturity, they wrote. The developers attempted to sell the hotel, but brokers didn't find a buyer that would pay more than the mortgage. That left them with little choice but to enter into an assignment-in-lieu-of-foreclosure with the lender, according to the letter.

“This is a very disappointing result for the sponsor and its investors,” Loudermilk and Freeman wrote. 

Buckhead hotels haven't bounced back since the pandemic because weekday business travel never recovered, Peachtree Group CEO Greg Friedman said.

“In some ways, it’s losing out to Midtown,” Friedman said.

Craig Leva invested $100K into the Thompson offering on CrowdStreet and put an additional $10K into the hotel across two separate capital calls, he said. He doesn’t blame the developers for the loss of his investment.

“It’s unfortunate that Covid came and business travel changed,” Leva said in a phone call Wednesday. “At the end of the day, [the Thompson is] still underwater, and there’s no chance. They don’t have the cash flow. Meanwhile, all the money is gone. I was excited to invest in that one.”

CrowdStreet has been mired in scandal over the past few years after Nightingale Properties CEO Elie Schwartz misappropriated $54M he raised on the platform. The bulk of that money was raised to purchase the Atlanta Financial Center office complex in Buckhead, a mile from the Thompson hotel.

Schwartz pleaded guilty in February to wire fraud and is due to be sentenced on Monday in Atlanta federal court. He faces a maximum of 20 years in prison. 

CrowdStreet has been hit with a $1B class-action lawsuit from investors who were defrauded by Schwartz, as well as multiple arbitration cases, over claims that it misled investors about the level of due diligence it conducted.