Peachtree Group Launches $250M Fund Targeting Hotel Distress

The real estate finance company formerly known as Peachtree Hotel Group is gearing up to take over problem properties in its bread-and-butter asset class.

Atlanta-based Peachtree Group is launching a $250M fund, primarily targeting hotels in need of fresh capital, the firm announced Monday.

The Peachtree Special Situations Fund will deploy cash to properties struggling to fill gaps in their capital stacks that were created by elevated interest rates and scant liquidity in the market, according to a release.

“We believe the next 12 to 18 months offer some of the most compelling risk-adjusted opportunities we’ve seen since the global financial crisis,” Peachtree CEO and Managing Principal Greg Friedman said in a statement.

Many hotels, which have some of the largest capital expenditure and refinancing burdens, are saddled with mortgages originated in zero- and low-interest rate environments that are now struggling to be refinanced.

“This fund is about capitalizing on dislocation, not chaos,” Friedman said. “We’re targeting high-quality assets not distressed by systematic factors but by capital structure.”

Peachtree’s fund is casting its net across the U.S., seeking distressed purchases from lenders and off-market acquisitions of hotels, multifamily, self-storage, student housing and other asset types. The firm also plans to offer preferred and hybrid equity to sponsors needing capital for acquisitions, development and refinancing.

It plans to target markets including California, Texas and Florida, which have strong demand fundamentals but have recently experienced pricing resets. The fund's first closing is expected in 90 days, with a final close roughly 18 months later.

Peachtree, which was founded 18 years ago as Peachtree Hotel Group, has developed more than $2B of hotels. It has recently focused more on real estate credit and has more than $4B of assets under management, according to its website.

Almost $1T of outstanding CRE debt is potentially troubled, with $582B of that set to mature between 2025 and 2027, according to a first-quarter report from Newmark.

While the majority of those loans are assigned to office and multifamily properties, financing woes for hotel owners are also growing larger. 

More than 10% of hotel CMBS loans were in special servicing last month, up from 7.3% a year prior, according to Trepp.