The debt on a prominent Midtown Atlanta hotel has been transferred to special servicing — where troubled loans go to be worked out — as its owner seeks an extension.
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The $37.9M CMBS loan tied to The Georgian Terrace failed to pay off when it matured this month, according to a note from Morningstar Credit. The debt was transferred to LNR Securities Holdings, the special servicing arm of Starwood Property Trust, which will negotiate with hotel owner Sotherly Hotels on the future of the 326-room upscale hotel across from the Fox Theatre on Peachtree Street.
Sotherly was current on the loan until this month, when it missed the balloon payment at maturity, according to Morningstar. The transfer to LNR is likely a precursor for an extension on the debt, especially since the hotel’s performance has been improving in recent quarters, Morningstar Senior Vice President Matthew Bendzlowicz told Bisnow.
“The extension is not going to happen prior to going to special servicing. It’s kind of like the first salvo, if you will,” Bendzlowicz said. “The hardcore real estate people are going to determine the best path for workout. An extension does seem reasonable.”
Sotherly didn't respond to a message seeking comment, and an LNR spokesperson declined to comment.
Sotherly CEO Dave Folsom laid out the path forward for the Georgian Terrace during the hotelier's May 13 earnings call. Analysts asked about the Midtown hotel and the $49.9M loan tied to the DoubleTree Resort by Hilton Hollywood Beach that is set to mature in October.
“I think our preference right now, which seems to be with the way we’re headed on these loans, is to extend them out, which seems to be consistent with the rest of the market,” Folsom said.
Sotherly said it has “engaged a consultant to negotiate an extension with the special servicer for the loan” in its first-quarter earnings statement. If talks to extend the loan fail, the hotelier may be “required to refinance the mortgage” and pay $3.9M to shrink the debt.
Sotherly acquired The Georgian Terrace in 2014 and a year later obtained a $47M refinancing loan with Bank of America.
Occupancy rates have improved for The Georgian Terrace, sitting at 58.6% in the first quarter, up from 46.7% two years prior, but it is still below the Atlanta average of 64.5%, according to Colliers.
The hotel's revenue per available room rose from $96 per night in Q1 2023 to $114 in the first three months of 2025, while its average daily rate has fallen from $207 to $195.
