Dive Brief:
- Investment management firm Peachtree Group has surpassed $1 billion in loan originations year-to-date, with the hotel sector leading in credit transactions, the company announced Monday. The firm now expects to exceed $1.75 billion in loan originations in 2024.
- Hotels accounted for more than $639 million worth of Peachtree Group credit transactions year to date, representing a 176% increase compared to the same period last year, according to the firm.
- The annual growth in hotel credit transactions is a positive indicator that the lending market is easing following several years of tight conditions amid high interest rates. With rates expected to lower further in coming months, an uptick in hotel investment is likely, Peachtree Group CEO Greg Friedman noted at last week’s Lodging Conference.
Dive Insight:
Notable hotel credit transactions that Peachtree Group closed this year include a $41.9 million first mortgage loan for the Kimpton Sylvan hotel in Atlanta, $40 million C-PACE financing for an AC Hotels property in San Diego, California, and a $26.4 million first mortgage loan for a Hampton Inn in Columbus, Ohio.
The deals closed despite a high-interest-rate environment, which has challenged lending and ultimately strained new construction and commercial real estate investment across the hotel industry and other sectors, experts have told Hotel Dive.
Last month, though, the Federal Reserve cut the main interest rate by a half percentage point to a range between 4.75% and 5%. Kevin Davis, Americas CEO for JLL Hotels & Hospitality Group, forecasted at last week’s Lodging Conference in Phoenix that additional rate cuts are likely in the coming months.
During a panel discussion at the conference, Davis predicted that more rate cuts will bolster strong hotel transaction activity starting next month and snowballing in 2025.
Friedman, who also spoke during the Lodging Conference panel, said fatigue felt by many banks is “coming to an end” as market conditions stabilize and there’s “a little bit more predictability [as] to where rates are going to be.” He added that the easing will help jumpstart the transaction market.
Despite the September rate cuts, Jared Schlosser, executive vice president of hotel lending and head of C-PACE for Peachtree, said in a statement that the commercial real estate sector will continue to face significant headwinds over the next few years, including “a sharp rise in debt maturities potentially approaching $1.5 trillion through 2025.”
JLL reported in June that billions of dollars’ worth of U.S. hotel securitized loans will come due for repayment later this year. And some 71.4% of those maturing loans are in “critical stress,” meaning they are unable to “generate sufficient net operating income to meet their debt obligations,” according to JLL. Because of this and other financial stressors, more hotel owners will turn to transacting to repay debt that’s coming due, JLL forecasted.
