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A prominent investor who shaped modern portfolio strategies, Robert Arnott, once said, 'In investing, what is comfortable is rarely profitable.'
This idea rings especially true in today's market, where uncertainty, volatility and shifting economic conditions create both risks and opportunities. The most successful investors recognize that these periods often present the most compelling investment opportunities.
We, too, see these moments as catalysts for strategic capital deployment. The evolving commercial real estate landscape is creating precisely the kind of dislocation where disciplined, well-capitalized investors can thrive.
As our team assesses the commercial real estate landscape, recent developments in the credit markets continue to present compelling opportunities.
The latest banking data reveals a noteworthy shift: while demand for C&I loans rises for the first time in two years, banks continue tightening the grip around commercial real estate.
Despite increasing demand for liquidity, traditional lenders remain highly selective, offering lower loan-to-value ratios and requiring stronger borrower covenants. As a result, many commercial real estate owners and developers face significant refinancing challenges, particularly with the substantial level of debt maturities in 2025 and beyond. We are talking about trillions of dollars in loan maturing.
This dynamic reinforces a growing reliance on private credit lending, a space where our firm not only has a long track record but is also well-positioned to capitalize on ongoing market dislocations to deliver attractive, risk-adjusted returns.
Our firm's ability to pivot across the capital stack—originating loans, acquiring debt or investing opportunistically - positions us to capitalize on this dislocation.
With rising debt costs and limited refinancing options, many commercial real estate owners will be forced to make tough decisions. While this warning has been repeated over the past few years, we are now at the proverbial end of the line. As a result, we anticipate an increase in asset sale opportunities, acquiring first mortgages and recapitalizations.
Our experience in navigating prior downturns, coupled with our underwriting expertise, allows us to approach these opportunities with discipline, ensuring we secure assets and debt positions at favorable valuations.
As we move through this evolving economic cycle, our focus remains on the disciplined deployment of capital into opportunities that offer strong upside potential while minimizing the downside.
We recognize that market dislocations create compelling entry points for special situation investments. As liquidity constraints tighten across key sectors, we are strategically positioned to deploy capital into high-value opportunities. In hospitality, the deferral of brand-mandated renovations is reaching a breaking point, driving distress and accelerating transactions—further reinforcing the need for flexible, well-capitalized investors to step in.
Our experience in stressed investing and structured finance enables us to use creative solutions when traditional capital sources are unavailable. By maintaining a flexible approach and strong liquidity reserves, we are positioned to act decisively as the market turns, capturing value where others cannot.
The favorable landscape for private credit lending will remain with us for years, but as it evolves, it is also creating new opportunities that we are poised to seize. Our ability to deploy capital where others cannot continue to drive outsized value for our stakeholders.
"Extend and Pretend"—Just as Hamlet famously questioned, "To be or not to be," we are also on the brink of a crucial revelation. Are we facing a seismic shift with sustained higher interest rates, a largely overlooked issue? How will this shift affect commercial real estate and other asset classes in both the short and long term? Are the public and private sectors ready for what appears to be the inevitable? Today, we face more questions than answers, and indecision is no longer viable in a higher interest rate environment.
Unlike in the past few downturns, such as COVID, the Global Financial Crisis and the dotcom bust, the Fed significantly reduced interest rates, enabling owners of commercial real estate and lenders to easily engage in "Extend and Pretend," even when cash flows were negative or razor-thin, thanks to the exceptionally low interest costs.
Today, we are in a commercial real estate recession showing no signs of abating. The economy boasts considerable strength, driven by a strong job market, and record liquidity is on the sidelines. I do not see the necessary catalysts to revert interest rates to levels seen in previous cycles. Therefore, I don't see “Extend and Pretend” to be an effective strategy and would prepare for more bankruptcies, foreclosures and forced sales as reality sets in that we are in a new rate paradigm or maybe just a return to normalcy that, unfortunately, will be destructive to values, especially to the lower cap rate assets. Ultimately, amidst any market disruption, there will be pivotal opportunities for those with the decisiveness and the liquidity to seize them at the right moment.
This commentary originally appeared on Greg Friedman's LinkedIn page on May 1, 2024, in response to a Wall Street Journal article titled: Even If the Fed Cuts, the Days of ultralow Rates are Over.
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ATLANTA, GA April 24, 2024 - Peachtree Group today announced that it has been recognized by Hilton as the 2023 Developer of the Year in the Focused Service category. The Hilton Americas Development Awards recognize the achievements of owners, development partners and hotel teams in the Americas across several categories.
“We are immensely honored to have been named Developer of the Year by Hilton, a distinction that underscores our desire to build outstanding hotels,” said Mitul Patel, principal, Peachtree Group. “This recognition highlights our unwavering commitment to creating exceptional hotels and further strengthens our partnership with Hilton. This award is a testament to our strategic approach to hotel development, which combines identifying great locations, assembling a top-tier team and maintaining a steadfast focus on quality.”
In 2022, Peachtree Group received the Multi-Brand Developer of the Year from Hilton.
These annual awards celebrate the resiliency and commitment of Hilton’s owners and team members who spread the light and warmth of hospitality. For more information about Hilton, visit the company’s newsroom at stories.hilton.com.
About Peachtree Group
Peachtree Group is a vertically integrated investment management firm specializing in identifying and capitalizing on opportunities in dislocated markets, anchored by commercial real estate. Today, the company manages billions in capital across acquisitions, development and lending, augmented by services designed to protect, support and grow its investments. For more information, visit www.peachtreegroup.com.
Contact:
Charles Talbert
678-823-7683
ctalbert@peachtreegroup.com
ATLANTA (April 3, 2024) – Peachtree Group ("Peachtree") announced the elevation of three senior executives, expanding their roles to strengthen the firm’s executive leadership team. The promotions include Michael Harper to president of hotel lending, Jared Schlosser to executive vice president of hotel lending and head of CPACE and Michael Ritz to executive vice president of investments.
"These appointments underscore Peachtree's commitment to its core growth initiatives in hotel lending, as well as fostering talent from within our own ranks, with an eye toward further diversifying its allocation strategies as it taps into new investment opportunities," said Greg Friedman, Peachtree's CEO and managing principal.
Since joining Peachtree in 2014, Harper has distinguished himself through a succession of leadership roles, directing the company's credit business, particularly in loan originations and strategic acquisition of credit portfolios. Since joining, he has led the team through over 500 investments totaling over $6 billion. As president, he is responsible for the entirety of Peachtree's credit platform for hotels, guiding all facets of the credit business.
Schlosser's promotion to executive vice president of hotel lending and head of CPACE reflects his exceptional performance and extensive knowledge of the hotel loan origination processes and the firm's Commercial Property Assessed Clean Energy (CPACE) program. His significant contributions since joining the firm in 2019 have been crucial in advancing Peachtree's CPACE program, which now exceeds $800 million in transactions and has become one of the largest in the U.S. Furthermore, since taking over hotel originations at the start of 2022, Peachtree has completed more than $1.5 billion in hotel loans, further demonstrating his expertise and effectiveness in these dual roles.
Ritz has been elevated to the position of executive vice president of investments and will oversee Peachtree's credit and equity investments across commercial real estate and other ventures. He joined Peachtree in 2017, and his promotion recognizes his expertise in successfully managing and growing a portfolio of investments that is now approaching $10 billion in transaction asset value.
Peachtree was recently ranked as the tenth largest U.S. commercial real estate hotel lender, its third consecutive year in the top ten, by the Mortgage Bankers Association ("MBA") 2023 loan origination rankings.
About Peachtree Group
Peachtree Group is a vertically integrated investment management firm specializing in identifying and capitalizing on opportunities in dislocated markets, anchored by commercial real estate. Today, we manage billions in capital across acquisitions, development, and lending, augmented by services designed to protect, support and grow our investments. For more information, visit www.peachtreegroup.com.
