Peachtree Group has launched a $250 million special situations fund targeting mispriced hotel and commercial real estate assets caught in today's capital crunch.
The Atlanta-based investment firm aims to exploit market dislocation rather than fundamental problems with properties, according to Peachtree CEO Greg Friedman.
“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,” Friedman said in a statement.
Peachtree Special Situations Fund is positioned to acquire properties and complements Peachtree’s existing fund, Peachtree Distressed Opportunity Fund, which targets debt investments.
“The investment vehicle before Peachtree Special Situation Fund was focused solely on private credit lending,” Charles Talbert, vice president, corporate communications for Peachtree, told CoStar News in an email. “By deploying both equity and debt, the new fund taps Peachtree’s vertically integrated platform to capitalize across the capital stack.”
Hotels face the largest refinancing burdens among property types. Many owners that borrowed during the zero-interest era now confront capital gaps as rates stay elevated and liquidity dries up.
"Balance sheet stress and refinancing hurdles intensify in the hotel space," Friedman said. Traditional lenders have pulled back, creating openings for alternative capital.
The creation of the fund comes as there have been few distressed hotel transactions since 2022 when the country saw more than $21 billion in distressed lodging sales, according to CoStar data. Last year, only $1.3 billion in such deals closed.
“Generally, distress has been masked by short-term loan extensions and decent operating performance, particularly in the hospitality sector,” Talbert told CoStar. “But we’re now at a tipping point. A wave of debt maturities, elevated interest rates that will persist for longer and deferred capital expenditures, particularly in the hotel sector, are creating significant dislocation in capital stacks. All this pressure is now surfacing in deal flow.”
Peachtree’s Special Situations Fund is designed for this moment, and targets mispriced, high-quality assets, he added.
Peachtree is targeting three core opportunities: off-market acquisitions of underperforming hotels, multifamily, student housing and self-storage properties for repositioning; preferred equity investments for firms needing liquidity; and/or distressed purchases directly from banks through deed-in-lieu or foreclosure transactions, according to the firm.
The fund is targeting nationwide opportunities with emphasis on Texas, Florida and California markets.
Peachtree expects the first close of the fund to occur within 60 to 90 days and final close within 18 months of launch.