Dive Brief:

• Diversified commercial real estate investment company Peachtree Group announced that it has invested $526 million since the beginning of this year toward the acquisition of five hotel properties and the development of three others. In the same time, the firm’s credit division closed $556 million in loan originations for notable hotel projects across the country. 
• The announcement follows the firm’s rebrand from Peachtree Hotel Group to Peachtree Group in October 2022 in a move to expand the breadth of investment types in the company's multi-billion-dollar investment portfolio.
• Peachtree Group’s year-to-date transaction volume remains on pace with previous years, though the overall U.S. transaction market is down, Peachtree Group Chief Investment Officer Brian Waldman said in a release. The firm predicts market transactions will accelerate through the rest of the year and into 2024, but market challenges will likely contribute to decreased hotel supply going forward. 

Dive Insight:

Since the start of the year, Peachtree Group has acquired five hotel properties totaling 677 keys, including a Hampton Inn & Suites in Austin, Texas; a Homewood Suites in Nashville; a Hilton Garden Inn and a Courtyard by Marriott near Atlanta; and a Home2 Suites by Hilton in Chandler, Arizona. 

The firm’s acquisition activity is on pace for the year, as it typically invests in 10 to 15 hotels annually, Waldman said. Transaction volume market wide, though, is down year-over-year due in part to “tightening of debt capital markets [that] has materially impacted transaction velocity,” he added. 

Peachtree, specifically, has maintained its transaction volume by acquiring the hotels in cash, therefore eliminating lending risk and closing quickly, Waldman said. 

Despite the market-wide decline, Peachtree predicts that market transactions will accelerate through the remainder of the year and continue into 2024. 

Peachtree Group’s development activity has also remained strong this year, with the firm’s development arm closing on three projects representing $293 million in aggregate value. The projects include an Embassy Suites in Gulf Shores, Alabama; a Caption by Hyatt in Nashville; and an AC by Marriott in Detroit. 

Additionally, the development team opened five hotels so far this year and plans to break ground on four more by year-end, which are worth some $200 million. 

“We believe supply will continue to be limited for the foreseeable future and have ramped up our development pipeline in response,” Will Woodworth, VP of investments and development at Peachtree Group, said in a statement. “Supply growth of new hotel rooms continues to be hampered by the challenges from the pandemic and has been further impacted today with dislocation in the credit markets.” 

Citing CBRE, Peachtree shared that new hotel supply growth is expected to average around 1% for the next three years, while demand sees 2.5% growth during that same time. And if demand growth rates exceed what is forecasted, the company said, the hotel market could face a hotel room supply shortage that results in increased occupancy rates and compression in room rates.