5 minutes with Peachtree’s Brian Waldman

LOS ANGELES – Atlanta-based vertically integrated investment management firm Peachtree Group recently surpassed $2 billion in hotel development with 48 properties since its inception and continues to add on with projects ranging from an Embassy Suites in Gulf Shores, Alabama, to a dual-branded AC and Moxy hotel in Uptown Dallas, and a Tru by Hilton in Huntsville, Alabama.

Hotel Investment Today caught up with Chief Investment Officer Brian Waldman to learn more about Peachtree’s strategy and get his take on some of the bigger hotel investment issues of the day.

Hotel Investment Today (HIT): What is the message behind the $2 billion development milestone?

Brian Waldman: New wins, and we’re a big believer in the power brands. We’ve found the ability to create a lot of value on the development side, whether it’s traditional development or opportunity zones, where we’re one of the most active developers.

We’ve really grown our joint venture development platform as well, where we’re working with regional developers that have great projects, very often in urban infill locations that they’ve been working on for years to get through the entitlement process and get the project ready to go. We’re able to bring in our development expertise and help capitalize projects that would be difficult to get out of the ground in the current market given some of the headwinds and bring these to fruition.

HIT: How are you managing all the challenges of development right now?

Waldman: It’s very challenging – capitalization, financing, sourcing, just getting through the construction itself is extremely difficult. But we’re believers in the process… If you have the right brand and the right location in a market where you’re not seeing a lot of new supply come out of the ground, we think we’re going to be really well positioned in a couple of years when these projects open with limited new supply and being the newest, nicest product in the respective markets.

Rendering of a dual-branded AC/Moxy hotel being developed by Peachtree in Uptown Dallas.

Having the right capital structure is extremely important. Historically, a lot of developers have overleveraged projects and had less skin in the game. By having a much more balanced capital stack, it helps derisk the project. So, if you do hit speed bumps along the way, you don’t have as much pressure – the deal stands on its own. You’re developing because the development makes sense, and not because you’re financially engineering a project.

For projects outside of the opportunity zones, we’re typically looking at 55% leverage. So, we’re really not driving our yield through leverage. For the projects in opportunity zones, we have a strategy of going even lower leverage, where we might put 25% or 30% leverage, or in some cases, zero leverage, on the project. We get it built, and then once the hotel is open and operating, go back to refinance or recapitalize.

HIT: Considering today’s macros, what’s top of mind for Peachtree?

Waldman: We have different verticals – we buy, we build, and we lend. It’s about getting the right risk-adjusted return for each vertical. We’re very excited about the credit side today, and we believe that we’re getting outsized returns for the risk that we’re taking on.

It also raises the bar for acquisitions and development. So, we believe that the projects that we’re moving forward with really have truly opportunistic risk-reward dynamics.

HIT: We’ve been hearing the bloom is off the rose on the credit side.

Waldman: We’re still seeing a ton of opportunity. I think there are a lot of lenders that have their own issues due to looming maturities in their book and valuation issues within their portfolios leading to significant overleverage that needs to be rightsized or may be materially impaired. Our book is very healthy. We continued to lend during COVID and were one of the most active groups buying notes. We continue to originate a record volume of new loans and buy notes. We’re very excited about the trade over the next couple of years… We’re seeing a lot of groups have more balance sheet pressure, and that’s where we can come in and help alleviate some of that pressure and create win-wins.

HIT: What’s your take on the purported momentum building for hotel M&A?

Waldman: It will be interesting to see the opportunities that are out there. There are a number of factors that will play into that. At this point, we continue to be true to our strategy, where we’re looking at one-off assets in small portfolios. But it will be interesting to see how the M&A market continues to evolve, and there could be some interesting opportunities.

I think there will be a lot more deals that get done in 2025 – some of that is due to the markets loosening. And frankly, I think some of that will be due to groups that just have severe balance sheet pressure and have to do something... We’re getting closer to that inflection point where sponsors aren’t going to be able to keep kicking the can and deals will get done.