Peachtree Group Lends $50M on Birmingham Hotel Development

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Ascent Hospitality has secured $49.8 million of construction financing to build a dual-branded hotel at a former office site in downtown Birmingham, Ala., Commercial Observer has learned.

Peachtree Group, formerly Stonehill, originated the bridge loan on Ascent’s planned 338-room AC & Element hotel. The project’s AC Hotel, which will be oriented toward business travelers, will have 190 keys. The Element Hotels component will feature 148 extended-stay style rooms with kitchens.

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Located on 20th Street, the future hotel property previously housed the 16-story Brown-Marx Building constructed in 1906 that operated primarily as an office property until it became vacant in the early 2000s. Ascent acquired the building in 2018 from Hughes Capital Partners for $3.66 million before beginning exterior and interior renovations as part of the hotel project, which is slated for completion in January 2025.

Michael Harper, executive vice president at Peachtree Group, said both AC and Element’s success under Marriott International ownership coupled with the project’s location near many corporate offices and the University of Alabama-Birmingham campus, which includes a medical center, made the deal attractive. 

“We don’t like any deals where you’ve got one single driver and it’s kind of binary on the success. Here, you have a nice healthy mix,” Harper said. “We’ve had success lending in the Birmingham market and done multiple loans in the downtown area from about a mile radius of this hotel, successfully deploying capital, and have been repaid on similar conversion-type projects.”

While Peachtree lends across all property types, its origins are in the hospitality industry. The firm remains very active in the sector, deploying $556 million of $1.1 billion in originations year-to-date as of late September for five hotel loan acquisitions. 

Jared Schlosser, Peachtree Group’s senior vice president, said focusing heavily on hotel loans has proven beneficial in a high inflationary environment because of the flexibility for operators to raise or lower daily rates depending on market conditions. 

“Hotels can adjust their revenues by repricing daily,” Schlosser said. “That’s their biggest competitive advantage in an inflationary and rising interest rate environment.”

Officials at Ascent Hospitality did not immediately return requests for comment.

Andrew Coen can be reached at acoen@commercialobserver.com