Apollo Undecided On Fate Of 763-Room Downtown Atlanta Hotel
Roughly two years after a New York private equity giant was handed the keys to one of Atlanta's biggest hotels, it is still undecided on the right path forward.
Apollo Commercial Real Estate Finance took over the hotel at 165 Courtland St. NE, formerly known as the Sheraton Atlanta Hotel, in a deed-in-lieu of foreclosure in 2023. In October of that year, the property was rebranded under Wyndham's Trademark Collection as the Courtland Grand Hotel.
The project has been generating cash flow for Apollo, but “below the type of return that we'd like to see,” Apollo CRE Finance Chief Investment Officer Scott Weiner said on an earnings call this month.
Apollo originally provided a $77M senior mortgage for Philadelphia-based Arden Group in 2017 to finance its purchase of the sixth-largest hotel in Metro Atlanta. Arden increased its debt with Apollo in 2019, but by the end of 2022 defaulted on its $98.2M mortgage, Bisnow previously reported.
On the earnings call, an analyst asked Apollo executives why it didn't list the Courtland Grand among the hotels it plans to sell in 2025.
The hotel is “really an asset we continue to evaluate the right business model in terms of balancing putting [capital expenditures] into it, what's the return on investment on that, what's the highest and best use of the asset in terms of what we're targeting and things like that,” Weiner said, according to a transcript of the call. “Also, just trying to raise the cash flow.”
He added that the company would be willing to sell the hotel at the right price. An Apollo spokesperson didn't respond to a request for further comment.
The hotel has been a weight on the balance sheet of Apollo CRE Finance, the mortgage lending subsidiary of Apollo Global Management. In the fourth quarter of 2022, it set aside $7M to cover for losses on the loan after it stopped accruing interest.
When Apollo took over the property from Arden in March 2023, it assigned a fair-market value to the Sheraton of $75M, writing off the $7M provision and taking an additional $4.8M net loss, according to Securities and Exchange Commission filings.
Apollo received an unsolicited offer shortly after acquiring it, but a year later, the deal fizzled, according to the filings. On its 2024 annual report released this month, Apollo dropped its estimate of the hotel's value by nearly 10% to $69M.
The hotel is being managed by Connecticut-based HEI Hotels & Resorts. It stands to benefit in the coming years from the World Cup in 2026 and the 2028 Super Bowl at Mercedes-Benz Stadium, roughly a mile from the property. It also sits across the street from Georgia State University’s main campus.
But Apollo is faced with a slew of new competitors: 1,200 new rooms delivered in 2024 and another 3,000 under construction, including the Phoenix Hotel Atlanta at Centennial Yards that will add 292 rooms by the fourth quarter and the 181-room Moxy Atlanta in Downtown Atlanta, according to Colliers.
Atlanta hotel owners are also facing a decline in leisure travel and inflationary pressures that are weighing on their performance, according to Colliers. Occupancy rates dropped 20 basis points to just over 60% and the average daily rate slid by 0.1% over the past year.
