A hotel and conference center across the street from one of Buckhead’s flagship malls has become distressed after years of lagging financial performance prompted its value to plummet.
The Atlanta Marriott Buckhead Hotel and Conference Center at 3405 Lenox Road NE was transferred to a special servicer after its owner missed debt payments on a $51 million mortgage that backed the 349-room hotel, according to data from Morningstar Credit. The default and resulting distress was first reported by online real estate publication Bisnow.
A special servicer is a company that often will take on a property backed by a distressed or defaulted loan, stabilize operations to maintain value and prepare the property for sale so the lenders can recoup as much as possible.
Located east of Lenox Square mall, the hotel has struggled to establish itself among Buckhead’s hospitality elite, and the aftershock of the COVID-19 pandemic’s effects on travel exacerbated those issues. Special servicer LNR Securities, which took over the hotel after a subsidiary of Alpharetta-based Atrium Hospitality missed its debt payments, wrote that ownership sees continuing to spend money on the property as a lost cause.
“The borrower (Atrium) is unable to continue making monthly loan payments, due to insufficient cash flow,” LNR Securities wrote in an October commentary obtained by Bisnow. “(LNR) is working with borrower to ensure property level (operating expenses are) paid on time. Does not appear as if borrower is willing to inject additional equity into the transaction.”
When contacted by The Atlanta Journal-Constitution, LNR declined to comment. Atrium did not respond to requests for comment.
Built in 1973, the hotel wasn’t always under the Marriott brand. The property was formerly known as the Sheraton Buckhead Hotel Atlanta before it underwent a $45 million renovation campaign in 2008 when it was transformed into a Marriott. The property also featured a Shula’s 347 Grill location, part of a chain founded by football legend Don Shula. That restaurant has since closed.
In 2016, the Atrium affiliate acquired the Atlanta Marriott Buckhead Hotel and Conference Center through a $51 million loan from JPMorgan Chase that was later packaged into a commercial mortgage-backed securities loan, also known as a CMBS loan. The loan went into distress in 2021, but a foreclosure sale was averted by modifying the loan, according to Bisnow. Morningstar reported a balance of more than $49 million remained on the loan when it was transferred to special servicing.
The hotel’s appraised value has steadily dipped since Atrium’s affiliate took over the property. It was most recently appraised at about $38 million, a 51% decrease from 2016, according to Fulton County records. Morningstar data shows the hotel’s loan was underwritten at 80% occupancy, but the hotel’s year-end occupancy hovered just above 50% in recent years. Occupancy hit 60% at the end of June.
Bisnow reported LNR’s most recent commentary note about the property included that the hotel could be placed into receivership or foreclosure.
While leisure travel has rebounded from 2020, business travel remains below pre-pandemic levels.
Lagging business and increased interest rates have squeezed many commercial real estate owners, leading some well-known Atlanta hotels into distressed sales or foreclosure. In early 2023, the 763-room Sheraton Atlanta Hotel teetered on the edge of foreclosure before changing hands and being rebranded at Courtland Grand Hotel. And the W Atlanta — Downtown hotel was sold last year for about $25 million, less than half of its prior sales price.
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