St. Regis obtains new financingJuly 29, 2010
The developers of the St. Regis Atlanta have obtained new financing from blue chip investment bank Morgan Stanley, a rare sign of confidence in Atlanta’s commercial real estate market.
The deal replaces $176.5 million in financing from Morgan Stanley Mortgage Capital Holdings. The loan was originated in October 2006 to develop the St. Regis Atlanta, the 16th hotel for the historic chain, which was founded by John Jacob Astor in New York City.
The debt that financed the construction of the St. Regis Atlanta would have come due in October, according to Databank Inc., a firm that tracks real estate transactions in Atlanta.
The development team behind the St. Regis declined to discuss the Morgan Stanley deal, but partner Kent Levenson said the original debt secured by the 26-story building involved “extremely complex financial structures.”
The new financing involves an undisclosed investment of new equity into the St. Regis, which includes 53 high-end homes and 151 hotel rooms overlooking West Paces Ferry Road, near the intersection with Peachtree Road.
The deal was struck despite deep problems facing the country’s luxury residential and hotel sectors amid a slow recovery from the Great Recession.
Developers have seen real estate prices collapse since the peak, putting their buildings under water. At the same time, much of that financing is coming due amid a much stricter lending climate, forcing borrowers to put significant equity into their projects to refinance, or risk seeing those properties go back to the banks.
The problems already have claimed one high-profile project in Buckhead — The Mansion on Peachtree. The 42-story tower was the first in a string of notable Atlanta foreclosures this year.
Capri has the primary ownership interest; Barry maintains an active role in the project.
Another luxury project is also seeking refinancing. Streets of Buckhead developer Ben Carter told Atlanta Business Chronicle in June that he is close to announcing new financing for his $1.5 billion retail project.
“You’ve seen so much bad news out there, but I think it’s a great sign to hear we have something positive to say,” said Paul Freeman, lead developer for the St. Regis.
“What you saw was a development boom that really lasted since the early part of the decade. There should have been a slowdown in lending the last three years of it, but that was not the case. There was too much overbuilding on speculation.”
And yet, the St. Regis has found success.
Half the square footage allotted for St. Regis condos is either sold or under contract, Freeman said. That represents about $80 million in sales closed.
The condos range from 3,200 square feet to 9,300 square feet.
Freeman declined to offer details on what St. Regis condos are selling for, but transactions in the past year have ranged from $2.7 million to $4.8 million, according to Fulton County property records.
At the peak condos cost about $800 per square foot, according to Marketing Directors LLC, a firm that sells condos across Atlanta. Some have sold for around $710 a square foot in the past year, according to Fulton County.
The St. Regis also recently qualified for Fannie Mae approval, a much sought-after designation that should make the condo sales easier to finance.
The new deal with Morgan Stanley, “protects every potential buyer from what’s happening to our competitors,” Freeman said, referring to the steep value declines that have undermined condo prices across metro Atlanta.
“The St. Regis has been an outstanding performer,” said David Tufts, president of Atlanta-based The Marketing Directors. “They have a great location. It has vibrancy.”
The St. Regis opened in April 2009, after The Mansion on Peachtree and the W Hotel & Residences.
Freeman, who had a resort background, spent more than five years planning the development.
It featured big names in real estate and hospitality, including designer Hirsch Bedner Associates and executive chef Jonathan Jerusalmy, formerly of the five-star St. Regis Resort in Monarch Beach, Calif., and the Loews Miami Beach Hotel.
It drew Atlanta power players to live there, such as Howard Halpern, founder and patriarch of Buckhead Beef Co.; and Gerry Benjamin, co-founder of Atlanta Equity and former managing partner with Chicago-based Navigant Consulting Inc. (NYSE: NCI).
Syndicated radio host, writer and political commentator Neal Boortz has a second home at the St. Regis.
The hotel has also been successful, ranking first in RevPAR (revenue per available room) in the Atlanta luxury sector.
The St. Regis stands in the heart of a Buckhead restaurant district that includes Chops, Seasons 52 and Nava, all within walking distance. Freeman said the most popular nearby amenity might be the Whole Foods Market across Paces Ferry. His personal touches are seen on every floor — the artwork, the courtyard, a waterfall by the pool and elevators to every residence. He blended concepts he saw in the great hotels and homes from New York to New Orleans.
“We spent so much time planning this,” Freeman said. “What we wanted was an intown resort that was unique, that was close to everything, and that’s what I think we’ve achieved.”