Atlanta Business Chronicle - by J. Scott Trubey Staff Writer
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A South Georgia hotel developer denied capital through traditional means because of the banking collapse is taking a non-traditional route to help finance a $57 million hotel adjacent to Gwinnett Center.
Tifton, Ga.-based GS Development Inc. is selling a $16.1 million equity stake for a 259-key Embassy Suites at Gwinnett Center, according to a filing March 17 with the Securities and Exchange Commission. The broker is Cambridge Legacy Securities LLC of Dallas, Texas.
GS Development announced an Embassy Suites at Gwinnett Center in June 2007. But the company has been shut out by regional and national banks since the unraveling of the housing sector and the financial collapse, said Greg Jacobs, GS Development vice president and director of finance.
Thus far, $9 million has been sold to private equity firms, hedge funds, insurance groups and other investors who have remained liquid and were able to avoid severe Wall Street losses, Jacobs said. According to the SEC filing, minimum investment is $50,000.
"I'm hopeful we'll be able to complete the financing for that project within the next 90 days," Jacobs said, adding the company is processing four- to five-term sheets from alternative lenders for a loan of between $36 million to $44 million.
If successful, the project could be the first major hotel development locally to obtain funding since the collapse of the traditional lending stream. The last major hotel development to obtain funding through traditional banks was the $134 million Gateway Center at the Georgia International Convention Center in College Park, industry insiders said. GS Development also is the developer of another Embassy Suites set to open in October at Town Park in Kennesaw. The firm sold $9 million in equity to partners for the $43 million hotel near Kennesaw State University.
Lending for new developments, particularly in hospitality, have essentially frozen from traditional sources, said Bill Grice, vice president of financing for Jones Lang LaSalle Hotels, a division of Jones Lang LaSalle Inc.
"New development deals in the Southeast have been hard-pressed to find traditional resources of financing," Grice said. Lending has frozen because of the heavy amount of non-performing loans and toxic assets clogging up banks' balance sheets.
Paul Breslin, managing partner of hotel consulting firm Panther Hospitality LLC, credited GS Development for "outside-the-box thinking" in a frozen lending environment.
"That's what we need today," he said.
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