Argosy Invests in Days Inn Atlanta

On February 14, 2012, Argosy Real Estate made a controlling equity investment in a partnership formed to purchase a portfolio of distressed mortgage notes secured by three properties, including a 3.1-acre parcel improved with a 263-room Days Inn hotel located in downtown Atlanta, Georgia.  Argosy formed the partnership with Peachtree Hotel Group (“Peachtree”), who will act as the operating partner.  Peachtree has deep experience with note acquisitions, hotel development and hotel management, particularly in the Southeast. Peachtree will manage the redevelopment and ongoing operations of the hotel.

The mortgage notes were acquired for a significant discount to the outstanding principal balance.  After the note acquisition, the partnership negotiated a deed in lieu of foreclosure for the hotel and sold the two non-hotel properties to a separate entity which reduced the acquisition cost basis of the hotel.

The property is composed of a 10-story, 116,489 square foot Days Inn hotel constructed in 1982.  The site spans an entire city block within the central business district of downtown Atlanta and is within walking distance of a variety of business, leisure, and convention demand generators.  The property includes approximately 1.5 acres of land currently used as a surface parking lot that could provide development potential when the market recovers.

The initial business plan is to invest a modest amount of capital to stabilize the property as a Days Inn while the partnership considers various business plan alternatives which include an immediate sale of the asset, a modest renovation with improved management while waiting for a real estate recovery or repositioning the hotel. If the repositioning plan is selected, it is anticipated that the property will be converted to a premium branded, select-service hotel within the next 18 months.  The conversion to a select-service hotel would consist of a full gut-rehab of the existing building, with all new interiors and a re-skinned exterior.  The low cost basis in the asset allows for greater flexibility with respect to maximizing value through various exit strategies.