Noble Investment Group’s Shah on the Industry’s  Future

Noble Investment Group is a real estate private equity fund manager, and an integrated hotel operator and developer. They specialize in value-added investments in the North American lodging sector. Noble’s senior managing director, Mit Shah, talks about Noble’s plans, and what his forecast is for the hotel industry. CPNHospitality: Please talk about some recent initiatives that Noble has launched? Shah: We’ve invested 40 percent of our current fund, about $400 million over the last 12 to 13 months. We’ve acquired three assets so far this year: the Kansas City Marriott at Country Club Plaza. We also bought an Amerisuites in Schaumburg, Ill., that we are converting to a Hyatt Place. Also, we bought a Hyatt Regency in Valencia, Calif. We were able to get 65 percent to 70 percent loan to values. Lenders like our ability to add value to a property, and they like our structure as a private equity fund.We are also developing new assets. We just opened a W Hotel in Midtown Atlanta.We believe this is our time. A lot of people who were putting equity deals together on the phone are on the sidelines. And a lot of institutional players only want to invest when the industry is in an upswing. This is an operating business, and they don’t want to entrust management to a third party when the industry is in a downturn. CPNHospitality: What kind of assets, and in what locations, are you looking to invest in this year? Shah: We have been investing mainly in the top 50 markets. But, not as much in the top five markets. We are hoping we will see more opportunities in the top five markets. An owner may have to have some new development or redevelopment done, and may have to sell to get liquidity. CPNHospitality: Has the credit crunch had an any impact on your investment and development initiatives? Shah: We are not seeing ten people competing on deals. On our three debt deals, one of which is about to close, we were able to get 65 to 70 percent loan-to-value, at 200 over LIBOR. All of these assets have existing cash flow, and we had a rational business plan for them. CPNHospitality: How have your assets performed this year, and please provide us with your outlook for the hotel industry? Shah: For the first five months of 2008, we are on budget. We haven’t seen a falloff in business group or leisure transient travel. There may be some softness this summertime. We were concerned last year, with $3-a-gallon gas. Now, with $4 gas, it is something we are keeping a very close watch on.