The 'Secret Sauce' in Noble's Deal Making
Fresh off more hotel acquisitions, Noble Investment Group’s Chief Investment Officer Ben Brunt talks about sourcing deals, what’s in the company’s pipeline and targeting “stressed” opportunities.
Noble Investment Group is always active in the hotel M&A market and the deal space is always competitive. Ben Brunt doesn’t see that as a problem.
“We always feel like good assets in good markets are going to have competition,” said Brunt, who is managing principal and chief investment officer for Atlanta-based Noble. “It’s really about figuring out where you want to be and then being proactive in terms of sourcing it. That’s how we prefer to do business.”
Brunt said in a brokered landscape, deals are going to be competitive by design, but Noble’s “secret sauce is uncovering the opportunities that are not readily available to other groups.”
Last week, Noble uncovered its latest opportunity by acquiring a pair of newer hotel properties (one was built in 2019 and the other in 2021) in the Indianapolis, Indiana suburb of Fishers, Indiana. They acquired the Courtyard by Marriott Indianapolis | Fishers and the dual-brand Hyatt House & Hyatt Place Indianapolis | Fishers from an undisclosed regional owner-operator for an undisclosed amount.
Brunt said Noble targeted the assets because it liked a lot of the market dynamics for Fishers and the mixed-use development the hotels were located in. Another positive was the properties were managed by a company Noble had a great relationship with – Evansville, Indiana-based Dunn Hospitality Group.
“It was important for [the owner] to transact with a group they had confidence in partnering with from an owner-manager relationship going forward,” he said. “Our expectation is that we can continue to do more with them. They have other projects in their development pipeline, so we hope to continue to build and grow that relationship into the future.”
Brunt said the deal took about six months to come together from start to finish, adding that he likes the benefits of the newer properties from a cash flow perspective.
“We’re able to tap into all of the demand segments through this location and capitalize off of a vibrant mixed-use environment that’s been created,” he said.
Noble currently has a hotel portfolio of 70-plus properties worth roughly $3 billion, primarily in the Marriott and Hyatt families.
While Brunt said the firm loves assets in its “backyard” of the Sunbelt, Noble is also cognizant of having a geographical balance for its portfolio, too, and has assets all over the U.S. in Washington, California, Colorado, Idaho, Utah and many throughout the Midwest (although these were the company’s first in Indiana).
Last January, Noble closed its largest real estate fund worth $1 billion from 25 investors, pension funds, endowments, foundations, insurance companies and wealth management funds, including $150 million from Bethesda, Maryland-based Host Hotels & Resorts.
Brunt said the company always has an active pipeline even in what’s been a challenging and muted M&A environment and said he’s happy Noble has still been able to get some deals done. The company has a couple of deals under contract that he expects will close early in 2025.
“We’re very optimistic about 2025 and early 2026 and we see that as a period of strength and activity for our pipeline and transaction environment,” he said.
Noble's Dealmaking
Noble is adept in dealing with individual assets as well as larger portfolio deals.
“We pay attention to both,” Brunt said. “With the size of our fund… a portfolio is certainly the more efficient way to spend our time and to transact. So, we’re constantly looking for that type of execution. However, we definitely pay attention to individual assets and small portfolios… It’s a little bit of everything. We liken it to more of a balanced approach versus a certain dollar amount to move the needle.”
Brunt said the company likes to target “stressed” hotels that might be dealing with a loan maturity, brand-mandated PIP requirements or deferred maintenance or partnerships that have held onto an asset longer than they have anticipated.
“There’s a lot of reasons that create the need or the desire for an owner or a partnership to transact. We think that the environment that we’re in and what we believe will still be the situation into the next 12-18 months will still be helpful to groups like Noble that have raised capital to deploy during this time period,” he said.
While events like the Federal Reserve cutting interest rates by 50 basis points certainly help the M&A environment, it doesn’t mean there aren’t significant bid-ask spreads for many deals.
“The challenge right now in terms of underwriting is that if you pay attention to any of the macro forecasts… aside from some of the unrecovered and more challenged markets… none of them really are showing or forecasting any kind of meaningful RevPAR growth over the next five years, despite the fact that supply growth is expected to be at an all-time low,” Brunt said. “So, it really requires some more in-depth analysis. That’s the challenge with underwriting – finding those markets and assets that you believe can outperform the forecasts that are in place.”