Noble closes $233m value-added hotel fund

Noble Investment bets that hotels stay hot with its third fund.

In a year with record-setting hotel occupancy rates, Noble Investment thinks the market will continue to heat up.

The Atlanta-based private equity real estate firm held the final close in August for Noble Hospitality Fund III, a $233 million fund that has already allocated about a third of its equity. The fund launched in 2014, according to a filing with the US Securities and Exchange Commission, and exceeded its target by more than 15 percent.

Noble focuses on branded properties in desirable locations, trying to reposition them for better returns, according to its website. The firm is targeting a 20 percent internal rate of return for this fund through acquiring, constructing or improving hotels in the top 50 US urban markets. In the past, Noble funds have drawn big institutional investors, including the Los Angeles Fire and Police Pension System and the New York State Common Retirement Fund, according to PERE Research & Analytics.

Thomas Boytinck, who handles public relations for Noble, said all of the limited partners are returning investors. They’re “a small group of predominantly endowments, foundations and public pension plans,” he told PERE.
Noble’s second hospitality fund, which is fully invested, raised $220 million in 2013. The fund series’ first vehicle closed in 2007 with $310 million. New York-based Allegro Advisors was the placement agent for all three funds.

Noble started a Marriott buying spree in December, picking up 10 Marriott properties from Gainesville, Georgia-based McKibbon Hotel Group. Executing its strategy of investments near universities and medical centers, Noble followed that December acquisition with the March purchases of two Marriott Courtyard hotels in New Haven, Connecticut, near Yale University, and in Chapel Hill, North Carolina, near the University of North Carolina. It also snapped up the Renaissance by Marriott Fort Lauderdale in April and a Houston SpringHill Suites property by Marriott in June. The investment firm became a Marriott franchisee in 1996, according to its website.

These purchases and the latest fund close come as hotel advising group PKF Consulting USA forecasted a continued period of growth for the industry in a June report. The consultancy predicts strong growth in revenue per room and average prices, with an increase in room rates driving growth in 2016. PKF forecasted revenue per available room increasing 6.8 percent in 2016, more than the long-run average.