Doing Business With Family Values

Mit Shah is giving the lodging business his typically upbeat spin one early April morning in a boardroom on the 11th floor of Monarch Towers, a modern office building in the Buckhead section of Atlanta. The founder, president and chief executive officer of Noble Investment Group is explaining the success of the company he formed in 1994, when he was only 25. A diversified management, operations and investment juggernaut with more than $500 million in projects in the pipeline, Noble does big business with the elite of lodging brands.

Within walking distance of Monarch Towers is Noble's 290-room Crowne Plaza Hotel Atlanta/Buckhead; a new InterContinental Hotel; and a Mansion under development by Rosewood Hotels and Resorts. This bustling, upscale area has always appealed to Shah, who is clearly at the top of his very competitive game.

A family man who relishes a great cigar and even better wine, Shah talks finance with an athlete's razzle-dazzle. He frames his projects in terms of “concepting” and apparently views the world as his oyster.

Noble is big enough to have been one of the top suitors of Meristar Hospitality, which The Blackstone Group bought for $2.6 billion in February. That suggests it would not be surprising to read that Noble acquired another major management company in the very near future. An expansive operation, Noble demonstrated its entrepreneurial ambitions in 2003 when it acquired Stormont Hospitality Group and turned it into a separate division, Stormont Noble Development.

All such moves are made with critical input from Mitesh Shah, a Wake Forest University economics graduate who schooled himself in investment banking before he founded Noble courtesy of a $40-million stake from his father.

Since Bharat Shah opened that fortune to Mit, the younger Shah has repaid the favor many times over, cycling through hundreds of millions of highly profitable dollars; he and his closest business associates — very few of them kin — have developed a financial dynamo. Not only does Noble have $558 billion in lodging projects under construction, it has developed $766 million worth of lodging already. Noble has a robust equity position and a track record marked by success.

There's no room for failure at Noble, Shah suggests. But that doesn't mean the company is regimented. Rather, it's built around core competencies and the notion of collaboration is at its heart. Noble is about building value, more than about buildings.

There are three parts to Noble: Noble Investment Group, the parent company; its branches, Noble Management Group and Noble Development Group; and a third, more independent branch, Noble Private Equity.

Noble Management owns and manages 6,000 rooms in 31 hotels throughout the U.S. Noble Development does master planning, entitlements, architecture and estimating and is involved in large luxury and select-service hotels, like the W Atlanta Midtown conversion of the Sheraton Colony Square and an aloft it is building for Starwood in Charlotte, NC.

Noble Private Equity, which raises and controls the money, is key to the success of the other branches, to creating the value that proves Noble's worth, Shah suggests.

“If we only operated 1,000 rooms and 10 hotels, I would ask my group the same questions,” he says. “Are we better than those we compete against, and if we're not, how do we get there? Can you create value?”

People in the business compare notes about how many hotels their company owns and how much business they're involved in, but that's just talk. “The thing that matters the most is how much value did you create in the last year,” Shah says. “That's how we measure our success.”

Noble has three metrics: team member loyalty, to gauge how Noble's 3,000 employees feel about the company (about 60 work at the 26,000-square-foot home office); guest loyalty, or how their allied brands feel about Noble; and ROI.

Between 1994 and 1999, Shah says, Noble achieved a “five times multiple,” making $5 for each dollar invested; between 2000 and 2005, the multiple was two. The latter is the goal.

A MATTER OF TRUST

Bharat Shah, Noble's chairman emeritus, who has an office at Noble, drops in frequently to visit his son, Mitesh. Not only did Bharat Shah stake Mit to what has become the highly lucrative Noble Investment Group, he similarly backed Mit's kid brother, Raj, who apprenticed at Noble, in forming Pinnacle Real Estate Partners, a development firm engaged in office, real estate and residential. Real estate is this family's lifeblood.

“We have the perception we're a family business,” says Mit Shah. “The reality is we are a dynamic real estate and lodging company with family values that isn't a family business.”

His father “allowed me the opportunity to start Noble and own 100 percent of it and take our family's capital and invest it in the lodging sector. It was never a family business. It was always a business he allowed me to launch and grow from, like he did with my brother.”

It astonishes Shah that his father entrusted him with building a platform around “everything the family had and (with) full ownership of that.” That gave him “100 percent of the benefit of the guidance without any of the complexity of the control.”

In many family businesses, the patriarch tells the son they will be in it together, “but I own the company and I'll give it to you a little bit over time,” Shah says. In his case, Bharat told Mit they'd do this together and Bharat would be a mentor as long as Mit needed him. Same goes for Raj.

So Mit Shah built on the family fortune by hiring the best. He believes in “bench strength” and in developing core competencies. Noble invests 40 hours of training per employee and gives its top tier ownership in the company; 15 Noble officials “have a piece of the action,” Shah says.

“The key aspect is to find the right leaders, share the vision and share our view on how we create value,” he says. “Our company creates value by making profits on our investments and for our real estate partners.”

Among those partners are Starwood Hotels & Resorts; not only is Noble developing an aloft in a mixed-use development in Charlotte, NC, it recently purchased the 460-room Westin Long Beach, its first California venture. That $88.4-million acquisition is Noble's first in a series of ventures with Starwood. Besides Starwood, Noble operates independent destination resorts and upscale hotels affiliated with Marriott, Hilton and InterContinental Hotels Group.

“People bring us opportunities that are strategic,” says Shah. Brands want to deal with owners and operators of depth and range — like Noble, which has moved from Courtyards and Hilton Garden Inns to full-service Marriotts, Westins and Ws. “In the last 12 months, we've invested a half a billion dollars in capital,” Shah says. “The only way we've been able to do that is my real estate group, which is great.”

WORKING FOR NOBLE

Bob Morse joined Noble in early 2005 after four years as COO of giant lodging management company Interstate Hotels & Resorts. He likes the hands-on nature of his job.

“We operate, we build and renovate and design hotels, and we invest in hotels,” he says. “At this point in my career, it's really enjoyable to be able to do not only what I've been doing for nearly 30 years — running hotels — but to be involved in looking at all of our acquisition opportunities and helping underwrite them.” He likes being a key player in a nimble, private company that can make an impact. “I feel I have much more control of my destiny when it comes to the business,” he says.

Like Morse, Chief Investment Officer Rodney Williams likes Noble's manageable size — and its ability to scale.

“It's exciting to take advantage of the current landscape and put my brush strokes on the canvas,” says Williams, who joined Noble from Hardin Capital in late 2004. “There are no real geographic boundaries anymore, and we've enhanced our operating team for the full-service nature of the properties we're going after.”

Besides mixed-use situations like the aloft development in North Carolina, Noble is looking into projects in which it could be the preferred hotel developer in a mall. “We like the lifestyle centers and the malls, many of them in great locations,” Williams says. Here, Noble is interested in developing select-service hotels like Courtyard and Hilton Garden Inn, since the malls already have food and beverage as well as retail synergy.

“This is a collective effort, this is not Mit decides what we're going to do and then a bunch of soldiers runs around and does it,” says Shah. “I've always believed you've got to take advantage of opportunities with real bench strength.

“You don't find bench strength after the opportunity, because then you're always going to have to play catch-up.”


Visit www.LHonline for more information and related articles.

THE BIG IDEAS

Create value. Measure your success through team loyalty, guest loyalty and ROI. Build value, not just buildings.

Create core competencies. Operations, management, development and investment are related. They stand or fall together.

Empower through ownership. Noble gives its key executives a stake in the company, motivating them to create and execute successful developments.

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