It was always a natural progression for Israel-based Fattal Hotel Group to look to North America for development, but finding the right property took time. Now, the company is finally making its move with an unannounced deal in New York City, according to Ronen Nissenbaum, Fattal’s CEO of Western Europe.
Nissenbaum noted that choosing the right launchpad is critical because Fattal doesn’t plan on maintaining a solo presence on the continent.
“Typically, when you look at our company, once you pluck down one hotel, it quickly mushrooms into 10 or 20 or 30 hotels, and that was the idea, strategically… in a significant market with a significant, a good-sized hotel, to allow us to move forward and look past the headwinds,” Nissenbaum said.
As an asset-heavy owner-operator, Fattal relies on taking over, improving, and managing properties internally to generate Alpha. For a long-term investor, conviction in the market is essential — and a favorable economic climate is sweetening the pot.
“For us, it's about putting the money in a place where we feel we're getting the right returns," Nissenbaum said. "The exchange rate is very helpful right now. When you think about the institutional money coming from Israel, it's the best exchange rate we've ever seen, which obviously makes buying here a little bit cheaper right now for us. Long term, it's the right decision.”
Because a large portion of the guests staying across Fattal’s 315-hotel global portfolio are from North America, establishing a brand presence here makes strategic sense.
“By putting a brand on the ground and making it a little bit of an easier decision (for our customers) to stay in one of our properties… it makes sense from every direction, and it's the beginning of a development strategy that we have for North America,” he added.
Nissenbaum shared these insights during the “Global Capital On the Move: Who is Deploying and Where They’re Betting” panel at the NYU International Hospitality Investment Forum in New York. Moderated by Abhi Jain, partner at New York City-based PwC, the session also featured Scott Ellman, managing director at New York City-based Eastdil Secured; Ben Klein, senior director at Dallas-based CBRE; and Stephany Chen, head of Investor Relations at Miami-based Trinity Investments.
Shift in Mentality
While direct fundraising has posed challenges lately, Chen highlighted a shifting mindset among international investors. Historically, buyers have viewed hotels as a risky, operationally intensive asset class.
“What has shifted is… there's more of an appreciation for the specialist nature and the need to have these asset managers on the ground to build Alpha and have a more direct influence on the results of the investment,” Chen said.
Consequently, international investors are pivoting away from relying purely on cap-rate compression and are instead focusing on hiring or partnering with specialized managers. While macroeconomic headwinds are still dictating the pace of deployment and diligence, Chen noted that this re-engagement marks a distinct new trend in the sector.
Equity Competing with Debt
Selling hospitality to sovereign wealth funds and foreign investors has become highly selective and situational, according to Ellman. Rather than utilizing the direct-investment approach that sovereign funds favored a decade ago, many groups are currently unwinding those direct teams. Today, they are securing exposure through existing equity portfolios or relying on specialized sponsors to handle capital allocation.
“Quite frankly, the equity is competing with the debt,” Ellman said.
With capital gravitating toward downside-protected options like preferred equity, traditional debt funds, and mortgage REITs, hospitality is also battling other commercial sectors for attention. Investors are constantly weighing hotel deals against data centers, industrial properties, and multifamily assets.
However, foreign high-net-worth individuals are stepping up to fill the void left by sovereign wealth funds.
“We're seeing a lot of high-net-worth, more than the sovereign [wealth funds],” Ellman said. “We're selling plenty of properties to high-net-worth capital coming out of Europe, selectively in the Middle East and occasionally in the Far East.”
Middle East Investments
Geopolitical factors are also reshaping capital flows. Klein noted that while direct investment from the Middle East was robust before the war with Iran, it has temporarily slowed.
“That's tapered off a little bit as you can imagine, for the time being, but we expect that to come back in full force,” Klein said. “We've been seeing quite a lot of activity from Asia, which has actually been an interesting bright spot.”
Even with the recent choppiness, Middle Eastern capital hasn't vanished—it has just shifted toward indirect vehicles. Sovereign funds are still making heavy hospitality allocations by acting as limited partners in flagship funds, ensuring global capital continues to find its way into the sector.