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Allegiancy is changing the game of commercial real estate


Allegiancy is changing the game of commercial real estate

By: Steve Sadler, CEO, Allegiancy

March 24, 2016

Cutting edge performance with an emphasis on the human side of real estate investment: That’s what defines our culture at Allegiancy. We believe in using creativity and ingenuity to identify problems, solve them effectively and protect the investor’s capital. Over the last decade, our goal has been to let each building tell its own story through the collection of data points that show trends, costs and functional issues. Those stories, captured through proprietary software, help us shift from being reactive to proactive. And that’s what maximizes investors’ return on a property.


Our passion as commercial real estate asset managers is what is pushing us to redefine the industry. Allegiancy is only the second company in the U.S. to launch an IPO offering under the new Regulation A+ crowdfunding rules. Announcing the plans at the NextGen Crowdfunding Ignition 1.0 event at SWSW on March 14, 2016, we laid out our plan to raise $30 million in capital to continue pushing the boundaries of commercial real estate to something bigger, something better.

Technology drives Allegiancy and we are defining the future of real estate investing. Join the revolution.

In case you missed our presentation, read the complete transcript below and watch the video.

CEO Steve Sadler

Ladies and gentlemen, my name is Steve Sadler. I am the CEO of Allegiancy. We are a commercial real estate asset manager. We are a commercial real estate technology disruptor. Our company has decades of experience in the industry and we have been working toward this day for at least 10 years. From 2005 to 2010, Allegiancy was deeply involved in the mastery of commercial real estate operations and asset management. From 2010 through 2015, we have focused our attention intensely on developing and perfecting a technology platform that enables our people to perform better and our properties to deliver superior results.

Those are the 10 years we’ve put into this and today we are here and we’re very excited to announce that we have been qualified by the Securities and Exchange Commission to launch a $30 million Regulation A + IPO. And what I’d like to start with is a little video that might help you understand what we do and why we think it’s important. There’s an awful lot of moving parts that go into a commercial real estate operation and there’s one key part that you cannot live without. So if we could cue the video:

Orchestra Leadership Allegiancy 1

So clarity from chaos is something that only comes with great leadership, and leadership is something that is really indispensible. You can see it in political enterprises, you can see it in your homes, you can certainly see it in businesses. In our case, we can see it in commercial real estate. Each building is a standalone operating business, and that business to be successful requires leadership. And Allegiancy’s technology platform is designed to give our personnel great information that’s rapidly and readily available so that they are leveraged to deliver superior results. Our people, our team is working with a technology platform that expands their capabilities, frees them from small things, and gives them the opportunity to build the relationships that make for a great company, a great business.

Why is that important? Well, it’s important to us for a number of reasons. The invested capital that a property owner has in their building is really the blood, sweat and tears of a life time. It’s missed family events. It’s long trips on the road. Weeks, days, months not seeing their families. There’s a lot of sacrifice that goes into generating the capital that is then invested in a piece of real estate. We take that very seriously at Allegiancy. We have had the opportunity to manage assets, to take over assets that were poorly administered. In 2009 we took over a series of buildings from a bankrupt manager that had done some unpleasant things to their investors. And in that situation things had gotten so bad for some of those investors, we actually had one property where a gentleman committed suicide. And so there are real costs to real people when you don’t do a great job.

colonade-166-(ZF-0814-27034-1-008)WEBOn the flip side of that, on the more positive side, there’s real advantages to delivering excellent services, to delivering superior results. And our technology platform and our processes and procedures have been carefully built to make sure that happens, that that excellence is both delivered and that it’s repeatable. So we have a real passion for taking care of our clients, both at the property level and for the investors in our company, Allegiancy.

And so while we don’t own the real estate, as an asset manager we are a fee-based service provider. We don’t own the real estate, we just make it perform. And making real estate perform is a surprisingly complicated thing. There are thousands of data points that are flowing through the system all the time. And what we’ve learned, surprisingly I guess, but what we learned is that virtually none of the people in the business today are paying attention to that data flow. And so what we discovered in our operations in the early stages, this is the 2005 to 2010 period where we were working on the mastery of the systems and the processes, we found that over and over again important pieces of data were not captured, they weren’t measured, important things weren’t measured, that data was not aggregated, it wasn’t analyzed, it wasn’t ever even looked at. Even to this day, you’re in what 2016? One of the largest commercial real estate operators who works for other owners captures data from their tenant platform where the tenant would call in and say “Hey I’ve got a bad air conditioner or it’s hot in here or my light bulbs are out,” and they have that kind of a ticket system, if you will, all across the country, and no one in the entire organization captures the data that’s being produced by that ticket system.

Predictive Analytics Commercial Real Estate Asset ManagementAt Allegiancy, we take that same information and we plug in our decision algorithms that allows us to do predictive analytics. So if your air conditioning in suite 301 is having challenges on the third Thursday, every month, we see those patterns. The algorithms pick that up and the analytics will send a technician out there to take care of that issue proactively, a very different approach. And the impact is visible on the top line in terms of revenue from tenants that are paying their rent and stay in the building because they’re happy. It’s also very visible from the bottom line perspective, in that we have a keen focus on operating expenses. One of the technologies that we deployed early on , that’s worked incredibly well, is a minute-by-minute real time monitoring of utilities expenses. So your building, in most commercial office buildings, particularly electric utility expenses, are your number one or number two cost. And so if you’re paying attention to that you can have a real impact.

The systems that we’ve delivered in the properties that we manage are saving on average 30 percent in total electricity expense. And for a commercial office building that might be $50,000 or $100,000 a year in direct savings dropped straight to the bottom line, which is paid right out to investors. Investors just like the people sitting in this audience, just like the people watching us at home, who have capital at risk in these properties and are counting on that income for retirement and other purposes.

And the money matters, it matters to real people. The gentleman that I had mentioned previously, who committed suicide, his situation was he had lost the income from all $10 million worth of invested capital. He went from being a well to-do person who had great freedom and flexibility to being someone who was trying to figure out how to live on social security. That had a very serious impact for him and obviously for his family. The money that we pay out each month in distributions to investors, both the property owners and those shareholders in Allegiancy, that money goes to fund the capital for startup businesses, for vacations, for retirement, for college educations. It has a real impact in the real world.

Leadership TeamMany people don’t realize this, but in the global scheme of things, certainly in the United States of America, more than 40 percent of the capital, of the assets, of the wealth that transfers generation to generation does so through the vehicle of real estate. So real estate is a very big deal in the lives of an awful lot of people.

And so what we’ve done, the reason we think it’s important is that the money matters, the money represents the life blood of real people. And that we care very deeply about. And what we’ve done from a technology perspective is linked to that same premise because we see that in our business the people component is a critical aspect. You’ve got to have good technology, but for that to mean anything it needs to actuate or activate your people. So our technology is designed to leverage people, to help them think more clearly, to help them think more accurately, to help them act faster: proactively as opposed to reactively. It’s designed to help them perform consistently and to free each of our people up from what I’ll call low order tasks, tasks that might be urgent but aren’t important, to free them up from the low order tasks and allow them to spend more of their time connecting to the people that make decisions in their buildings to their vendors to their investors.

And that leverage, leveraging our people, is really what sets us apart. The technology platform, we have algorithms that are sorting data, every morning, reams and reams of data that the properties generate from real time accounting data to property operations and utilities information. The data is sorted each day and the critical pieces that are defined by these algorithms are pushed to the surface so that when you walk in in the morning and you worked for Allegiancy and you’re in the asset management group, you walk in in the morning and on your desktop is a list of things that have been identified for you that are critical, very important items you need to address along with the 3 million other things you have to do that day. But the technology is driving that and that kind of technology gives us two big advantages. One is that we can program it. So we can take the experience of a 30 year or 40 year veteran or the experience of an entrepreneur who’s been incredibly successful, and we can code that in and give a young guy who’s right out of college the advantage of that kind of knowledge base. The other thing it does is that it allows us to learn very quickly. We can see problems, identify where we’re falling down, where something’s not working and get that fixed very quickly. A typical data cycle in a commercial real estate property is about 45 days long, which is to say that a problem occurs and in most cases it’s at least 45 days until somebody who can fix that problem knows that it’s happening. Forty-five days before the person who’s money is being spent is aware of what took place. At Allegiancy with the technology platform that we have in place that cycle is down to less than 24 hours.

Allegiancy Predictive AnalyticsAnd that innovative technology plus the leadership is driving superior execution. In an industry where tenant renewal rates hover in the 50 percent Allegiancy is driving 70 percent plus in renewals. That means more rent, less down time, less capital expense that’s incurred at the property level. 95 percent client retention because the clients are getting more money, because the properties are well cared for, they have a tendency to stay with us longer. And that means the combination of these things has driven a 200 bases point increase in return on equity for the people who own properties managed by Allegiancy. Just so you know what that means, 200 bases points is 2 percent, which is about the yield of the ten year treasury. So in effect if your property is managed by Allegiancy ,it’s like getting a free ten year treasury. I don’t know if you want one of those or not, but free is still a good price.

What that delivers in terms of dollars, last year in the last 12 months, Allegiancy has paid out to investors about $7 million dollars more money than they would have received had their properties been managed on another platform.

And so what I want to mention to you is that we have a $30 million Regulation A + IPO that is now qualified by the Securities and Exchange Commission. It’s available. We’d love to have your interest. We’d love to have you take a look at our company and our platform. The investment banking effort on our behalf is being led by WR Hambrecht, which may be a name that’s familiar to you. And we have, we will expect to pay a 4 percent to 6 percent dividend in the first year. And we are disrupting a $15 trillion dollar industry with $886 billion in revenues. This is a big opportunity and the company, Allegiancy, has been in operation for over a decade and we are currently profitable. Thank you very much.

  • eryk gryphon

    no idea who wrote it but, as a software guy, a commercial broker, and an efficiency nut / project manager (respectively), i went into this article about a (relatively) small brokerage trying to leverage a monitoring/management tool that they built themselves while herding all the cats inherent to any brokerage this size and shape .. well,i was laughlingly skeptical. I finished the article very intrigued. All i can really compliment with what i know is that this is a very well written piece….. and i am going to learn more about you all because of it. cheers

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