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Q&A with Allegiancy CEO Steve Sadler, Part 3


Q&A with Allegiancy CEO Steve Sadler, Part 3

By: Baker Lynn

February 17, 2015

Steve Sadler, CEO of Allegiancy, a Richmond-based commercial real estate asset manager, answers frequently asked questions about his ever-changing industry, and what his company brings to the table. Here, in Part 3 of a three piece series, Steve discusses commerical real estate and investment industry trends.

Allegiancy is changing the business of asset management for commercial real estate owners and investors. With an advanced technology platform and singular focus on serving as the owners’ advocate, the company brings fresh vigor to an often poorly understood business.

Missed Parts 1 and 2? Read Part 1 here and Part 2 here, then continue on to Part 3 below.

Please tell us about the opportunities you foresee when the new Reg A+ takes effect and what Allegiancy is doing to prepare to capitalize on this.

Allegiancy is in growth mode. A meaningful part of that growth will come from acquisitions of other asset management companies and their contracts to manage properties as part of our portfolio. We have been in the marketplace raising capital to fund those acquisitions.

Last year, we did an equity raise using the U.S. Securities and Exchange Commission’s (SEC’s) Regulation A in anticipation of the new rules for Reg A+ becoming effective soon. What Reg A+ means is that we’ll be able to raise $50 million to fund our acquisition strategy. That’s a meaningful uptick from the old rule of $5 million maximum under Reg A.

For us, Reg A+ gives us the opportunity to access the public marketplace. We can issue stock that’s traded like any public company’s. It gives investors liquidity and access to the audited financials of our company. It gives us the capital we need to grow, to provide more and better service to our clients, and to hire more people. But what’s may be even more important for the country, it gives investors who may not be private equity funds – or may not be the Bill Gates of the world – access to new opportunities. It gives regular investors access to young companies with huge upside potential far earlier in the game than a traditional initial public offering (IPO) would.

So with Reg A+, a lot of smaller firms will get access to capital without selling their souls to private equity firms, and investors will get the chance to make those investments while there’s still a 10 to 12 or 20 times growth story to be taken advantage of.   Whereas today, by the time an IPO comes out, most of the enormous returns have been taken up by those early private equity investors.

We at Allegiancy see Reg A+ as a great opportunity for companies to fuel growth, and for investors to bolster their returns.

What was significant about thought leader Dara Albright mentioning Allegiancy in her blog?

That confirmed that there’s a new wave forming. For us, the conversations we’ve had with Dara have been supportive of our view that there’s a whole new era coming, and that Regulation A+ , along with crowdfunding, essentially mean the democratization of our capital markets. American markets are finally moving back to where they were at the beginning, when the little guy with the great idea and lots of gumption really could make things happen.

Dara’s highlighting us – and our subsequent involvement in her conferences – have been an affirmation that we’re on the right track.

What has been your greatest success in this industry, and what has been the challenge that you learned the most from? What are some of your goals for 2015 and beyond?

Our greatest success was completing the Reg A offering so that we’re in a position to capitalize on the opportunities we see in the marketplace. In April of last year, we closed on a $5 million equity raise, and we now have a great group of investors supporting our future growth. So that’s been big success for us.

In terms of challenges, there are lots of moving parts. We have to coordinate them, and none of it is as easily done as it is said. There’s a lot of work that goes on behind the scenes in commercial real estate asset management that’s block-and-tackle, get-your-hands-dirty work. It’s not particularly sexy stuff, but applying shoe leather and elbow grease really make a difference.

Executing on an idea is at least as hard as coming up with it. At Allegiancy, we’re in the execution phase, so that’s an ongoing challenge. But that’s naturally where we learn the most. As we overcome the challenges, part of where the opportunity lies in asset management – part of why our technology-enabled asset management platform is so valuable — is that other people haven’t done it before. Part of the reason is it’s a lot of work, and it’s not easy. For us, these are all linked – the hard work is the most valuable work where we can learn the most.

In 2015, we expect to close on two to three acquisitions. We expect to have more than $1 billion of assets under management in 2015. We’re hopeful that our friends at the SEC will complete their rulemaking for Reg A+, so that will give us the opportunity to close another $30 million round of funding. With our next two acquisitions, we will have utilized our first capital raise, and we’ll be ready to deploy a second one. We’re hopeful that by the end of 2015, we’ll be in the position to do that.


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