Skip to content-main content

News Room

March 21 2015

Q&A with Allegiancy CEO Steve Sadler

Leading commercial real estate asset manager discusses growth opportunities, challenges and plans for 2015

Richmond – 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.

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.

Here’s how.

Part One: Allegiancy’s Story

  1. What is the history Allegiancy? What does it do today?

My partner, Chris Sadler, started in commercial real estate in the mid-1980s, and I started in the early 90s doing investments and syndications for institutional investors. In 2005, we entered the industry as direct participants, rather than employees of large companies. We founded our predecessor company, Real Estate Value Advisors and our management firm, REVA Management, which has now become Allegiancy.

Allegiancy is a pure-play, fee-for-service asset manager. We operate commercial office buildings for the benefit of the owners. Functionally, we are the guardians at the gate to protect those owners’ interests. We make sure that their properties are being run as efficiently and effectively as possible to maximize the return they get on their capital.

  1. What qualities do you seek in potential clients, and on the flip-side, what qualities do you and Allegiancy have that prompt potential clients to select your services?  

Functionally for us, we look for the opportunity to serve an investor in commercial real estate – someone who owns anywhere from one building to a portfolio of buildings. We have several clients who are considered small players in commercial real estate – they may own a single 50,000- or 100,000-square-foot building. And we have clients that are large institutions, with millions of square feet under management, in which we may manage part of their portfolio.

The central element we look for is the opportunity to add real value, so we can deliver a meaningful improvement in bottom line performance for that investor.   That covers a wide array of assets and geographic locations.

Allegiancy has developed a sophisticated technology platform that leverages our performance, while many of our competitors are still operating with pencil-and-paper technology platforms. So when we take over asset management, it’s very rare that we don’t find meaningful savings and revenue potential in a property.

  1. Allegiancy talks about integrity being your best property.   Can you explain why that’s important, especially now after all the financial debacles of the housing bubble and advisors scamming their clients?

For most commercial property owners and investors, their investment is physically not near them. So they’re investing in assets that are far and wide. Because they can’t keep their eyes on their properties, these owners need someone looking out for them.

That’s why you as an owner have to have a partner you trust to keep your best interests in mind – a partner who will do the hard things on your behalf, and sometimes a partner who will give you the bad news you don’t want to hear.

For us, integrity is about telling the truth and working hard for a client as if it is our own money – as if it’s our daughter’s college tuition that’s at risk.

For the most part, there’s been a huge disconnect between the service providers and the people whose money is at risk. What we see day in and day out is that investors aren’t getting a fair shake a lot of the time. They really are being taking advantage of because they’re not able to pay close attention to their property.

In the real estate business, it’s all too common for a property manager to write a $10,000 check to replace an air conditioning system, when a $1,500 check would have solved the problem. But for a lot of property and asset managers, it’s not their money so they’re not as concerned about the efficient use of it as we think they should be.

A big differentiator for Allegiancy is that we operate on a different ethical plane, where we’re looking at every dollar, every capital expense, every bit of income, and every operating expense, as if the dollars were our own. We are weighing expenditures carefully to make certain it’s the highest and best use of a limited resource, and that’s someone else’s money.

Part 2: Fundamentals of Allegiancy’s Approach to Commercial Real Estate Asset Management

  1. Would you share with our readers some of the rags to riches stories your firm has transacted that have brought new life to distressed properties?

One of the things we’ve done a lot of is taken over properties where there were challenges. In most cases, those challenges were due to lack of attention by previous asset managers.

Certainly in 2008-09 era, there was a lot of stress in the marketplace. But what we see 70 to 80 percent of the time real is that the real crisis was self-inflicted by management that wasn’t paying attention.

For example, we have a property in North Carolina where, when we came in, the tenants were very unhappy. Some of their bills had not been paid. In fact, $1.5 million was owed to two tenants for improvements they had made, which hadn’t been reimbursed.

We did the things that I would think any reasonable person would do. We walked in and had face-to-face meetings with those tenants, listened to them, and found out what they saw as the main issues. At the same time, we sat at the table together and negotiated a solution that would get them most of what they wanted, and allow us to continue to operate the property for the benefit of our clients. Then we executed on our commitments to the tenants and the owners. The end of that story is that that property has almost doubled its net operating income. It’s been refinanced, and the ownership is very solid and stable with good cash flow.

We also have numerous examples that may be less dramatic, but tell a similar story. We had a property in Arizona where the previous asset manager had evaluated the air conditioning control system and decided it needed a new one. They had bid it out, and found that the price to replace was $120,000. When we came into the property, it had little or no capital, so an expenditure of $120,000 was a problem.

We reevaluated the situation and came back with a system that would cost the owners considerably less. It didn’t have all the bells and whistles of the more expensive system. But interestingly, that expensive control system could also control the building’s lights, doors, and water flow; yet none of those were compatible with the proposed control system.

So as an owner, you were going to end up with a $120,000 thermostat. At Allegiancy, we were able to get Internet-controlled thermostats installed throughout the building for $20,000. So there, we saved those owners $100,000 in capital. That’s the kind of meaningful impact that an asset manager who’s paying attention can have. It’s real money, and it makes a difference.

  1. What is the importance of tenant interviews and surveys to your work?

At Allegiancy, we ultimately we have a couple of different audiences. We communicate with our property owners, the tenants in the building, and the various vendors who work for us.

Ongoing interviews and communications with tenants give us direct feedback, so we know how our people are doing, how our services are perceived, where we have opportunities to improve, and how our various vendors are accomplishing their tasks. Direct communication with tenants is an important way we know what’s really happening on the ground.

  1. What do you require of investors? What are their qualifications for making a minimal investment?

Allegiancy is an asset manager, so we’re not typically involved in setting up the investment side of a commercial property. But on the assets where we are managing, a typical investor is accredited with a couple of million dollars of net worth. On average, their capital contributions to a property are around $250,000.

  1. Many investors are turning to real estate to diversify their portfolio, and some are being told that it is a real simple deal: just invest and collect the checks. Why is that not necessarily the case? What is the reality of real estate investment?

The reality is that, like any other business, there are many moving parts that have to be accounted for in commercial real estate.   If you were to look at the average suburban office building — and look at it as we at Allegiancy do — as a standalone operating company, here’s what you would see: That “company” needs a president to look at every aspect of its operations to make sure it’s efficient and profitable.

If you look at an office building as a business, it may have $3 million in revenue and $2 million in expenses, with a $1 million profit margin. In the grand scheme of things across the United States, that would be a large “small business.”

As with any other small business though, there are a lot of things that need to be taken care of – there are tenants, vendors, and physical property that need to be cared for. All of that is real work.

What an owner needs is someone protecting their interests and executing on a business plan for their property so that the owner can just relax and cash a check. At the end of the day, what you’re really looking for as a passive investor is someone you can have faith and trust in to execute on a business plan. Without that partner on the ground making it happen at your real estate investment site, your returns aren’t likely to be as good as they could be.


Part 3: Industry Trends

  1. 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.

  1. 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.

  1. 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.


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. Combining its proactive Value Assurance? operational rigor with an intense focus on cash flow and profitability, Allegiancy is expanding on a track record of more than four decades of success.

Headquartered in Richmond, Va., and led by a team of seasoned professionals with more than 100 years of experience, Allegiancy manages properties that have outperformed their peers by 45 percent since 2006. The company has approximately $300 million in assets under management (AUM) and delivers clients attractive returns and profitable, hassle-free investments in commercial real estate. Allegiancy grew by 62 percent last year, largely due to referrals from satisfied clients.

More information about Allegiancy may be found at To schedule an interview with Allegiancy’s leadership, contact Audrey Bevel at or 866.842.7545 ext. 204, or (804) 201-7161.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Allegiancy, LLC’s (the “Company”) present expectations, but these statements are not guaranteed to occur. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” section of the offering circular dated January 14, 2014 and filed by the Company with the U.S. Securities and Exchange Commission on January 15, 2014. The offering circular, and any supplements or updates thereto, is available on the EDGAR system located on