Case Studies

One of our key value add strategies is through asset class conversion. Sage purchases exterior entry hotels in high density growth markets that fail to provide quality housing to their residents. With a critical imbalance between supply and demand, our units offer privacy and value for an attainable rate in a resort like setting. Utilizing the strengths hotels offer with a variety of amenity options, an all-inclusive utility package, and accessibility to down town markets near major employers. With such high demand for quality, attainable housing, the stabilized communities are at 95%+ occupancy quickly after Grand Opening and we consistently have annual occupancy exceed market occupancy rates by 3-5%. Due to the low cost per unit at the time of purchase as a hotel, and the value the asset represents once the property is an apartment building, large annual returns on our investment are generated while providing thousands of attainable housing units to markets with housing shortages.

Our competitive advantage is a result of our history in General Contracting and network of General Contractors that we contract with to renovate hundreds of units across the country every month. The majority of our contractors are invested in Sage Investment Group as Limited Partners and have rigid cost control, creative input, and construction management control that results in high quality work for a fraction of the cost the general market assesses for a full property renovation cost per unit. Utilizing responsible leverage for the purchase and renovation, our projects are completed and becoming occupied within 12 months of our closing date yielding fast deliverable housing units to markets in need and dramatically increasing the value of the asset as a result of its conversion to an apartment building.

1. The Sahara Apartments

Address: 919 N Stone Ave, Tuscon, AZ 85705

Project Summary: Purchased April, 2019. Sold November 2021. Held 19 months. 175 Units, 

Built 1954

Background:

The Sahara Apartments was originally built as a hotel in 1959 and was partially converted in 2004. Comprised of 175 total units (171 Studio, 1 – 2 bedroom, 1 – 1 bedroom, and 2 commercial), 58,000 SF, and 2.76 AC, the average rental rate upon acquisition was $575/month with an average 75% occupancy rate. The seller was operating 25% of the property as a hotel with nightly rates. The remaining tenant demographic was International Students attending the University of Arizona 5-blocks away from The Sahara. The seller was a hands-on operator that had not been efficient with operating expenses, had a large loss to lease, and high vacancy which provided the opportunity for a low cost per unit and large value-add upside.

Our Approach:

The Sahara provided an opportunity to rejuvenate a mid-century aesthetic and provide independent living studio apartment units to a market where few studio options existed. A $2.7M renovation was completed within 12 months and the business plan operations originally implemented was targeting the student demographic set to attend U of A in August of 2020. With Covid greatly impacting student attendance, a key strategy shift occurred in August 2020 with the removal of the student housing management team and new marketing plan with AMC Property Management targeting young professionals as the core demographic tenant. In February of 2021, the Sahara was 99.6% occupied and exceeding our forecast NOI. With continued CAP rate compression and multi-family purchase demand from low interest rates, the property was sold in November 2021 for $18.9MM.

2. Clover Creek

Address: 12502 Addison St SW, Lakewood, WA 98499

Project Summary: Purchased January, 2020. Sold October 2021. Held 22 months. 15 Units, Built 1965

Background:

Clover Creek Apartments is a 15-unit apartment community comprised of 13,200 SF, an average unit size of 813 ASF on a 22,550 SF parcel. Prior to the purchase of the property, the building had experienced fire damage with 6 of the 15 units down. Purchased off market, directly from the seller, Sage negotiated a reduced purchase price and the retainment of insurance proceeds from the seller for funding the renovation. The purchase price was $1,750,000 and the seller passed insurance proceeds to Sage of $502,500. The seller owned the property since 2006 and had not been keeping up with market rate rental increases or cosmetic renovations when turning units. The fire damage provided the ultimate opportunity for buying at a discount.

Our Approach:

Sage completed the fire restoration and renovation through the Covid era of essential labor requirements and supply chain disruptions. The property received a complete exterior overhaul including a new TPO roof, windows, siding repairs, painting, lighting, landscaping, and signage. The interiors had comprehensive fire restoration and a scheduled vacate notification for renovating all units systematically throughout the course of the year. With new management and operations expectations in place, the property was fully renovated and 100% occupied within 14 months of the purchase. Upon stabilization and T-3 accrual, the property was prepped for sale with a professionally marketed Offering Memorandum, a 2-month pre-sale marketing strategy to maximize engagement, and a designed on-market listing window of 12 days with a Call For Offers and acceptance of highest and best.

3. Lake View Apartments

Address: 1510 Lewis St, Centralia, WA 98531

Project Summary: Purchased September, 2019. Sold June 2022. Held 34 months. 25 Units, 

Built 1954

Background:

Lake View Apartments was an assemblage comprised of three parcels, 15,296 SF, on a 37,897 SF lot. The seller had owned it since 1998 and had operational inefficiencies, loss to lease, and was in need of cosmetic renovations. The property is near I5 and easy access to large employment centers. Located within a quiet residential neighborhood with small lake views, the property had a large loss to lease that could be eliminated through property renovations and creating a new target demographic for the community. 

Our Approach:

Purchasing off market provided the ability to purchase at a 4.6% Cap Rate with after renovation value of 7.7% Cap Rate. Without demand pressure from other buyers, the upside was preserved, and risk was reduced.  Creating operational efficiency, improving units upon vacancy from operational cash flow keeping the debt amount and expense low during the ownership period, and cosmetically updating the exterior allowed us to capture market rental rates from the comparable units rented and increased NOI by 67%. With a designed marketing approach at resale to garner the highest and best sales results, the property was sold with 60 days off market distribution, 14 days of online market exposure, and a call to offers with a highest and best round concluding in the sale of the property without contingency. 

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