INVESTMENT
buying opportunities are on the horizon and will come later this year and early next year and all the way through 2023 … We ’ re really gearing up for that buying opportunity .” In no case is Sage the majority capital partner in a deal , but the company with its roots in operations will act as a minority , general partner investor , raising capital on a deal-by-deal basis through high-net-worth individuals and friends and family networks . “ We delineate investments into two buckets – value-add opportunities , which sometimes we ’ re partnering with the big institutional , private equity folks and help create value through operations and our F & B expertise , and we ’ re very comfortable as just third-party managers . So , flexibility is the name of the game for us .”
In the current environment with higher interest rates , Sage is even more selective about partnerships . “ Strong sponsorship is really critical right now . So , working with all relationship lenders is critical ,” Stambules says . “ Fortunately for us , we ’ ve never been a high-leverage investor – never more than 65 % and in most cases 60 % to 55 %. So , I think / believe there ’ s still availability of debt for that level of leverage with good sponsorship and good economic moats that might be insulated from new supply through some competitive advantages that we can create .”
Underwriting is also very fluid with labor being one of the biggest challenges , Stambules adds . “ We ’ re going to see hospitality jobs come back to the space . So , we ’ re feeling like we can get that participation , but we ’ re also very sensitive to underwriting pay rates that are above living wage , and that ’ s probably where there ’ s been the most changes to the numbers .”
The new normal also has Stambules and his team forecasting differently – by segment . “ That ’ s maybe one of the best lessons from COVID . So , we are forecasting leisure , corporate and group in three different buckets and coming up
MIXED-USE CAN STILL FEEL VERY SEGMENTED AND ROLLING IT UP INTO ONE P & L , MAKING HOLISTIC DECISIONS ABOUT THE WHOLE PROJECT MAKES A LOT OF SENSE AND CREATES A LOT OF ECONOMIC MOATS AROUND OUR INVESTMENTS AND DEVELOPMENT PROJECTS . IT ’ S BEEN AN AREA OF SIGNIFICANT GROWTH FOR US .
– DEAN STAMBULES
with what we think RevPAR growth will be for each individual market based on those assumptions , versus just one master forecast .”
Being in charge of growth , both on acquisitions and on the investment side , as well as the third-party puts front of mind the capital market environment , the choppiness and pressure on labor , and getting people back into Sage . “ It ’ s a little bit of a wait-and-see environment on the acquisition front until interest rates settle ,” Stambules says . “ There ’ s a little bit more clarity now than even maybe a few weeks ago , or months ago into what interest rates will look like over the next 12 to 24 months .”
BRAND BUSINESS While more than 80 % of Sage ’ s portfolio is branded in one sense or another , it is moving toward independent concepts and continues to develop its own in locally infused Maven and the extended-stay / micro-apartment concept recently introduced in Denver called Catbird .
Sage ’ s Maven concept ( very local ,
lifestyle 4-star ) could be scaled , says Stambules , as somewhat of a collection brand . “ If we were to take it to Nashville , Tennessee , or Austin , Texas , for example , we ’ d want to make sure that it is rooted in that culture … We see that as an opportunity for growth over the long term .”
The group also wants to expand Catbird , a micro-extended-stay hybrid model that checks all the boxes in that it is 390 square feet with a full kitchenette . Sage doesn ’ t have additional Catbird projects executed yet but is eyeing CVB-adjacent markets and local , cool neighborhoods that may be traditional hotel gateway markets , according to Stambules .
“ We think these hybrids are here to stay … We see the opportunities to leverage the branding and creativity to lead with hospitality because , from our lens , it feels very multi-family and when you go to other concepts there ’ s no communal space , no activations ,” Stambules says . “ At Catbird , we have no traditional front desk – it ’ s a big kitchen counter with a chef behind it every morning … We think hospitality is going to bleed through all other asset classes – you
38 hotelsmag . com October 2022