Frequently Asked Questions
Why invest with Sapient
Most crowd funding portals do not serve as Managing Members/General Partners of the real estate investment project entities being offered on their sites. They simply advertise and market the real estate offerings of other Sponsors like SPG.
Whereas the Managing Members of SPG are actually the developers of each project and have the responsibility of providing quarterly reports, serving as the tax partner and achieving the financial performance for their investors. Further, the Managing Members of Sapient’s offerings typically have “skin in the game” on every project being offered on the SCPS portal. The Executive Team of SPG has over 70 years of extensive successful experience in almost every aspect of syndication, development and operational management spanning almost every real estate asset class. SPG’s projects are designed to create potential cash flow (mail box money), appreciation, tax shelter, portfolio diversification and tax shelter. SPG performs extensive research and due-diligence on every potential project under consideration and only targets properties which have the potential to provide investors with a minimum targeted IRR of 20% (on leveraged projects) or 15% IRR on non-leveraged (“all cash – no debt).
SPG exclusively target projects located in the growth areas of Texas with a heavy focus on the thriving and rapidly growing areas such as Dallas/Fort Worth and SMSA.
Why structure development projects on a non-leveraged basis (all cash with zero debt) when leveraged properties (utilizing debt) can produce higher rates of return?
Given the current interest rate market SPG is currently structuring its new ground up development projects on an all-cash basis with no financing because time and debt provide the greatest risk to a development project . Aspects such as city and county approvals, supply chain restraints and the weather are elements which are beyond the control of the developer and are therefore hard to predict or budget for. When you have construction financing on development projects these delays, caused by these unpredictable elements, translate into higher development costs due to the increased debt service amounts. And, with the recent increase in interest rates, debt can end up being the difference between a highly profitable project and a marginally profitable project. Or, worse, a failed project. Thus Debt translates into Higher Risk. Sapient targets new development projects which have the potential to provide its investors with a 15% plus IRR (on an all-cash basis with zero debt). And, when you remove the greatest risk (Debt) to a real estate project a 15% IRR is a very good rate of return.
What is the Risks associated with debt?
With existing projects, permanent financing typically has a term date of ten years or less. So, in periods of rising interest rates, such as what we are currently experiencing, when the due date arrives the loan must either be paid off or refinanced. That is usually accomplished by selling the property or re-financing it. Refinancing may be problematic during periods of rising interest rates as lenders tend to reduce the Loan To Value (LTV) or percentage of the property value on which they will lend. In some cases, this may mean that the owners/borrowers may have to contribute more equity to qualify for a loan. The office building market is a good example of this. COVID made it necessary for employees to work from home and therefore office building occupancies plummeted, reducing the Net Operating Income (NOI), thus dramatically reducing the property’s value. Even today, with the lower risk of COVID workers resist going back to the office so office building occupancy remains low. There is presently a valid concern that when the office building market’s debt becomes due we may see a dramatic rise in foreclosures as property owners are faced with either contributing more equity or being foreclosed by their lenders.
The Sapient Property Group believes that its primary goal is the preservation of its investor capital and thus strives to eliminate risk wherever possible and therefore has trended toward funding its investment offerings on an all cash basis rather than with substantial debt as has been the typical historical method.
Why invest in commercial real estate as opposed to stocks and bonds?
Why invest in Multi-family (MF) ground-up development projects rather than existing value add MF projects?
Due to the high demand for quality existing projects, it has become a seller’s market with higher prices which have driven investor’s returns to unattractive levels. However, in this increasing interest rate environment there may be some opportunities to acquire properties from sellers who find themselves caught with the debt on their property coming due and the prospect of not being able to refinance without putting in more equity. And, that may present a buying opportunity. As Warren Buffett has said, pounce when others are fearful.
However, new ground up development projects continue to offer the greatest potential for creating above average rates of return. As a result, investor returns in development properties are typically much higher than for existing properties. The SPG’s current offerings are in the most vibrant real estate segment, the multi-family market. Multi-family rents in the Dallas area increased by roughly 21% during 2021 creating tremendous increases in revenue and value increases for multi-family projects. Occupancy rates in multi-family properties are currently running around 98%. SPG’s ground-up new development projects are targeted to provide its investors with a 20% IRR (on a leveraged basis) or 15% IRR on a non-leveraged basis (all cash – no debt). With ever increasing interest rates many potential home buyers are being priced out of the market and therefore relegated to the rental market. This fact alone makes investing in multi-family properties a wise option. Muli-Family properties have also historically been a very good inflation hedge.
What services does Sapient provide?
Texas: A Prime Market for Real Estate Investment
Texas continues to rank among the top U.S. states for real estate investors due to its strong population growth, robust job market, and business-friendly climate.
Population & Economic Growth
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Texas is the 2nd most populous U.S. state with over 30 million residents.
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Home to four of the nation’s largest cities: Houston, San Antonio, Dallas, and Austin.
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Since 2010, Texas has added over 4 million residents—more than any other state.
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The state’s GDP exceeds $2.4 trillion, making it the 9th largest economy in the world if it were its own country.
Job & Business Climate
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Texas leads the U.S. in job creation and company relocations.
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No state income tax and a pro-business regulatory environment.
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Home to 55 Fortune 500 headquarters (2023), second only to New York.
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Major industries: energy, tech, healthcare, aerospace, logistics, and finance.
Real Estate Market Strength
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Texas cities like Dallas, Austin, and Houston remain top destinations for residential and commercial real estate investment.
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Despite rising home values, housing in Texas is generally more affordable than coastal markets.
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High in-migration and job growth continue to drive demand for rentals and homeownership across metro areas.
Quality of Life
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Cost of living in most Texas metros remains below national averages.
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No state income or inheritance tax.
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Diverse culture, strong education systems, and a wide range of recreational and professional opportunities.