Dean Stambules, managing director of growth and investments at Sage Hospitality, said Sage thinks of the property not as a short-term rental (which has a cap in Savannah) or a branded residence. He considers it more of a lifestyle extended-stay property.
“It’s really more hotel in the way that we would describe it to the market or our guests,” he said. “This apartment-style living accommodation with fully furnished units, we think in certain markets, particularly Savannah… This is a compelling product.”
Sage has worked with Tidal Real Estate Partners before (it was an original investor in the Perry Lane Hotel, a Luxury Collection Hotel project in Savannah which opened in 2018. Tidal later sold its stake, but Sage is still involved in the project) and was happy to work with the company again on this project.
The project, which was formerly called the Ann Street Lofts, was previously used for student housing for SCAD (Savannah College of Art and Design) and was vacated in July. That left the building effectively vacant, which Stambules said created a unique opportunity to make some “modest” capital improvements and recapitalize the project under the lens of an apartment hotel versus just apartments.
Sage Hospitality has some experience with this concept because its Catbird property in Denver is zoned for apartments and a hotel.
“Over the last couple of years, we’re starting to see that first trend of lifestyle in extended-stay and we feel like Catbird was a little bit ahead of the trend,” Stambules said. “[This project] is a really compelling next step for us, where we feel like we know the operating model and understand the revenue management strategy. But now have the power of Marriott Bonvoy behind us as well, which is exciting.”
Stambules said Sage isn’t anticipating as many long-term stays as the company has at the Catbird in Denver (he anticipates a three-to-four-day average length of stay for The Ann Savannah with an ADR in the $275-325 range). He thinks most of its business will be under that 30-day mark, with some executive relocations, small group components and SMERF (social, military, education, religious and fraternal) business, as well.
As for the joint venture, Sage declined to speak to the exact ownership percentage, but Stambules said Sage is usually no more than a 50-50 partner and often takes a minority (25% to 30%) position on transactions, in addition to being involved with the operation and management of the hotel.
Converting to a hotel
Stambules said the conversion process with Marriott has been a great collaborative process and is going smoothly. He said Sage is in the process of ordering FF&E and is hoping for a January opening.
“This project worked well because… we were able to turn over the whole project at once versus having to wait for tenants to leave or leases not to renew, which made it a clean transition for us,” he said.
There are some nuances from converting traditional apartments to a hotel (things like housekeeping closets and storage on floors). Still, he said that because the project was originally conceived as a hotel, things like trash and linen shoots already existed.
A big part of the conversion is happening on the ground level, including adding a lobby experience and turning a vacant corner retail spot into a standalone restaurant.
Adding F&B
Stambules said the restaurant is additive overall, especially with Sage’s extensive F&B experience. He anticipates 50% of its business coming from outside the hotel, especially because of the existing foot traffic from SCAD.
“I would say the buildout of the food and beverage has probably been where we’ve put the most emphasis during the conversation,” he said. “We’re approaching that as a standalone F&B operation… and taking that mindset of independent food and beverage, but having that be part of the guest experience, which creates a real halo in the lifestyle space.”
The approach, which Stambules said required a waiver from Marriott because it isn’t core to the Apartments by Marriott brand, will also operate as a standalone restaurant in terms of its labor model but still be involved in the guest experience.
“We felt it was really important to activate that as part of our whole guest experience and provide a light bites cafe in the morning and then have a Happy Hour type of cocktail lounge in the evening.”
But he said Sage will operate the restaurant as if it were a lease. “We think we have a great outside capture opportunity.”
Stambules said there are built-in synergies with having another hotel in Savannah, but he thinks the model works with or without that because of the lean staffing structure Marriott requires for that brand (a general manager and 24/7 front desk staffing plus housekeeping on a weekly basis or at checkout).
“On the capital side, we’ve been focused on OS&E type of stuff, like providing extra linens, extra towels and having the rooms fully furnished with those extra operating supplies, so to speak, because it will be a much more efficient labor model,” he said.
More in the pipeline?
Stambules said he would like to see more of these apartment-hotel deals in Sage’s future, whether with Marriott or as an independent.
“We think this is a core to our growth strategy. We’re seeing more and more of these luxury brands announce residential partnerships,” he said. “This is a really compelling business line for the guest and the consumer today, but where we are as an industry has been a little behind in making these [concepts] feel a little bit more lifestyle or unique.”
Stambules said one of the things he loves about the Apartments by Marriott product is its ability to serve as a soft brand that can be unique to the community. “In these neighborhoods that are maybe very trendy and hip and cool but don’t support the fundamentals of traditional hotel development, this is maybe an area where you can make the numbers work and create something really compelling, both on the investment side, but for guests too,” he said.
BY ROB SCHNEIDER
