Multifamily Deals In Texas OZs, With Savoy Equity Partners

In this webinar, Barrett Linburg discusses the multifamily development opportunities in Dallas and Savoy’s development process.

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Webinar Highlights

  • History of Savoy and the backgrounds of its partners.
  • Overview of the Dallas market, including current demographic trends.
  • Pictures and renderings of current and completed deals.
  • Discussion of different deal structures and timelines.
  • Hedging strategies used to mitigate interest rate risk.
  • Opportunities to reduce or eliminate property taxes in OZ deals.
  • Terms, timeline, and projected returns for Savoy’s OZ fund.
  • Live Q&A with OZ Pitch Day attendees.

Industry Spotlight: Savoy Equity Partners

Savoy Equity Partners is a Dallas-based real estate investment and development firm specializing in multifamily properties. With a focus on revitalizing neighborhoods and integrating complex tax structures, including Opportunity Zone benefits, Savoy has a proven track record in transforming and managing apartment buildings with efficiency and strategic foresight.

Learn More About Savoy Equity Partners

Webinar Transcript

Jimmy: So while Barrett joins us, let me tell you a little bit about Savoy Equity Partners. They specialize in developing and renovating apartment buildings in Texas. And he’s gonna be discussing with you their Texas multifamily Opportunity Zone Fund platform. To date, they’ve invested over $63 million in qualified capital gains, across 20-plus real estate projects in Texas, leveraging the OZ tax incentive. Barrett, that, I’m not sure if that’s up-to-date or not. Maybe you’ve got more updated numbers than that, but that’s what I pulled from your website a few days ago, at least.

Barrett: We did buy one last week, so we’re one more in.

Jimmy: Okay. Fantastic. Well, Barrett, I can see you, I can hear you. The stage is yours for the next 20 minutes. So, without further ado, please take it away.

Barrett: Wonderful. Well, thank you so much for having me, Jimmy. My first OZ Pitch Day, and glad to share a little bit about what we’re up to here in Dallas, in the apartment space, and in the OZ space.

We’ve been doing this for a very long time. So, we’re here in Texas, we’re here in Dallas, we’re working on apartment projects. And really, if there’s one takeaway from today, I want it to be that we’re experts in the apartment space, we’ve got the tailwinds of everything going on in Dallas, in Texas, and that the OZ tax benefits are really gravy for everything that we’re doing in the apartment world. So, we’re doing great apartment deals, that have good returns, that stand on their own, and that the OZ tax benefits are really a thing that we’ve only used for less than a third of our time in the apartment investing career that we’ve had.

So, my business partner, Seth, and I have both been in the real estate business since 2005. I started as a mortgage broker. He started in investment sales. But in 2011 and ’12, each of us, separately, we didn’t know each other at that point, started buying apartment buildings, those really ugly, beat-up apartment buildings that you might see on your drive home from work, and say, “Why doesn’t anybody buy that and fix it up?” Well, we were the ones crazy enough, with no prior apartment ownership experience, we were the ones crazy enough to buy them, fix them up, lease them up. And I sold my first one. He still owns his first one. But the returns on both were very good, good enough to inspire us to go do more. And so, over the past decade, how many more have we done? Well, today we’ve now bought 58 projects. Combined, we’ve sold 27 of those, and we’ll sell a 28th next week. And our track record on those is shown on this slide. It’s very small, I know. But the average hold period, the punch line, is that the average hold period has been four and a half years, and that the average weighted IRR has been over 40%.

So, we’ve had the past decade where we’ve had everything go up and to the right. But in general, private real estate deals have returned about 15% over the past decade. And so, for us to have done a 40% average over the past 10 years feels really, really good, and we’re proud of this track record that we put together. Well, we’ve done 58 deals and we’ve only sold 27, so that means we still own 30. Most of those are in the Opportunity Zone tax structure, and most of those we’ve bought since 2020. And so, again, this is kind of a new thing for us, this OZ, over the past four years, but it really speaks to our commitment now to this tax structure and how we’re doing it.

So, let me talk a little bit about why Texas, why Dallas? Why should you join us investing here, in this place that we call home? So, Texas is really booming, and it has been for a long time. So, up on the screen now, you see two things. Number one, there’s seven mega regions throughout the United States, which are really getting a bulk of the population that’s migrating around, and also a lot of the economic growth. And in Texas, we have what’s called the Texas Triangle. The corners of that are DFW, San Antonio/Austin, and Houston. Over the past 10 years, 4 million people have moved into the Texas Triangle. This growth is fueled by huge diversity in economy. I mean, we’ve got tech, we’ve got oil and gas, we’ve got finance, we’ve got banking, and healthcare. And so, I’m gonna read a couple specific numbers, but over the past 30 years, Houston has grown from 3 to 7 million people, Austin from 1 to 2.5, and DFW from 3 to 7.5 million people.

And then, this slide on Dallas really shows the Dallas MSA has grown enormously, and specifically, Dallas and also its suburbs have absorbed a huge number of people over the last decade. Let me talk specifically about Dallas, though, and a demographic trend that really impacts the projects that we’re doing, since we’re apartment developers. Over the past four years, over 100,000, in fact, 130,000 young adults have moved to DFW. It’s more than any other metroplex or MSA in the country, and what that really means is that our potential tenants are moving here more than they’re moving anywhere else. And that speaks very well to our potential returns, and also the rents that we will see over the near future. A big part of that, why people are moving to Dallas? The city offers a good quality of life, a lot of jobs, educational opportunity, and also no state income tax. I bring up no state income tax because the common response from people all over is, “Well, you have no state income tax, but you have high property taxes.” I’m gonna come back to that, but a huge part of what we do is that our projects don’t pay property taxes. You may be saying, “Well, how do they not pay property taxes?” I promise I’m gonna come back to it.

The other thing that you may be hearing about, and other people today may talk about it, is supply and demand. What’s happened? Well, some areas of the country have really overbuilt, but the bottom line is, over the past decade, we’ve built a lot of housing in this country, and we’ve overbuilt housing in some parts of the country. The City of Dallas itself has not overbuilt. If anything, it’s underbuilt or it’s right on track. In 2024, only 8400 units will deliver in the City of Dallas, the city of 1.3 million people. But in 2025 and 2026, the number of units delivered will be far lower than that. We are really excited to be delivering units in the City of Dallas, which we feel is undersupplied, and we feel construction costs are going down. This slide really shows that in the City of Dallas, almost all the supply is in the far outlying areas. You see the dark green, which are in McKinney and Melissa and Celina. Those areas are 45 minutes from our office, which is near downtown Dallas. We’re also showing the actual units being delivered right now, infill, close to downtown Dallas, but as far as the number of units, that’s only 15% of the supply in the DFW metroplex. So, there’s still a large demand, for people who want to live close to the core, what we call urban infill units.

So, let me tell you a short story about how we got started in OZ development, and that’s a neighborhood which we now call the Bishop Ridge neighborhood. This area was blighted, there was a lot of crime, but it was close to the urban core, close to downtown, close to a highway system that led to a lot of jobs, close to a new park that was being built, but it was this really rough area, and if you bought just one building in this area, it wouldn’t work. You had to really create a critical mass. Well, luckily, it was in an OZ census tract, and luckily, there was a lot of good stuff going on around it. And then all of a sudden, eight buildings came up for sale at once. It was from an out-of-state owner, and we knew that if we could buy all eight of these buildings and fix them up really nice, then we had a chance to fix up this neighborhood. And so we did. There’s some pictures on the screen showing what they looked like after we were done. We’d underwritten $1.50 rents. That means 800 bucks for a one-bedroom, 1100 bucks for a two-bedroom. Well, when we finished our first building, we ended up getting over $1000 for a one-bedroom and almost $1500 for a two-bedroom. It was a big success. And so, before anybody knew what we did, we doubled down. We bought four more renovation buildings, we bought seven land sites, so that we could start developing, and now, in a 3-block-by-5-block area, we have 20 buildings, all in the Opportunity Zone tax structure, and we continue to develop and buy new projects today. I mentioned we bought a building last week. That’s in this neighborhood that we now call Bishop Ridge.

I’m showing some pictures of both completed buildings and renderings of things that we’re working on there. It’s a really neat Opportunity Zone strategy, because each new property that we deliver is helping the ones that we delivered prior to that, helping their rents, helping their expenses, because our management costs go down. It’s been a really neat way to invest in the OZ structure. It leads me back, something I didn’t say earlier, that I kind of run the company Savoy Equity Partners that we’re talking about today. My business partner really runs the property management and the construction management side. So, we’re vertically integrated, and it helps that we invest locally, so that we can be boots-on-the-ground on all these different properties.

Let me talk a little bit about how we structure our OZ deals. We have investors, who are individuals, who invest in our Opportunity Zone Funds. But then we work with a lot of people who have already set up their own OZ Funds, and they invest in our Qualified Opportunity Zone businesses. The bottom line is, if you have Opportunity Zone dollars, or if you just had a capital gain, we would love for you to invest with us in any way, shape, or form. Now I’m gonna just kind of scroll through different projects, and show you pretty pictures of deals that we’re doing in the OZ tax structure, as I talk to you about different ways that we’re doing deals. So, number one, we like to give our investors liquidity. That sounds simple enough, but we’re doing projects with low loan-to-cost construction loans. That way, once we complete them, we lease them up, we can do a permanent loan with Fannie, Freddie, or HUD, and we can send money back to our investors in year 2, 3, or 4, and then we can make quarterly distributions to them in year 4, 5, 6, 7, 8, 9, and 10. We don’t want our investors to feel like they’re locked up for 10 years and never have any liquidity, and we want them to be able to pay their tax bill in April of 2027. So, that’s really important.

Number two, we’re hedging our refinance risk. We use something called swaptions. And so, two, three years from now, if interest rates have gone up to 10%, we’re still going to be able to do that cash-out refinance, because we’ve hedged our refinance risk, not just on our construction loan, with a rate cap, but also on our long-term refinance, using swaptions. I mentioned earlier, we don’t pay property taxes. Well, that’s not on every deal, but it’s on a lot of our new construction deals. We make a trade with the local municipalities, where we make 50% of our units on projects like the one on the screen right now, we’ll make 50% of the units affordable, at 80% AMI. In Dallas, that means we rent to people who have an $86,000 a year income, and we reduce the rents a little bit. In exchange, we get a 75-year property tax abatement. Jimmy, who lives in Fort Worth, I’m sure he’ll tell you that his property tax bill is outrageous. Well, we’re developing new properties in Austin, San Antonio, and Dallas, and not paying property taxes for the life of our investment.

We have two projects out to bid right now. Our construction costs are 4% lower than projects that we completed two years ago. The reduction in supply, in Dallas today, and all over the country today, is leading to a decrease in materials cost, and in labor costs, and that will impact our returns for projects that we’re starting right now. And then, last of all is something OZ-specific. We just are really focused on maximizing tax-adjusted returns once we’ve started an OZ project. And so, we’re really careful about doing a cost seg as soon as we’ve placed a building in service, using bonus depreciation, and then passing all of those losses through to our investors, so that they are getting the best tax-adjusted returns. So, why would you work with Savoy? Well, number one, we’ve been in the apartment business for a very long time, and we’re doing good deals that will have great returns on their own, but then also, we’re Opportunity Zone experts, working to maximize your tax-adjusted return.

If you’re an investor with a capital gain, we have an Opportunity Zone Fund open right now. The terms are up on the screen. We’re aiming to get a low to mid teens IRR on that, and hopefully better. Or, if you’re an investor who’s already set up an OZ Fund, we would love to show you deal flow for your Opportunity Zone Fund to invest into a qualified Opportunity Zone business. Our Opportunity Zone Fund will immediately invest into the nine assets on the screen right now. They’re all located near one another, they’re all multifamily projects, and they’ll utilize all the interesting aspects of multifamily development that we’re using now, to get great yield on cost, and great returns.

Those are the main points that I wanted to talk about, but the big takeaway, again, is, we’ve been doing this a long time, we wanna do great apartment deals in Dallas, in Texas, where we’ve got wonderful tailwinds, and if you are an OZ investor as an individual, or you’ve started your own OZ Fund, we’ve got a way to help you get involved in our projects. That’s it. Jimmy, I’d love to answer any questions that you have or that may have come in from anyone else.

Jimmy: Great. We’ve got a few minutes for some questions. If you have any questions for Barrett or for any of our presenters today, please use the chat, or you can use the Zoom Q&A tool in your toolbar to ask those questions. Barrett, you mentioned swaptions kind of helping you hedge interest rate risk. That’s a pretty clever strategy, but has the interest rate hike of the last 24 months had any negative impact on your investments or on your ability to finance the investments? What impact has there been?

Barrett: Sure. So, the interest rates where they are today allow us to do everything that we’ve been talking about right now. So, we can get a deal, a construction deal financed, we can refinance and get cash out. So, we’re fine today. What we’ve really been doing is using these swaptions to hedge in case interest rates go to 10%. And then we’ll still be able to do a cash-out refinance because we essentially bought insurance.

Jimmy: All right. We got a question in here from Barry. Barry asks, “Barrett, what is the ZIP code for this neighborhood in Dallas?”

Barrett: Sure. We’re working primarily in 75203, 75208, and 75205.

Jimmy: 203, 205, and 208, I think you said. 75.

Barrett: Yep.

Jimmy: Starting number of all of those. We had a question earlier. I don’t think it specifically pertained to this presentation, but it came in during your presentation. I think you might have an answer to it. Kind of comparing OZs to 1031s. What’s your take on, if I have the option to, if I sold some real estate property, I can do a 1031 exchange or I can come in as an investor into one of your Savoy Equity Partners properties. What’s the difference there? Why should I do this OZ instead of a 1031?

Barrett: Sure. Well, 1031’s a wonderful program. And certainly, if you have something in mind, you should go for it, and, you know, find a project to 1031 into. However, you’re on a pretty short clock. So, you have 45 days to identify, and 180 days to close, and some people just can’t find a great project to do in that short of a timeframe. So, OZ provides you a little bit longer time to find something. The other benefit of OZ is that you don’t have to roll every dollar of your sales proceeds. You could take some chips off the table, and only roll a portion into an Opportunity Zone investment, and maybe enjoy some of that hard-earned money in another way. So, there’s pros and cons of both. I think, if someone can find a great 1031 deal, then maybe that is the best option. But certainly, there’s pros and cons weighing that decision.

Jimmy: Good. I just got a message in here from Mike. Mike asks, “Can you talk more about the property tax abatements, and what specifically have you done to secure those?”

Barrett: Sure. So, in Texas, it’s state law, called PFC, Public Facility Corporation. And you have to strike a deal with each municipality to get it. So, the municipalities want affordable housing. We don’t wanna pay property taxes. And so, we agree to make 50% of the units affordable to people making 80% AMI or les. In Dallas, that’s $86,000 a year. And we give them a rent reduction of a couple hundred dollars. In exchange, we don’t pay property taxes. That ends up being a very good deal for us, financially. It ends up being a good deal for the municipality, because they get affordable housing, and it doesn’t cost them anything on the front end. That’s the basic trade that we make. We’ve done more of those in the City of Dallas than any other developer.

Jimmy: By the way, you made that crack about me living in Fort Worth, and I would probably say my property taxes are outrageous. You are 100% correct. They are outrageous. The Tarrant Assessment District just tried to raise my property taxes here. They tried to reassess my property by increasing the value of it by, I think it was, like, close to 20% or something, but I successfully won my protest though, so no change from prior. Actually, I think I got it revised downward. So, just wanted to toot my own horn there a little bit, but it’s still outrageous. You’re absolutely right.

Barrett: It’s the largest line item… When we underwrite a development with no abatement, it’s the largest line item in our expenses. So, taking it away is obviously accretive to returns.

Jimmy: All right. We got… Let’s see. Let me check the time. We got two more minutes until I gotta yank you off the stage, Barrett, and move on to our next presenter. We did just get in a question from Leon. Leon wants to know, “What’s the best way to learn about opportunities to invest in Savoy Equity Partners deals if we have a captive QOF?”

Barrett: Yeah. So, Leon, 27 of our investors have now invested $45 billion in our QOZBs. So, you wouldn’t be the first one to do it. Essentially, reach out to me. I’m sure Jimmy’ll share my email, or you can go to and reach out to us, and let’s chat about it.

Jimmy: Yeah. There we go. We got Barrett’s phone number and email address on the screen. He hasn’t shared that phone number with anybody, so…

Barrett: Except now a couple of… Your audience is pretty big.

Jimmy: Yeah. Yeah, yeah. Now quite a few people know. But that’s great. Yeah. Please do call or email Barrett if you have questions about how to invest directly into their underlying QOZB assets. One more question here, just came in from Connie Rathbone. Connie is a member of our OZ Insiders mastermind group, and she’s gonna be joining us on our panel discussion, in just about another…when is that coming up? Is that coming up…? That’s coming up in about 15 minutes, “Why Invest in Opportunity Zones Now?” So, I’m looking forward to that one. Connie asks, “Is this Section 8 housing, or just workforce with no governmental payment?” How is that structured, Barrett?

Barrett: Yeah. So, there’s no governmental payment. There’s no Section 8 component. When we make this deal, there’s a requirement that we don’t discriminate against anyone, including those who have a voucher. But we do not have a contract with any government for, to provide housing.

Jimmy: Fantastic. Let’s see. I don’t see any other questions. Barrett, any final thoughts or words about this presentation, or how folks can reach out to you? We got another 30 seconds here.

Barrett: No. Appreciate it. Website, Twitter, LinkedIn. And now everyone has my cell phone. So, thank you so much, Jimmy, and glad for the time, and for sharing your platform.

Jimmy: All right. Fantastic. Barrett, thank you so much for your participation in OZ Pitch Day today. Really appreciate your time and your support. Thank you so much.