Saxony Capital Management creates value through creative financing
Successful execution included both Debt and Equity Advisory
Spotlight
Financing enables acquisition and future earnings growth of 176-unit apartment complex
Value
Highly competitive proceeds and fully funded capital expenditures
Saxony Capital Management has a mission centered on identifying, acquiring and improving multifamily projects across the southern United States. In August of 2023, Saxony’s Principal, Eric Horan, and his team began researching and analyzing the Wildwood Apartment community in Tyler, Texas. The property, with 19 buildings and 176 units located in one of the state’s largest secondary markets, was ripe for repositioning.
Maximizing revenue streams through capital improvements
Wildwood Apartments boasted a strong occupancy rate of just over 92%. In an effort to further capitalize on strong tenant demand, the seller had previously renovated 100 units, which were yielding rental rates 20% higher than “classic” units. In turn, Saxony developed a business plan focused on renovating the remaining units to continue capitalizing on this growth. The plan also included an injection of roughly $1.5 million in capital expenditures (capex), which would be used to make improvements to the unit interiors by resurfacing countertops and cabinet fronts, installing stainless appliances, updating flooring and redesigning the unit paint scheme. Additionally, capex dollars would be allocated toward bringing enhancements to the property’s drive-up appeal, amenity areas and landscaping design.
Having worked with JLL for nearly a decade to secure financing for their many endeavors, Saxony turned to JLL’s Debt & Equity Placement team to secure the best possible debt and equity structure.
Exploring the debt and equity markets
Over the course of several weeks, the JLL team approached nearly two dozen lenders, including government agencies like Fannie Mae and Freddie Mac, as well as banks and debt funds to find the most competitive proceeds level and cap ex structure. The team ultimately secured four quotes with various financing structures. In parallel, JLL also helped Saxony identify and secure a JV partner who would inject equity into the transaction.
Finding the ideal financing fit
The challenge was to find a lender able to provide Saxony with enough loan proceeds to maintain attractive returns for the project and its investors. One lender proposed a five-year, fixed-rate financing package at 65% loan-to-cost, including future funding. Another offered a fixed-rate, seven-year financing at 68% loan-to-value, but no future funding. However, one lender’s terms rose to the top as the best course of action. After canvassing the market, Saxony chose a debt fund, SoundPoint, which offered a 3+1+1 floating rate, interest-only financing option at 73% loan-to-cost, which included 100% of their proposed future funding. This favorable structure along with the existing relationship between Saxony/JLL and SoundPoint, provided confidence that the transaction would close without complications or delays.
Through this robust financing package secured by JLL, Saxony Capital Management has already begun renovations and is on their way to unlocking the full potential of the Wildwood Apartments and generating superior returns on their investment.
