SDS Capital Launches $1B Affordable Housing Fund
The company expects to finance new homes and preserve existing affordable units across the nation.
In an effort to be a one-stop shop for affordable housing developers seeking financing solutions, Los Angeles-based impact fund manager SDS Capital Group has launched its SDS Impact Debt. The capital platform expects to finance more than $1 billion of new units over the next 18 months by providing below-market permanent and construction financing to preserve or develop affordable housing across the nation.
“SDS was founded on the mission of engaging the private sector in the battle against poverty, so the addition of SDS Impact Debt is ideally aligned,” Deborah La Franchi, founder and CEO of SDS Credit Group, told Multi-Housing News. “If we can be a one-stop shot in some geographies where we proved both products, we can eliminate the need to chance a range of funding programs—which cuts the time and expense of chancing a more complex capital stack.”
Jason Riffe, who has previously founded community impact investment funds utilizing private capital to develop affordable and workforce housing, has been tapped as managing director of SDSID. Riffe has led affordable housing financing across the West Coast with more than $230 million deployed and $900 million leveraged in community impact capital.
The new SDSID platform will complement SDS’s current $1.7 billion of assets under management. Founded in 2001, SDS has invested in more than 8,000 housing units across the U.S.—72 percent of them affordable to families that make less than 80 percent of the Area Median Income or permanent supportive housing units for the unhoused.
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SDSID will use corporate bonds to financing affordable housing investments. The fund will structure bonds and corporate notes and sell them to institutional investors through partnerships with financial institutions. SDS partners will underwrite and market the bonds. The variety of private asset-based products will offer financing for a single or pool of assets with terms ranging from three to 40 years, priced at 150 to 250 basis points below current retail debt offerings with a loan-to-value- up to 90 percent. Loans will start at $25 million.
SDSID is currently focused on closing six financings for 1,427 units of multifamily housing with 54 percent of the units affordable to families earning up to 80 percent of the AMI. Noting there is a shortage of 5 to 7 million units of affordable housing in the U.S., La Franchi said the SDS team believes it is critical to provide developers with cost-effective equity, as well as debt.
“When you can make both of the key elements of the capital stack attractively priced, more deals can get done, which in turn increases the velocity and volume of affordable housing units being financed and built across the country,” La Franchi told MHN. “Currently, with construction costs and interest rates at such high levels, and coupled with tariff and the uncertainty surrounding the overall market, as well as government financing programs—it is even more imperative that we put out attractively-priced private-sector solutions for affordable housing.”
Funds in action
Considered a leader in impact investing, SDS has four funds that focus mostly on affordable housing or permanent supportive housing—the Develop Michigan Real Estate Fund, the American South Real Estate Fund I and II, and the SDS Supportive Housing Fund.
Early last year, American South Fund Management, a joint venture between SDS and Vintage Realty Co., closed American South Real Estate Fund II with $174 million in commitments to back investments in affordable housing across the South.
In January, American South Capital Partners, a joint venture of SDS and Vintage Realty, provided an $18.8 million investment to Infinity Real Estate Partners for the acquisition and renovation of a 1,068-unit portfolio of affordable housing properties in North Carolina and South Carolina.
The seven communities were built between 1968 and 1973. The units in each of the properties will be affordable to individuals and families earning 60 percent or less of the AMI.
