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February 5, 2024

IREI Covers ASREF II $174M Close

Institutional Real Estate Inc. interviews ASREF Co-Managing Principal Deborah La Franchi on the Fund’s $174M close with $50M from GCM Grosvenor. 

By LEWIS DAYTON, Institutional Real Estate, Published February 5, 2024

American South Fund Management (ASFM), a joint venture between SDS Capital Group and Vintage Realty, has held a final close for American South Real Estate Fund II (ASREF II) after raising $174 million in equity commitments.

ASREF II provides preferred equity and equity financing to real estate sponsors for projects in the U.S. South. To date, ASREF I and II have collectively committed $106 million to 22 projects, financing 5,147 housing units, 81 percent of which are affordable to families with less than 80 percent the area median income.

Deborah La Franchi, founder and CEO, SDS Capital Group, said in an interview with IREI that part of what has made the ASREF series successful is ASFM’s eye for solid sponsors. La Franchi pointed to a sponsor with whom ASFM has funded five transactions, saying, “We know they execute, they just do excellent work. They know we can execute, we can underwrite and close quickly if they find an opportunity in the market. So we really look for those programmatic relationships where we grow and we help our sponsors grow.”

Notably, ASREF II received $50 million from five pension funds via an emerging manager program from GCM Grosvenor. La Franchi commended the pension capital, saying, “We’ve struggled for years to bring pension funds into any of the SDS capital group funds that we have. And without these emerging manager platforms where the pensions provide a group such as Grosvenor to basically slice their capital into smaller pieces that can come into our fund, we would not be able to bring pensions in.

“Most pensions, they need to invest $100 million, $200 million, $300 million into a single fund. And as an emerging manager, we’re too small. So only through the emerging manager platforms, where they bring in Grosvenor to represent them and then Grosvenor is able to provide a smaller amount that’s scaled for our funds, can we get into the pension fund.”

She added, “This is a huge watermark for us, and we’re optimistic that it will help open other doors in the future. Obviously, Grosvenor is a fantastic partner, and we’re really looking forward to a long-term relationship with them.”

“We are so fortunate to partner with ASFM in delivering affordable housing to communities that need it most,” said Peter Braffman, managing director, GCM Grosvenor. “The ASREF II investment closely aligns with our focus on identifying firms representing compelling strategic partnerships, and we look forward to the opportunity the fund presents to deliver positive outcomes to our investors.”

ASFM is also predominantly woman owned, a rarity in real estate, noted La Franchi. “Only $3 of every $1,000 invested in real estate funds is managed by a woman-owned fund management firm,” she said.

Emerging manager programs like Grosvenor’s, La Franchi said, are “really important to help smaller women-, minority- owned emerging managers scale, or we’d just be stuck at less than $200 million and never be able to really get to the scale.”

“The success of the ASREF II is a testament to our investment strategy,” said David Alexander, ASFM managing partner and CEO, Vintage Reality Company. “We are financing affordable housing units in communities that have a deep desire for this housing yet confront a stagnant supply within their communities. We are deeply grateful to each of our investors who support our investment strategy and mission.”

ASREF II has deployed roughly half of its capital to date and is continuing to actively seek opportunities with real estate sponsors for projects in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee and Texas.

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