November 6, 2023
Top Los Angeles multifamily housing experts — including SDS Founder Deborah La Franchi — make up this short list of distinctive leaders in this real estate sector.
Affordable Housing Mission: Deborah La Franchi’s SDS Capital Group manages $1.3B in assets.
By Brynn Shaffer, Los Angeles Business Journal
Published November 6, 2023
MULTIFAMILY MOVES
During the first half of the year multifamily properties in Southern California saw both vacancy and asking rents rise. Still, developers were active, with tens of thousands of units under construction in the region, according to a report from Northmarq. This Special Report talks to 12 multifamily experts, including both developers and brokers, about the state of L.A.’s multifamily market.
AFFORDABLE HOUSING MISSION
Deborah La Franchi is the founder and chief executive of SDS Capital Group, a Westwood-based firm dedicated to launching and managing exceptional impact funds for affordable living, which she founded in 2001. Today, the firm has over $1.3 billion of active assets under management in six different fund and product strategies. The SDS Supportive Housing Fund, a private equity approach to financing permanent supportive housing for unhoused Californians, was awarded the 2023 Pension Real Estate Association Environmental and Social Governance Award in the social impact category.
How did you first get into real estate?
From the time I started in college, I focused my career on finding ways to alleviate poverty. I was interested in economic development. I wanted to work in government or the nonprofit sector, focusing my efforts on job creation in distressed communities. My introduction to real estate was a baptism by fire. I worked on the shutdown General Motors plant in Van Nuys, where thousands of manufacturing jobs were lost. I worked with the developer to secure the government financing, address the infrastructure issues, and clean up and attract tenants. In the end, the 80-acre abandoned site was transformed into a community and job-creating asset that was 50% retail land 50% manufacturing.
Why is affordable housing important?
Currently, the state is short an estimated 1 million very low-income and low-income affordable housing units. California also has 50% of the country’s unsheltered homeless population. Los Angeles County has over 75,000 unhoused Angelenos. These statistics and numbers are not coincidental. The affordability crisis is fueling the homeless crisis. We need to do more as a city and as a state.
Tell me about your investment strategy.
Everything we invest in must directly benefit low-income people or communities. Period. Our core mission is to engage private-sector capital in the battle against poverty. We create specific investment vehicles. Each fund as a unique impact strategy, target return thresholds and a designated geography. The average poverty rate of the communities we invest in is over 30%. We’re showing that you can make a difference while generating market rates of returns for investors.
Which submarkets are you most interested in and why?
SDS’s real estate funds are located in different markets across the nation. Our newest – and my most personal submarket – is Los Angeles. I’m an Angeleno. My family and I see the encampments and tragedies unfolding on our streets every day. Our $190 million SDS Supportive Housing Fund seeks to finance over 2,000 units of permanent supportive housing units for unhoused Californians. Our fund has invested in over 800 PSH units that are now in construction. We have a great partner in RMG Housing, the developer we are funding.
Their vision to create a new development model focused on our state’s unhoused community members spurred us to develop a new financing model to scale their development model. We still have a long way to go – and it hasn’t been easy given the market – but we are chugging away. We’re proud to be focused on developing solutions for this seemingly overwhelming challenge. It’s going to take a village to tackle the homeless crisis, but I believe our 4 million personal village will ultimately succeed.
In your opinion, what are the biggest challenges facing the Los Angeles housing market today?
I’m concerned that the homeless crisis is transforming the perception of how attractive it is to invest in or locate a business in Los Angeles. This is the biggest challenge business leaders are facing – making the need to find solutions to the crisis of paramount importance.
Tell me about a recent success.
I consider the launch of the SDS Supportive Housing Found to be our biggest, as well as our most recent, success. There was no prototype for creating a private-equity model focused on financing 100% PSH for the unhoused. It was a tremendous achievement to find investors who saw the potential of this fund and invested in a new and unproven financial model.
What’s your favorite part of your job?
I love creating new products – this is what recharges my battery. I also enjoy collaborating with talented people whom I have met in the impact industry. Our SDS team members are amazing. While our investors seek the returns we target, they deeply care about making a difference. In addition, the people involved with the projects we fund and the developments we support all have fantastic, dedicated teams.
