SDS Capital Group Launches $1B Affordable Housing Credit Investment Vehicle
Founder Deborah La Franchi told CO that the firm was started to “engage the private sector in the battle against poverty.”
By Brian Pascus March 19, 2025 11:00 am
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A Los Angeles-based investment firm that has previously played exclusively in the equity space will now use corporate debt issuance to finance affordable housing construction and rehabilitation.
SDS Capital Group, a firm with $1.7 billion assets under management, announced it has launched SDS Impact Debt (SDSID), a debt capital platform that uses corporate bonds to finance affordable housing investment. The fund will issue bonds to institutional investors and use the proceeds to invest more than $1 billion worth of capital to build and renovate affordable housing nationwide over the next 18 months.
Deborah La Franchi, who founded SDS Capital Group in 2001, told CO that the firm was started to “engage the private sector in the battle against poverty,” and has since raised five equity funds for investment in both affordable housing and supportive housing. These pools include a $174 million fund devoted to assets in the Southern U.S. and a $190 million fund devoted to supportive housing in California, she said.
All told, SDS Capital has invested in more than 8,000 affordable housing units across the country.
“I felt we needed that nimble, efficient private capital, along with the government and nonprofit money, but we needed more private sector funding in the space,” she said. “What I love about the debt product we’re launching is that it’s national — we are able to provide debt across the country.”
La Franchi has tapped Jason Riffe, who previously raised a pair of $200 million debt funds at United Way devoted to affordable housing investment, to serve as managing director of SDSID.
Riffe told CO the business model for the new fund involves structuring bonds and corporate notes and selling them directly to investors through partnerships with financial institutions, where SDS’s partners will underwrite and market the bonds, as the firm provides access to its deep list of developers.
“The buyer of that bond is buying a de-risked, asset-backed, fixed-return note in the capital markets, and on our side we have those partnerships, as well as the pipeline of developers,” explained Riffe. He added that the firm structures the bonds on a per-deal basis, where the maturities can range from three years to 40 years.
“We can be both the senior debt and the mezzanine debt, we can be taxable and tax-exempt municipal bonds,” he said. “We provide higher leverage, and we typically provide the debt at the cost of capital that we access, so we don’t put a spread on the rate.”
Riffe told CO that the firm has already closed $500 million of credit commitments this year that will help build or renovate more than 1,400 units, and that an additional $700 million has been underwritten since January.
The buyers of SDSID bonds are predominantly money market funds, endowments and insurance companies. The minimum loan size is $25 million, but the firm is currently quoting one deal that requires a $400 million senior note, he noted.
“There’s really no cap on how high we can go,” said Riffe.
La Franchi emphasized that by issuing corporate bonds to finance affordable housing development and rehabilitation credit, as well as their previous expertise as equity investors, SDS is putting affordable housing deals together at a lower per-unit basis than seen in most public sector developments, or even public-private ones.
“Time is money, especially with affordable housing — you don’t want to wait five years to toggle together 10 different sources of capital,” she said. “[With us] as your debt and equity partner, you’re closing within a nine-month period, not over years, and that drives down your per-unit costs lower. It helps sponsors scale more efficiently — you don’t have to focus on a whole team of people chasing capital.”
La Franchi said she believes a blended debt and equity investment product can allow sponsors and their investment partners the luxury to focus on originating, constructing and stabilizing assets at a time when supply is dangerously low, and increasingly outdated.
“We have a shortage of 5 million to 7 million affordable housing units in this country,” she said. “We have to do this differently, it’s getting worse, not better, so we need to find new ways of getting capital out more expeditiously.”
Brian Pascus can be reached at bpascus@commericalobserver.com
