- The $300m fund would target market rate core-plus properties
- Firm is focusing on Tier 1 and Tier 2 markets with high rental demand
- Targeting an 8%+ after-tax IRR over the 10-year OZ period
Standard Asset Management and Investments (SAMI) has launched its first commingled opportunity zone (OZ) fund, With Intelligence has learned.
The fund, SAMI Tax-Free Stabilized Real Estate Fund, would target $300m in capital commitments and is looking to invest in multifamily assets in US OZs.
SAMI would look to acquire distressed, but stabilized, market-rate core-plus properties with 100+ units in growing Tier 1 and Tier 2 markets with high rental demand.
The firm is targeting an 8%+ after-tax IRR and a 3.0x equivalent equity multiple over the 10-year hold period. The cash-on-cash yield is expected to start at about 5% and grow as rental income increases.
The El Segundo-based firm is eyeing a max LTV of 55% to 65% at the fund level.
The minimum investment size is set at $250,000. The $300m+ target fund size includes a 5%+ sponsor co-invest.
SAMI has set management fees at 1% of revenue (asset management) and 1% of invested capital (fund management). The firm listed a 5% cumulative preferred return subject to GP catch-up. The fund also lists quarterly cash distributions from operating income.
Carried interest is 80/20 LP/GP above pref (operating and refi) and 70/30 LP/GP above pref (disposition). The last 10% of GP portion is contingent on LP achieving OZ tax benefits.
The fund comes on the heels of the One Big Beautiful Bill Act, which included language that would make the OZ program permanent starting in January 2027.
The OZ 2.0 program would give investors significantly better tax benefits to investors.
These include the deferral of income for five years on investing capital gains and a 10% step up in basis after five years.
Most importantly, if the money stays in the fund for 10 years, then all the appreciation from invested capital is tax-free.
The fund is structured for investors to stay in the fund for the entire 10-year period to get the greatest benefits. However, the firm is mindful of the liquidity concerns that have hit headlines for the last several months.
The firm is holding dry powder and geared the fund to have liquidity every year at NAV appraised values if smaller investors need to take their chips off the table — though that means they’ll lose out on the tax benefits.
Opportunities amid influx of multifamily
Under the original OZ 1.0 program, the US government designated specific census tracts as opportunity zones to spur private and public investment in under-invested communities.
The map will shift under OZ 2.0, with new designated census tracts in effect through the end of 2036. New maps will be chosen every 10 years.
SAMI sees a particularly strong opportunity to buy assets after managers and developers built heavily in original opportunity zones during the low-interest rate environment from 2018 to 2022, according to president and CEO Michael Treiman.
“You’ve got a bunch of (OZ developments) during that time period that are in serious distress because of factors far outside the control of the developer or the fund managers,” Treiman told With Intelligence.
As interest rates skyrocketed in 2022 and 2023, and as a historically large number of multifamily properties hit the market this year, SAMI is gearing up to invest in those prime OZ 1.0 locations while benefitting from OZ 2.0 benefits.
“It’s sort of the trifecta of advantages that we’re able to deliver because of our timing,” Treiman said.
SAMI is eyeing particularly strong OZs, such as in the Las Vegas Arts District, which has had a decade of tailwinds behind it, he said.
The firm is interested in the Washington, D.C., area as well and is eyeing a seed asset in the capital city.
SAMI has an over 60-year track record and has sourced over $1bn of projects. The firm’s multifamily unit portfolio clocks in at over 3,000 units.
The firm is led by Treiman, SVP of investments Sandy Schmid, director of IR William Schumann and director of asset management Ted Soo.