South Street Partners closes fund at more than $225M

Listen to this article

South Street Partners, a private equity real estate investment firm headquartered in Charlotte and Charleston, has closed SSP GP Fund I on July 27. The firm’s inaugural discretionary commingled fund raised more than $225 million, easily exceeding an original target of $100 million, according to a news release.

The fund was formed to continue South Street’s strategy of executing on opportunistic, value added and special situation investment opportunities in real estate assets located in the Southeast and other select U.S. and international markets, the news release said.

The fund’s GP structure enables South Street to scale its 13-year strategy of partnering with institutional investment firms on large cap transactions as well as to pursue small and mid-cap deals utilizing the fund’s balance sheet. In addition, the firm expects to generate co-investment opportunities for its limited partners, the release said. The fund could provide South Street with as much as $2.25 billion of unlevered buying power via these partnerships and co-investment vehicles, the company speculated.

The fund can invest across a spectrum of real estate asset classes but will primarily focus on upscale and luxury resort and residential opportunities. Its first two investments were:

• Palmetto Bluff , a 20,000-acre private residential club and resort community in Bluffton, just north of Savannah, featuring 32 miles of river frontage, a 5-star 200-key Montage Hotel, the Palmetto Bluff Club and May River Golf Club, Palmetto Bluff Realty and entitled land for approximately 2,500 additional residences.

• Kiawah Partners, a portfolio of real estate and operating assets including much of the remaining residential land on Kiawah Island, a 10,000-acre resort community off the coast of Charleston, featuring 10-miles of beachfront, the Kiawah Island Club, Kiawah Island Real Estate, the island’s dominant residential brokerage, and Two Meeting Street Inn, a 130-year-old bed-and-breakfast located South of Broad in Charleston.

The fund secured commitments from a range of limited partners including family offices, registered investment advisers, wealth management firms, funds of funds and high-net-worth investors through an oversubscribed fundraising process.

“As a former fund-less sponsor raising capital on a deal-by-deal basis, reaching the closing of our inaugural U.S. discretionary commingled fund is a major achievement,” partner Chris Randolph said in the release. “Raising this fund through the pandemic certainly created challenges but we are honored by the outsized investor demand the fund received, which we believe is not only related to compelling opportunities that we are seeing but also the reputation and track record we’ve built over the past 13 years.”

South Street Partners says the fund seek to generate attractive risk-adjusted returns for its limited partners by sourcing acquisition opportunities through a network of owners, advisers, managers and developers of real estate created over decades of operational and investment experience; acquiring properties at attractive prices, usually as a result of distress or underperformance at the asset level, improper capitalization, or unique management or ownership dynamics which limit a seller’s ability to effectively bring the asset to market; instituting and managing a repositioning or redevelopment program; and adding value through hands-on asset management through in house operational expertise.

“The current environment and demographic trends in our markets of focus create significant opportunities for the fund’s investment strategy,” Patrick Melton, co-founder and managing

partner of South Street, said in the release. “We believe our history of sourcing and executing a wide range of complicated transactions throughout various stages of the market cycle while providing excellent returns to our investors over the last decade is one of the main reasons investor appetite was so strong.”

Since its founding in 2009, South Street has executed trades that include North Beach Towers, Kiawah Partners, Doonbeg, Christophe Harbour, The Cliffs Communities, The Residences at Salamander and Palmetto Bluff.