Pictured (top to bottom): Pamela West, Nadir Settles, Donald Hall
As one of the world’s largest real estate investment managers, with more than $156 billion of assets under management, Nuveen Real Estate has turned its sights toward the global impact investing sector. Its recently launched platform aims to foster healthier communities through investments in affordable housing that simultaneously address some of our most pressing social and environmental challenges.
Defining impact
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“To the uninitiated, the term ‘impact investing’ often brings to mind the more traditional interpretation of environmental, social and governance (ESG) initiatives,” says Nadir Settles, Global Head of Impact Investing at Nuveen Real Estate. But impact investing, especially in affordable housing, covers much more than that. While he believes ESG should automatically be a core component of all investments, he finds that typically the “E” becomes the focus, whereas Nuveen Real Estate emphasizes the “S” as they amplify their impact to create healthy communities.
In that way, their group’s influence goes beyond investing in what most people consider “affordable housing.” As Settles explains, “For us, it’s not just about the four walls. We operate a comprehensive model designed to provide supportive services that allow people to thrive in their neighborhoods—to ensure residents are connected and comfortable where they work, live and play.”
Creating a true community
This focus on community building begins by transforming existing properties to make them healthier. “Many of the assets we acquire have been passively managed and therefore aren’t well-maintained,” says Pamela West, Senior Portfolio Manager for Impact Investing at Nuveen Real Estate. “We get excited about going in and handling deferred maintenance and immediately improving the resident experience, which restores dignity to residents who can be proud about where they live.”
That might include removing carpet that can contribute to asthma, adding insulation to walls and swapping out appliances. In one property Nuveen Real Estate recently acquired, they found equipment permanently parked on-site to scoop out standing water, which created a subpar living environment that was prone to insects and other damage. By upgrading the plumbing, heating, ventilation and air conditioning equipment, they were able to make a change that immediately improved the quality of life for residents.
We have a plan to upgrade every unit we acquire and turn properties around as they change hands from private capital to institutional capital, which we think is part of being a good institutional investor, West says.
Nuveen Real Estate’s ultimate objective is to move from a real estate mindset to a people mindset. But it starts with these property improvements. “You can’t think about your financial literacy or upskilling toward new job options if you don’t feel safe and secure in your home,” Settles says. “So it’s critical to preserve housing and then use that as the cornerstone to build an ecosystem that allows residents to thrive.”
Nuveen Real Estate implements strategies designed to put residents on a trajectory to become more self-sufficient through job training and increased financial acumen. For example, they make sure timely rent payments are reported to credit bureaus to help boost credit scores so that residents can access money at a lower cost when they need a car or home loan in the future.
In their 65+ communities, many older residents want to age in place. The Nuveen Real Estate team provides subsidized healthy meals and free transportation across most of their senior assets, then goes a step further to partner with local healthcare organizations for in-home visits. “Tenants often begin to decline after taking a fall, so a key marker of success is preventing that first one,” West says. Through home assessments, practitioners can conduct wellness checks and also offer insight on how an environment could be revamped to provide safer conditions.
In the more family-oriented properties, the Nuveen Real Estate team might shift their focus to deploying free Wi-Fi to support jobs and schooling and offer access to telehealth. And they are promoting financial wellness goals by helping residents open bank accounts and exploring pathways to home ownership and equity building.
Addressing the dearth of affordable housing on two fronts
The shortage of housing has become a national crisis in the U.S., one that Nuveen Real Estate is attempting to address. They approach the issue from two fronts: the first of which is a defensive play where they preserve existing housing stock. That’s key because many developments are expiring from current restrictions, which means they will lose subsidies and will likely either be destroyed or converted to market-rate housing.
“Our investment thesis is the antithesis of gentrification. We take communities that were traditionally blighted and help them flourish,” Settle says.
Nuveen Real Estate develops an offensive play as well. “We want to generate new stock for that same demographic, but it shouldn’t look like what’s been developed over the past few decades,” West says. To do that, they take what might strike some as a counterintuitive approach and create communities that aren’t 100% targeted toward affordable rates.
“We believe we can more effectively address societal needs and create communities that will thrive by advancing mixed-income housing,” says West. “With this new strategy, we can attract a more diverse community which allows for better amenities, transportation options, educational resources and jobs.”
“Through Nuveen Real Estate’s proprietary research platform we identify opportunities across property sectors to create a win-win environment,” says Donald Hall, Nuveen Real Estate’s Head of Research for the Americas. “We can help identify which communities have a lack of nearby grocer or medical options and work within our platform to help address these needs,” Hall says.
West points out that highlighting the purchasing power of these tenants can help diffuse NIMBY (“not in my backyard”) mindsets that can crop up as neighbors aim to curtail growth. “It’s vital to educate the greater community that these are paying tenants and customers.”
Identifying investment opportunities
While the doing “good” component is clearly embedded in Nuveen Real Estate’s actions, the doing “well” needs to be just as prominent. “For us, it’s about the double bottom line: If we’re not improving people’s lives then we’re not making good investments,” says Settles.
Fortunately, the opportunities for investors are immense, finds Hall. While it’s no secret affordable housing is scarce, he shared some alarming statistics. In the U.S. nearly half of renters are rent-burdened, which means they pay more than 30% of their income in rent. Of those, one-quarter are severely rent burdened, which means they have to allocate 50% or more of their income toward rent.
It’s clear there’s a huge and growing demand, yet never enough supply, says Hall, adding that 1% or less of new housing stock is typically devoted to affordable housing. Given the clear disparity rising between market rents and income over the last decade, there has to be more of a match between supply and demand.
That’s why Nuveen Real Estate’s strategy is proving so appealing to investors. “When you invest your capital in affordable housing, you provide an integral service but also gain exposure to a resilient investment sector that simultaneously helps achieve social goals,” Halls says.
Putting ESG at the center of their philosophy
Although Nuveen Real Estate’s comprehensive neighborhood building goes beyond environmental goals, it doubles down on those impacts as well. “Sustainability is in our DNA and a focus across our global portfolio,” Settles said, adding that many years ago they committed to reducing their carbon footprint by building more efficiently. In fact, while sustainable building has become more popular and the effects of Local Law 97 emerge, they were already on the forefront.
“We didn’t need to react as other firms are doing,” Settles says, citing their new headquarters that incorporates the latest building materials to promote both sustainability and a healthier environment for its team. “Well before Local 97, we were heeding those requirements and setting the standard. Because this commitment permeates everything we do, we are going to carry those factors through to ensure all our buildings—including affordable housing—are sustainable, while promoting health and well-being.
Building a better world, one community at a time
Nuveen Real Estate aims to be true to its mandate to serve those who are deeply in need by creating a community where everybody participates. “We are on the forefront of impact investing and are unlike any other institution out there in the space,” says Settles.
Do you want to know more about how Nuveen Real Estate’s commitment helps drive value and change? Find out more in their annual ESG report.