Nuveen Real Estate, which earlier this month launched a global impact investment sector, anticipates financing diverse developers and investment managers for US-based real estate projects as part of the sector mandate.
The program aims to look globally at critical social and environmental challenges in the US, Europe and the Asia-Pacific region, said Nadir Settles, head of global impact investing. The goal is to improve communities by offering affordable, safe housing that also provides necessary supportive services.
While there are many managers with expertise in specific markets who want to grow their residential and mixed-used platforms, there has been one major roadblock: accessing financing.
“When we think about the structural challenges in this industry, one of the major issues is access to capital,” Settles said. “We will be starting an emerging managers lending program that will finance diverse developers and investment managers.”
Many of the managers Nuveen anticipates working with have the skills and expertise necessary to execute the completion of the real estate projects, but lack the growth capital.
“For example, many of these managers are backed by a state pension plan or a family office and have the equity necessary but need financing to get it going,” Settles said. “These are middle-market loans and we know that because it takes about the same amount of work to underwrite a $20 million loan as it does to underwrite a $200 million loan, and diverse managers seeking middle-market loans can be adversely affected. We are going to be really intentional about providing financing to managers with great capability and track records.”
The strategy expands Nuveen’s existing focus in affordable housing across the US, Settles said.
“We will be investing in affordable housing and disinvested communities where we’ll aim to foster public-private partnerships to create economic engines in those communities via an intentional place-based real estate strategy through which it is possible to invest in multifamily and also in medical office, retail and other aspects of real estate that can allow for the creation of jobs, communities and build density and ultimately self-sustaining neighborhoods,” Settles said.
The strategy has a broad, national focus because of the widespread issues facing the US affordable housing market. “We like particular markets in the Sunbelt, the Eastern region and West but this is a national crisis, which is why we are targeting public-private partnership that can take shape in different markets,” Settles said.
When Nuveen thinks about diversity within its portfolio, it is also thinking about supplier and vendor diversity, among other factors, said Pamela West, senior portfolio manager, impact investing.
“More than fifty percent of our current partners are minority- or women-owned firms. We are already partnering with emerging and diverse managers on the equity side, and we will now provide similar groups with credit support,” West added.
By providing financing, Nuveen believes it will be able to work with managers to get projects off the ground that might otherwise have stalled.
“These projects will now be executable and that will immediately increase the stock of affordable housing that is available,” Settles said. “We will be working with managers who greatly care about their communities and are working on projects that will be extremely meaningful in their communities. These managers will now be able to have growth capital”