Housing justice
stok Investment Group develops healthy, sustainable housing for undeserved middle markets at a higher yield on cost
We live in a changed world, and the market is ready for a new approach
Everyone -- from investors to renters -- is reflecting on how to build back better. The development models of the past are quickly transitioning to reflect a newly realized set of values and demands. To better understand our business model, we’ve outlined why our strategy is defensible and provides better risk adjusted returns than investing indirectly into assets through funds.
“The projects we invest in have the right price point for an underserved demographic, are sustainable for the environment and communities, and healthy for the people and communities who interact with them” - Ross Holbrook, Managing Partner
Widening Market Gaps
Renters with incomes ranging from 50-140% Area Median Income in desirable urban centers are not well-served by current offerings
51% of the total U.S. renter market
Is not being actively addressed by investors and funds and remains the greatest opportunity for risk adjusted returns in the multifamily sector. When purposefully built with appropriate densification strategies and the right community oriented management practices, we see accretive returns to Class A luxury product.
More than 50% of renters in the U.S. are cost-burdened, meaning they spend more than 30% of their total income on rent. Saddled with debt with little left over for savings after utilities and food costs are paid, they have few affordable options to turn to. Outside of the limited availability of subsidized affordable housing for a specific audience of lower income renters, most average or median renters in urban areas require choosing between financing a roof over their head and financing their future.
ESG Investing takes off
numersous studies demonstrate two important concepts:
Consumers will pay up for sustaibale assets
Assets screened for sustainability are in Demand
ESG Assets in Demand
It’s difficult to see the shifts as they happen before your eyes but especially since Covid, the flow of capital to ‘sustainable assets’ has blown by all expectations. Today over 3,000 funds screen investment using ESG criteria and most investors do so seeking to address environmental concerns.
The practice of investing in companies or funds that aim to achieve market-rate financial returns, while considering positive social or environmental impact, is gaining more popularity than ever before among institutional investors. Among asset owners surveyed, 80% said that they actively integrated sustainable investing in 2019, per Morgan Stanley’s biannual survey. 2019’s survey found more asset owners identifying return potential as a key driver for sustainability integration, and accordingly many envision a future where they will limit their allocations to managers with formalized sustainability approaches.
stAkeholder capitalism finds room to grow
More than ever, institutional buyers are actively seeking out ESG assets that both fit requirements and generate returns
The Rise of the S
The global pandemic has both amplified and accelerated the push of social issues as an economic reality, driving forth the evolution from the ‘S’ as a values-based question to the ‘S’ as a material business question.
For our business and our communities the most pressing issue of our time is affordable, safe and healthy housing. It’s a basic building block of not only Maslow’s Hierachy but also one of wealth. Within our target demographic, average debt is $55K while greater than 75% have <700 credit scores putting other options such as buying a starter home out of the question.
+ = aspects of our developments that contribute to a healthy community
The heightened focus on ‘S’ factors will require investors to understand how companies approach social considerations in their core business model in the long-term, not just how they respond in the moment. A 2018 study conducted by JUST Capital showed that companies in the Russell 1000 that performed within the top quintile on metrics such as worker treatment, customer satisfaction, and community support generated a Return-on-Equity 6.4% higher than their peers, had higher net and operating margins, and commanded a meaningful valuation premium over their lower-scoring peers.