To further Leverage.com’s mission of democratizing knowledge about commercial real estate, we started an interview series with all kinds of CREF pros: everyone from multifamily and medical to cannabis and construction. This time we connected with John R. Williams, President and Chief Investment Officer at Avanath Capital, an investment firm that acquires, owns, renovates and operates affordable, workforce and value-oriented apartment communities across the U.S.
Here’s how the conversation went:
Avanath has a strong record of committing to ESG projects. Can you explain to our readers what ESG investing is like in commercial real estate?
ESG investing is a commitment to environmental, social and governance and ensuring investments are having a positive impact. We focus on all three pillars of ESG. From an environmental standpoint, we incorporate sustainable features in all of our properties that reduce our carbon footprint, as well as decrease operating costs.
From a social standpoint, we invest in affordable and workforce housing communities in areas where there is a strong need for affordability. Rents have continued to increase in many major markets across the U.S., and home affordability remains high, creating significant demand for affordably-priced apartments.
Beyond the affordability aspect, all of our communities also incorporate social programming and services that aid in improving residents’ lives. This programming includes benefits such as after-school and mentorship programs for kids, financial literacy programs for adults, and gardening clubs for our seniors, to name a few.
We also place a significant focus on health and wellness, and provide programs that aid in keeping residents healthy. At a few of our properties in Maryland, we transformed underutilized space into exam rooms where residents could receive cholesterol screenings, blood pressure checks and other health screenings free of charge. During the pandemic, when community gyms were closed, we also gifted free virtual gym memberships to our residents so they could still work out from the safety of their homes.
Lastly, from a governance standpoint, diversity is a core component of the Avanath team. We place a significant emphasis on ensuring we have a diverse team at all levels, from our onsite property management staff to our executive team.
For our readers who might now be familiar with workforce housing, can you explain the term and why this type of investment can still be profitable?
Workforce housing is a type of housing that is priced lower than the market. For example, many other competing communities in the area that are considered “Market-Rate” communities are charging a higher rent. Workforce housing simply means that it is priced lower than competing market-rate communities and is serving the general working class population. This differs from affordable housing where rents are regulated based on AMI (area median income).
What’s next for Avanath? Do you want to eventually expand into new markets or assets classes?
Avanath is positioned to continue to grow. We are actively looking to expand in new markets across the country. We recently entered the Orange County market this year and the Boston market at the end of last year. We remain bullish in these markets, as well as several others throughout the U.S such as Denver, Austin, and Orlando, to name a few.
We remained focused on affordable and workforce housing. It is core to our investment strategy and proven very successful, so we do not anticipate shifting into other assets classes in the near future.
Why have affordable and workforce housing properties been profitable investments?
Our portfolio of Affordable/Workforce Housing has remained profitable because of our high occupancy and collections, along with low turnover. In fact most of our assets have waitlists.