AMDP's Investment Proposal

TO: Clark Hansen, CEO, Anima Mundi Development Partners

FROM: Rachel Jacobson, Research and Development Analyst, AMDP

DATE: September 30, 2020

SUBJECT: Investment Proposal for Nestidd

 

This past week, I have been researching different investment opportunities for AMDP. After much consideration, I have concluded that AMDP should invest in Nestidd. Nestidd provides affordable housing to people with Intellectual and Developmental Disabilities (I/DD). I believe that Nestidd’s mission aligns with our desire to invest in socially responsible, sustainable, and profitable companies.

 

In my proposal, I will outline:

•       AMDP’s Investment Standards

•       Nestidd’s Mission/History

•       Nestidd’s Services

•       Nestidd’s Financials

•       A Critical Analysis

•       My Recommendations

 

AMDP’s Investment Standards

Before going into Nestidd’s investment opportunity, I want to remind you of the four different requirements AMDP considers before investing in an organization: Triple Bottom Line, Corporate Social Responsibility, Social Enterprise, and Carbon Footprint.

 

Triple Bottom Line

TBL is an accounting framework that goes beyond traditional monetary performance reporting to emphasize the importance of social and environmental measures.

• People: the social benefit a company has provided to their community, employees, and clients

• Planet: actions a company has implemented to reduce waste, be more sustainable, and help the environment

• Profit: the financial surplus from revenues minus costs (“A Simple Explanation of the Triple Bottom Line: University of Wisconsin”)

 

Corporate Social Responsibility

CSR is how a company can ‘do good’. The company aims to be socially responsible by working to better their environment, community, and people. CSR is becoming more and more important as people want to invest their money into companies doing good (Schooley).

 

Social Enterprise

A social enterprise is a company that wants to address social issues and serve the common good. Although they are cause-driven, like traditional charities, social enterprises have sustainable revenues and do not depend on donations or grants for income (Osberg & Martin).

 

Carbon Footprint

Carbon footprint is the amount of greenhouse gas emissions that accumulates from a company’s actions, product, or service. Most of our carbon footprint comes from our transportation, food, and household. We can measure carbon footprint by converting our greenhouse gas emissions into tons of carbon dioxide. It is essential to reduce our carbon footprint as the increase in greenhouse gases leads to climate change (“What Is Your Carbon Footprint?”).

 

Mission/History

Nestidd is an impact real estate firm that wants to provide people with Intellectual and Developmental Disabilities (I/DD) an affordable home in a good neighborhood. This social enterprise works with care providers to find and buy homes in a safe community and renovates it to make it comfortable and accessible for their clients. They utilize affordable housing options in potential neighborhoods and serve a niche community of people at a low cost.  They take care of all issues related to the property and the community, from neighbors to zoning; Nestidd does all the work, so the transition is seamless (“Who we are”).

 

In 2017, Andrew Parker and Tad Ritter founded Nestidd. After working for seven years in finance, the long-time friends decided to fill the need for low-cost housing for people with I/DD. They spent a year going to conferences and meeting with care providers to understand the market and where there was a demand. Parker and Ritter began flipping houses and working with care providers to serve all housing needs for people with I/DD. As of July, Nestidd owns and manages over 250 homes across the United States. There are few competitors, none of which pose a threat to Nestidd’s revenue.

 

Services

Nestidd’s ‘flipping houses’ business model eliminates their carbon footprint by enhancing existing properties instead of developing new properties that would cost time, money, and resources. Their services include a range of different options for care providers and tenants to take advantage of. Nestidd has three services they provide:

•       Simple Leasing: care provider organizations will explain what they are looking for in a new home or property, and Nestidd will find options and purchase them

•       Maintenance: Nestidd360 is a 24/7 service that hires vendors licensed to work in I/DD communities to tend to any issues post-move-in across the country

•       Sale/Leaseback: Nestidd will buy I/DD community homes from care providers and lease them back to them (“Home”)

People with I/DD have a new set of challenges they have to face due to COVID-19. They are more vulnerable to complications of COVID-19, making them high-risk individuals. Now more than ever do people with I/DD need safe homes. Nestidd has grown despite the current real estate market because of its unique value to customers that is in high demand, making it the right investment decision.

 

Financials

In January, Nestidd closed its second fund of $20 million in equity commitments equating to $50 million in market share (“Ross Alum Acquires $20 Million Fund to Purchase Homes for Individuals with Intellectual and Developmental Disabilities”). Their first fund, which kickstarted their operations was $13 million to create 250 homes—which they were able to do. The second fund included all of the same investors from the first fund (“Ross Alum Acquires $20 Million Fund to Purchase Homes for Individuals with Intellectual and Developmental Disabilities”). This is a great tell that investors are happy with their returns from the first couple of years of Nestidd. Their second fund will continue to acquire and lease out different homes to care providers.

 

Nestidd charges $2,000 a month for rent, including all management services, for a house acquired for $200,000. Leases average at about five years in length with a high turnover rate, which reduces costs. Revenues per year are about $2 million across Nestidd’s properties, with expectations to significantly grow due to the second investment fund. Nestidd saves care providers $7,000-10,000 annually per home, allowing care providers to offer 25% more people housing than without Nestidd (Brubaker).

 

In Pennsylvania alone, there are more than 50,000 individuals with I/DD, 5,413 licensed group homes of 18,713 people, and thousands more on the waiting list (Brubaker). There is such a high demand for homes for people with I/DD, and this niche market has been left untapped. With the government backing payment for all of Nestidd’s acquisitions, they have minimal risk and infinite opportunity.

 

Critical Appraisals

University of Michigan Ross School of Business posted an article on their website praising Nestidd, explaining that “Nestidd comes at a critical time” with an apparent demand from the market and a waitlist of 500,000. With minimal competition and overwhelming need, Nestidd is bound for social and financial success (“Ross Alum Acquires $20 Million Fund to Purchase Homes for Individuals with Intellectual and Developmental Disabilities”).

 

The Philadelphia Inquierer’s article highlighted the unique value Nestidd brings to care providers explaining they “relieve agencies of their real estate burden… that is essential to serving their clients”. Nestidd does not just provide affordable housing for people with I/DD, but they make it accessible and comfortable for tenants with no further action needed from care providers. Dennis Roberts, a healthcare provider with tenants in multiple Nestidd properties, explained the process as extremely helpful, convenient, and comfortable (Brubaker).

 

Recommendation

Nestidd is a company full of potential. There is a disability housing crisis, and Nestidd is providing an answer. Their mission is to create warm, safe homes for people with Intellectual and Developmental Disabilities where they can become more independent.

•       Nestidd works for people: to enhance the underserved community of people with I/DD

•       Nestidd helps the planet: by acquiring and converting houses that are not being used, rather than building more real estate

•       Nestidd makes a profit: with government backing, minimal risk, high turnover, and increased demand

This niche market has an abundance of opportunities, and I would highly recommend investing in Nestidd.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Work Cited

Brubaker, Harold. “How This Real Estate Startup with Philly Roots Helps Those Serving the Intellectually Disabled.” Https://Www.inquirer.com, The Philadelphia Inquirer, 17 Feb. 2020, www.inquirer.com/business/health/nestidd-andrew-parker-group-home-intellectually-disabled-20200217.html. 

 “Group Home Operators Outsourcing Real Estate Worries.” Disability Scoop, 4 Mar. 2020, www.disabilityscoop.com/2020/03/04/group-home-operators-outsourcing-real-estate-worries/27919/. 

“Home.” React App, 2020, nestidd.com/home. 

Osberg and Roger L. Martin, Sally R, et al. “Two Keys to Sustainable Social Enterprise.” Harvard Business Review, 20 Apr. 2015, hbr.org/2015/05/two-keys-to-sustainable-social-enterprise. 

“Ross Alum Acquires $20 Million Fund to Purchase Homes for Individuals with Intellectual and Developmental Disabilities.” Ross Alum Acquires $20 Million Fund to Purchase Homes for Individuals with Intellectual and Developmental Disabilities | Michigan Ross, 2020, michiganross.umich.edu/ross-news-blog/2020/07/24/ross-alum-acquires-20-million-fund-purchase-homes-individuals-intellectual. 

Schooley, Skye. “Corporate Social Responsibility.” Business News Daily, 2018, www.businessnewsdaily.com/4679-corporate-social-responsibility.html. 

“A Simple Explanation of the Triple Bottom Line: University of Wisconsin.” University of Wisconsin Sustainable Management Degree, 2 Oct. 2019, sustain.wisconsin.edu/sustainability/triple-bottom-line/. 

“What Is Your Carbon Footprint?” The Nature Conservancy, www.nature.org/en-us/get involved/how-to-help/carbon-footprint-calculator/?redirect=https-301. 

“Who we are.” React App, 2020. nestidd.com/who_we_are.