NewRiver REIT

UK client interview

By Martin Gedny on Mar 27, 2017 in People

The British retail investment market joins the rest of the United Kingdom’s business community in facing a host of unknowns in 2017.  Chief among them is the timing and impact of the UK’s exit from the European Union following the outcome of the referendum in June 2016.

Yardi caught up with one its partners, NewRiver REIT, a specialist retail and leisure investor, asset manager and developer whose convenience-led positioning means it is uniquely placed to navigate these uncertain times. NewRiver’s £1.3 billion portfolio includes 33 community shopping centres, 22 retail parks, 16 high street assets and 350 pubs. The portfolio provides consumers up and down the UK with its daily essentials – those items essential to daily life, the things consumers require, opposed to what they simply desire.

Fundamental to the success of the business over the past seven and half years has been how NewRiver has engaged with and satisfied all the stakeholders within its chain, from store customers, retailers, peers, advisors and local authorities all the way to its institutional investors and shareholders.

“At the heart of the retail sector is the customer and our business begins with building and retaining consumer loyalty,” says Emma Mackenzie, a Director at NewRiver who manages assets in Scotland, Northern Ireland and the north-east of England.

“At the local level, we make sure our shopping centres satisfy the needs of the towns they serve. Its about providing a variety of products and services at a price the customer can afford. Furthermore, we work hard to ensure the environment is fit for purpose – and that includes such basic factors as the centre being clean and accessible as well as bright and attractive and providing somewhere to sit down or get a cup of tea.” Brexit has triggered a period of uncertainity yet Mackenzie says “but even in times of downturn, the consumer still needs to feed, wash and clothe themselves. This is why the NewRiver portfolio, with our convenience-led focus, remains well-placed during this time. Our portfolio provides shoppers with their everyday needs and with 150 million shoppers visiting the NewRiver shopping centres, we work hard to continue to provide consumers with a convenient and quality customer experience.”

An integral part of NewRiver’s ethos and asset management is its relationship with its partners, including its agents, architects and lawyers but especially its retail partners. Mackenzie continues, “we run our shopping centres as though we ourselves were retailers. We have over 2000 occupiers in our portfolio and we value our retail partners, striving to understand their businesses to ensure mutual success and a positive long-term relationship. Our external advisors and consultants are an equally critical part of the NewRiver team. Again, we strive to inspire and forge a team spirit with them.”

 

Growing and Creating Value

NewRiver was founded by David and Allan Lockhart in 2009 as an AIM-listed real estate investor, asset manager and developer specialising in the retail and leisure markets with a head count of two and zero assets. Fast forward to September 2016, and NewRiver is a FTSE 250 company listed on the Main Market of the London Stock Exchange with £1.3 billion of assets under management, a team of over 50 and a market cap approaching £800 million. When the company moved up to its premium main market listing, it simultaneously rebranded its name from NewRiver Retail to become NewRiver REIT plc and also qualified for FTSE All-Share and EPRA indices.

NewRiver has grown year on year and consistently created value by delivering upon its proven business model – a simple four-fold approach: retail and leisure specialisation, strategic stock selection, proactive asset management and risk-controlled development.

Key to NewRiver’s growth has been the management’s ability to identify unrealised value-creating opportunities as it deployed it disciplined acquisition strategy. The Company takes a very hands-on approach to managing its assets, focusing on generating sustainable income through active asset management and maintaining affordable rents. NewRiver has a healthy development pipeline totalling 1.6 million sq foot from within its existing portfolio which offers solid prospects for more of the same in 2017 and beyond.

“We focus on the non-discretionary retail and leisure sector where the UK household budget is spent day in, day out and we saw that a proactive asset management strategy could maximise the convenience-led positioning of our assets. Disciplined stock selection in the first place has been critical to the success of that approach,” Mackenzie notes.

Using Technology Effectively To Improve Performance

To deliver a superior consumer experience and seize marketplace opportunities, NewRiver must operate at optimum efficiency while satisfying exacting regulatory and investor requirements. The company came to realise that successful execution of all these activities requires a solid, versatile technology foundation.  “Accounting rules relating to our preparation of accounts are constantly evolving, as are good practice guides relating to Service Charge. The technology we use must be able to cope with the changing nature of regulation,” Mackenzie says.

In 2014, NewRiver acquired the necessary technology foundation by adopting Yardi Voyager^®, a cloud-based property management and accounting software platform that integrates lease management, business intelligence, investor relations, expense recoveries, task management, reporting, mobile data access, and more.  “Housing all financial and operational data in one system allows for real-time performance analysis. With Voyager we can analyse using various metrics at a granular level.  We can examine trends related to income, anticipate where voids are likely to occur, and effectively manage our partners who access the same data source,” Mackenzie says.

Yardi Voyager provides commonality for all participants in NewRiver’s business.  “Accurate billing of rents and their collection is the core of our business. This involves external managing agents and internal finance and asset management teams. Therefore it’s imperative that we all work from the same live data. And mobile access to Voyager is crucial for our widely dispersed asset and property managers,” according to Mackenzie.

She continues, “As a listed REIT plc we have strict reporting requirements to both our shareholders and the market in general. Voyager ensures that the underlying source data is correct and validated.”

Automated workflows within Yardi Voyager drive efficiency in other operations as well.  “We have a number of holding companies that involve a significant amount of accounting roll-ups and consolidations.  Prior to Voyager these were time-consuming events with the potential for errors. Voyager allows the preparation of accounts in a timely and accurate manner,” Mackenzie says.

Using a centralised platform has allowed NewRiver to manage and make sense of the formidable amount of data generated across its portfolio.  “Data is king and the retail is detail!” Mackenzie says.  “Assessing the performance of an asset helps us retain occupants and fill vacant units. Quick access to data is the key. We can also analyse performance at the individual asset level, as well as business-wide.”  Using Yardi Orion^® Business Intelligence, which delivers business-wide operational and financial insight, “we can generate portfolio-level statistics and real-time performance, and view trending patterns to identify any issue related to tenant performance.”

Last, but certainly not least, Mackenzie says, Yardi Voyager gives NewRiver peace of mind in another important way.  “Having a hosted solution that provides 24/7 data access and excellent support for both NewRiver and our external partners allows us to sleep easy and have a life outside of work!”

Additional technology adoptions will further streamline business processes. “The more our business grows, the greater the need for us to deliver and benefit from economies of scale and effective, efficient systems and infrastructures,” Mackenzie said, adding that NewRiver will soon integrate an electronic invoice processing solution into Yardi Voyager.

Positive Signs Ahead

NewRiver’s business philosophy, success and timely technology adoptions fuel Mackenzie’s optimistic outlook on her industry’s dominant issues.  For example, “The physical store remains fundamental to retail. Yes, online sales will continue to grow, but so will the physical store.  Our research indicates that physical store sales are set to grow by 10% over the next five years.”

She’s similarly upbeat about weathering Brexit, whenever it happens. “Through it all, we’ll remain focused on our business model, be consistent in our pursuit of doing things better, and continue to work with best-in-class partners.”

For Mackenzie, as with NewRiver, business is ultimately defined by personal connections. “I am driven by the pride that comes from working alongside like-minded individuals. We continuously strive to improve and innovate. We want to be the best owner/operator of shopping centres and deliver results for our customers, retailers, stakeholders and investors,” she says.