Quickly expanding real estate portfolio vs. guarantee of operational effectiveness in property management

NEWGATE INVESTMENT Sp. z o.o. is a company which major strategy consists in investing in real estate with retail operators at the best locations, with proper purchasing power potential, which guarantee long-lasting and stable business. The company intensely invests in shopping facilities in Poland and is currently managing more than a dozen of such facilities.

Planning as a source of operational effectiveness driven by fast growth

NEWGATE INVESTMENT (NGI) started to operate on the Polish market by purchasing two middle-sized shopping parks. From the very beginning, the company focused on a fast expansion of real estate portfolio by way of acquisitions and investments in new facilities. The management of the company, who have much experience in working in the retail sector, from the very start concentrated on optimization of all property management processes, according to the principle that in the current situation on the market the optimization of commercial facility maintenance costs and effective management constitute one of the main methods for achieving real estate appreciation, especially in the retail sector. This sector shows a high saturation level. In consequence, tenants can negotiate so many parameters of tenancy agreements that a property manager of even just one facility may have to deal with many different models of utility settlement, maintenance costs, turnover rents, indexation or agreement security.

„Considering the plans of quick expansion of our company, I was sure that spreadsheets and an accounting program will not be enough, let alone the target optimal solution for our company. The dynamically changing retail sector and the diversity of terms negotiated by tenants require adequate planning already at the very beginning of business operation.” – Robert Dudziński, Head of Asset Management, NGI

Taking into consideration the above circumstances, upon setting up the company the management decided to implement modern and specialized IT tool, substituting the standard methods of management pursued in many companies starting to operate in the property management sector, which methods are based on spreadsheets supported by a simple financial and accounting system. In a “beauty contest” the offer made by NOVO Technologies, the producer of the NOVO Property Management system (NOVO PM), was selected as an offer which was best fit for the specific nature of shopping center management and characterized by a flexible price-related business model which was supposed to follow the growth in the number of managed facilities, which removed the "barriers to entry" at the beginning of co-operation and allowed NGI to link the costs of implementation and maintenance of comprehensive IT systems with the growth of its basic business.

Expanding real property portfolio as a generator of IT system development

Initially, the system was implemented on the basis of the standard system functionality and in+built package of operational and management reports. The project team consisting of representatives of both companies prepared system input data, performed a proper parametrization of the system and finished this stage off with test invoicing of tenats. The test results were positive, so after training the users, NGI could start the day-to-day work witn the system. Over the first year of system operation, NGI - as result of acquisition - increased the number of managed shopping parks 4 times and the number of rent agreement went up several times.

„As our business was expanding, we started to notice that we needed to integrate our NOVO PM with an accounting system. Such integration turned out to be a substantial improvement in work for both the accounting department and the people managing the facilities and working directly with tenants” – Robert Dudziński, Head of Asset Management, NGI.

Then, more non-standard provisions appeared in rent agreements, the number of issued documents increases significantly, there were more cost invoices and there emerged the need for new categorization of some tenants and rent payments. The situation required that the parameters in NOVO PM be optimized, including redefinition of the reporting system and corrections allowing for the methods for issuing and settling two-currency invoices and methods for settling different rent categories to be changed. Furthermore, NGI decided to integrate NOVO PM with Sage Symfonia, a financial and accounting system, with aim to optimize revenue accounting, boost effectiveness of receivable management and provide much more advanced analysis of costs per facility and per tenant. Due to an automatic integration of the systems, part of settlement processes were shortened, time associated with the operation of manual data transfer was eliminated, the reports expanded in scope and they required less time to be prepared. One of the main reports which enriched the functionality of NOVO PM considerably was the "one-click available" dedicated NOI report (i.e. Net Operating Income), which became one of the key reports in managing the real estate portfolio of the company.

"The necessity to adjust the system to the new business situation of the client is a test for its producer: it shows how flexible the system is, which business practices have been included there and - as a result - what the producer knows about the sector and whether he will be a good partner - an advisor in business. I am very much satisfied that the quality of our work has been appreciated by NGI" – Marcin Grodzicki, President, NOVO Technologies

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