June 28, 2023

[Interview] Anton Grytsenko, Newgate Investment: Investments in retail parks have become a priority for us

We are currently working on our first project in Malbork, which we are building from scratch. This project is already 100% commercialized - says Anton Grytsenko, Chief Operating Officer of Newgate Investment, in an interview with Retailnet

The end of last year was an intense time for NGI - the acquisition of further retail parks, the completion of the reconstruction of the Wysocki PH. Does this mean that you are accelerating your development in the retail park sector?
Last year, we made purchases in five different locations in Poland: Ostrów Mazowiecka, Częstochowa, Chorzów, Zielona Góra and Grodzisk Mazowiecki. Our main focus are retail parks with a food operator or in the vicinity of a food chain with a shared parking lot. We are also interested in “stand alone” facilities that offer long-term rental and operate under one contract. Recently, investments in retail parks have become one of our top priorities. It is worth noting that this development strategy was developed before the COVID-19 pandemic.

How to effectively attract customers to retail parks? How to build an attractive tenant mix of these projects?
The key is tenant mix synergy. Customers want to buy goods at good prices and we provide them with that. When completing tenants, attention is paid to ensure that the client can easily create the entire basket of basic needs in a given facility, i.e. groceries, industrial products, etc.

The advantage of our facilities are large parking lots, from where there is easy access to selected shops. Most of our tenants have entrances to the premises from the outside, not from the inside. Customers appreciate the convenience, easy access and speed of shopping. In addition, our parks are conveniently located on major access roads or close to residential areas.

Please also pay attention to the tenants who cooperate with us - these are the so-called value chain. The prices offered by our tenants and the ability to satisfy basic needs in one place attract people to our shopping facilities. It has been assumed that the frequency of shopping may be higher because customers need products more often on a daily basis. They often come to us two or three times a week, while in the gallery they usually appear only once a week.

The second thing that we consider very important and interesting, and which also distinguishes retail parks from traditional shopping malls, is the fact that everyday shopping is more likely to be done in a traditional way. So online shopping is not so much of a threat to us. That is why this module is doing very well at the moment and successfully defends itself against online platforms. We see many advantages here, we have a wide range, which allows us to better meet the needs of customers.

Thanks to the flexibility of our retail parks, we can provide tenants with the desired space so that they can arrange it in accordance with their actual format. Our tenants like the shape and size tailored to their needs (a rectangle with a large window is their target format) as well as easy access to the parking lot and a convenient delivery zone. Due to access to a given space from the outside, they are not charged with additional fees, as is the case in shopping centers, especially in the current market situation and the increase in electricity prices. Our facilities have the status of the so-called crisis-proof, i.e. basic demand (during the epidemic, the crisis, our facilities were and are open).

At what stage of commercialization are the facilities Newgate is currently working on? Is it safe to say that the entire surface sells on the stump?
I must admit that the subject of commercialization is very interesting, because we managed to end the previous year with an absolute record of results in this area. At present, we have leased over 99 percent of the space. The same is true for buildings that are under construction.

We are currently working on our first project in Malbork, which we are building from scratch. This project is already 100% commercialized. Agreements have been signed with such tenants as Lidl, Pepco, Sinsay and Rossmann. These are our key tenants who are with us in many if not most of our spaces.

What is your cooperation with tenants like? Are you an investor and manager desired by tenants?
It's hard to say, it's rather tenants who could comment on this issue. Nevertheless, I can say with certainty that we are building long-term relationships with our core tenants. As developers, we do not focus on the sale of facilities, but on ensuring that our tenants are satisfied and want to cooperate with us for a long time. Therefore, when we extend contracts with tenants or sign new contracts, they are usually sure that they will work with us for the next ten years, which results in a very low tenant turnover. In business, we always try to get a simple formula of cooperation and achieve mutual profit.

In addition, it is important for us to maintain a specific standard for each building. That is why last year we completely rebuilt our older project in Białystok and refreshed our project and added additional space to it in Łęczna.

In this way, we invest not only in new facilities, but also in existing buildings.

How do you assess the potential of the Polish market in terms of further development of retail parks?
I believe that now, in the retail park segment, where there are shops with basic products at good prices, is the best time for development. This is beneficial both for us and for the tenants. Of course, it also depends on the strategy and development of grocery stores, which is one of the biggest challenges for this type of project. These days it's hard to say that something will be forever, but at the moment the potential is huge and we are trying to make the most of it.

Finally, I wanted to ask you about the biggest challenges that are facing you now?
We must remember that we are part of an ecosystem on the market. This is a big challenge for our industry, because we have to adapt to changing trends and market needs. We must constantly analyze carefully what directions will dominate and what investments will be profitable for us and our tenants in the future. This requires constant development and adaptation to the changing reality, but we are ready for these challenges and try to act flexibly and anticipate the needs of the market.

In addition, like everyone else, we face today's challenges, such as high inflation, rising energy and labor costs. These factors have a direct impact on the costs of maintaining and operating our facilities. Unfortunately, we have recorded a record increase in energy costs over the past year. We focus on cost reduction, looking for alternative solutions, while taking care of existing contracts with tenants. However, maintaining profitability and the level of commercialization remains our main challenge. We try to stop the increase in costs, but sometimes it's just not possible.

There are also other challenges we must face. One of them is to keep a motivated team of employees. Our company has a very low staff turnover, which means that most of our employees stay with us for a long time. We build long-term relationships not only with our tenants, but also with our employees. This is very important to us, but also a challenge. We have recently moved to a larger office due to the intensive growth of the group.

And when it comes to our tenants, we have noticed an interesting trend recently - we have received many applications from tenants from Ukraine. Despite the ongoing war, Ukrainian retail chains are seriously considering entering the Polish market. It is also an interesting opportunity for us to find ourselves in new trends that appear on the market. We are also open to expanding our portfolio outside Poland. We are aiming higher and higher and I hope that you will soon see the effects of this.

Interviewer: Katarzyna Łabuz