At NSI we aim to enable our customers to achieve maximum productivity and growth, providing best-in-class, flexible space solutions and an unparalleled level of services in modern, healthy, sustainable buildings in prime locations.
Our long term value creation model is based on the above purpose. We strive to become the leading Dutch real estate company, by effectively and efficiently utilising the permanent capital entrusted to us to deliver on our strategy to create vibrant multifunctional urban areas where people want to work, live and play, underpinned by sustainability and well-being.
We generate long term attractive returns through investing in circa 50 high quality assets in strategic locations in the G4 cities, Eindhoven and Leiden Bio Science Park, and provide a variety of services to complement the space we offer to existing and potential customers. We consistently track and monitor customer satisfaction to improve the attractiveness of our offering, in the process strengthening the NSI brand. Both customer satisfaction and brand recognition are prominent in the centre of our long term value creation model, as these are the best way to track whether we succeed in our ambition.
We constantly strive to improve the quality of our offering, and consider sustainability, operational and customer excellence to be key to our long term success. We can only achieve this with an excellent team of ambitious professionals. We aim to be a great place to work, where our employees feel engaged and connected, and can help to set and exceed our joint ambitions. Our best in class IT systems and infrastructure strongly support the team to be productive and genuinely drive sustainability, which is deeply rooted in all our decision-making and activities.
PORTFOLIO MANAGEMENT & DEVELOPMENT
Our view is that long-term rental and value growth in real estate can only be achieved in vibrant economic locations, as these offer the basis for strong, enduring, natural demand for space. We focus our activities therefore, in line with the global trend of urbanisation, on Amsterdam and selected other key cities in The Netherlands. In particular we concentrate our investments and developments predominantly in inner city locations and locations at or near the main transport hubs, which are – or are on track to become – vibrant multi-functional locations.
Although we continue to see location as the most important driver to real estate returns, the ability to improve the sustainability of buildings to the Paris-proof standard, and the cost to do so, will increasingly determine the future attractiveness of these buildings, and thereby impact the assessment of their present asset value. We are working towards a Paris-proof pathway, and the outcome will significantly determine our investment plan and asset rotation from here.
Whilst there is a clear economic rationale to focus on sustainability/Paris-proof, as per above, we also genuinely believe that the real estate industry has a role to play in reducing the use of the earth’s limited resources and leaving a better world for the next generation, as the industry currently is known to make up over 30% of all CO2 emissions. To recognise our responsibility here, we have positioned the environment and climate as a pre-eminent (albeit silent) stakeholder in our value creation model.
NSI pursues selective (re-)development opportunities to expand its asset portfolio with modern, Paris-proof assets in the best locations, at better risk-adjusted returns relative to acquiring comparable assets in the open market. Development as such can enhance prospective returns and drive shareholder value creation, on a risk-adjusted basis, if managed well. NSI will continue to prudently manage the balance sheet to allow for selective development and is keen on mitigating development risks by selecting the right locations, securing pre-letting arrangements and working with reputable partners.
Our development projects enable us to shape our buildings and portfolio around the changing needs of our customers and provides new insights that can be used to improve the attractiveness of our standing assets. In our development vision we anticipate changes in demographics, the way people work, shop and live, and the ever-growing importance of sustainability to ensure a future-proof design. Furthermore, we incorporate services and technology into our developments to create flexible and adaptable workspaces to maximise usability.
Customer behaviour and demands are structurally shifting, with flexibility, hospitality, services and amenities increasingly becoming key considerations in the wider real estate industry. The focus on attractive economic growth locations (and the asset rotation in recent years to achieve this) has resulted in a clear change in our tenant profile.
Tenants focus on being able to attract the right talent, productivity, sustainability and well-being, less so on costs. Providing the right mix of attractive spaces and services so that their businesses can thrive are therefore key to our success. Not only do we offer space in the locations where the talent pool is greatest, and we have a strong focus on sustainability and well-being, but we also have the capabilities, both in-house and through partnerships, to be able to offer a full range of services.
In our ambition to become the leading Dutch real estate company operational excellence is a key enabler. We continuously explore how to make the best use of existing information technology solutions and stimulate the introduction of innovative applications.
A best-in-class data warehouse and business intelligence system provide the data-analytics and management information to support multi-functional collaboration and data-driven decisions.
Only with the right team, culture and processes we will be able to deliver outstanding results in an optimal and cost-efficient way. The right team is a diverse team that embraces an inclusive culture of open debates, professionalism, relevant expertise and the will to push boundaries.
PORTFOLIO MANAGEMENT & DEVELOPMENT
To strengthen our focus on the most promising, vibrant markets, in line with our strategy, we sold a total of twelve assets (disposal proceeds €105.0m) in 2021, including the last remaining retail and non-core provincial assets. These proceeds were reinvested in 4 assets (2 in Amsterdam, 1 in Rotterdam and 1 in Leiden), representing a total investment volume of €100.8m (excluding acquisition costs).
This asset rotation has improved the overall quality of the portfolio, with more exposure to our focus markets. Whilst the last non-core assets have now been sold, asset rotation will remain an integral part of our activities going forward, as we continue to look for ways to further strengthen our positions in our focus markets thereby enhancing expected long term returns.
NSI sees project development as a way to enhance returns on the overall portfolio, on top of the return of the standing portfolio, on a risk adjusted basis. In 2021, the total offensive capex amounted to €15.2m, of which €3.4m was invested in our three major development projects Vivaldi, Vitrum and Laanderpoort. The team has made good progress to bring these projects further, with starts foreseen for at least one of the projects in 2022. One asset, Alexanderhof in Rotterdam has been transferred to the development pipeline in 2021.
IMPROVING SUSTAINABILITY CREDENTIALS
We believe our focus on sustainability is critical as the financial performance and long-term viability of businesses (the licence to operate) becomes increasingly correlated to their efforts on sustainability.
In 2021 we have continued to work on improving the BREEAM credentials of our assets. The aim is to have all standing assets achieve at least BREEAM ‘Very Good’ by 2025 and where viable we will upgrade to BREEAM ‘Excellent’.
For all new (re)developments, we aim to achieve BREEAM “Outstanding”, the highest possible BREEAM rating.
The team in 2021 also started to work on the Paris-proof roadmap of NSI, to reduce our carbon emissions on the portfolio. This is proving a larger than expected exercise, which therefor will continue in 2022.
We introduced a Sustainability-Linked Revolving Credit Facility framework as part of our funding, cementing our strategy to fully integrate sustainability not only in our asset portfolio, but into all aspects of its business and operations.
In 2021 NSI took further steps to transform data into management information, and improved its capabilities to process data. This has led to more ownership of the data infrastructure, better quality of data and increased accessibility and usability by building clear dashboard functionalities.
For example, NSI has developed a tool that visualises and summarises all operational data of the portfolio on individual building level, even on floor and unit level. This allows asset managers for instance to zoom in on unit level of a specific building and retrieve all relevant information of that individual space when interacting with potential customers or advisors.
As a result, the team spends its time on analysis rather than data collection and management information is real time available to support all operational activities to make better data-driven decisions.
NSI started a partnership with Spectral in 2021. Spectral developed a Smart Building Platform to transform buildings into smart, sustainable assets that are fit for the future. The Smart Building Platform uses self-learning algorithms, based on real-time weather and consumption data, to increase the energy efficiency of buildings, allowing for savings in gas- and electricity usage.
In 2021, a new brand positioning for HNK was defined, based on the functionalities and experiences our customers want, with a strong focus on sustainability, well-being, and comfort. A brand manual and HNK blueprint were created in which the intended customer experiences are defined and substantiated, including how we should behave and interact with our customers to deliver on our brand promise.
In 2021 we brought new programme requirements and elements into a new design for the upgrade of the common areas in the HNK Scheepvaartkwartier and for the opening of two new HNK locations in 2022, at Amsterdam Sloterdijk (Motion building) and at Rotterdam Alexander (Alexanderpoort building). These HNK’s are the first in which the new brand positioning will be implemented in full.