How Mitiska REIM drives sustainable renovation and value creation in convenience real estate

Sustainability is now the new currency in real estate. The market’s perspective on sustainability has moved from a ‘nice to have’ to a key requirement, with green credentials now seen as a premium for commercial property.  

At Mitiska REIM, we believe that considerations concerning ESG factors play a crucial role in being a responsible fund manager and are a key driver in creating long-term value for all our stakeholders and society by making our business and our managed assets future-proof.  

There are many historic assets, such as large hypermarkets, cash & carry locations, showrooms and offices, which no longer meet current consumer or tenant demand or future sustainability requirements, where we see significant value can be created by transforming these into modern and sustainable convenience real estate projects. 

We see this trend as an advantage for existing assets in our portfolio, with buyers paying a premium for sustainable properties that are future-proofed. But the same is true for potential acquisitions – an investment situation we aim to capitalise on the opportunity to repurpose and retrofit assets which are currently in danger of being “stranded” due to their poor ESG credentials. 

Mitiska REIM’s investment focus is on the accelerating opportunity we see in convenience real estate across Europe, targeting food-anchored retail parks, multi-let light industrial, self-storage and urban logistics projects. Our latest fund, MEREP 3, for which we are currently deploying capital, aims to capitalize on the increasing demand from a growing range of end users for urban infill sites that offer accessible locations, affordable buildings, flexible design and sustainable solutions.  

MEREP 3’s investment strategy focuses on light to heavy value-add investments including repositioning, reconfiguring and retrofitting of existing properties and risk-mitigated development projects. In line with our ESG strategy and 2035 net zero carbon ambition, MEREP 3 will seek to deliver future-proof sustainable assets, aiming for “Very Good” to “Excellent” BREEAM ratings at the asset level and a GRESB rating on the fund. In addition, MEREP 3’s ESG policy also includes the commitment that each asset needs to be 10 years below the CRREM pathway after completion of the value-add program. 

Mitiska REIM is a frontrunner in convenience real estate regarding BREEAM assessment, achieving full certification of retail park assets during 2023. At the end of last year, 85% of the BREEAM certifications received thus far across the convenience real estate portfolio were “Very Good” or better. These BREEAM certifications are part of an ongoing program to actively future-proof our investments across Europe, through initiatives such as renewable energy, LED lighting, increasing green areas and biodiversity, and green leases. 

Two challenges I would highlight would be the importance of convincing tenants and also dealing with the differing regulatory environments across European countries.  When it comes to sustainability, cooperation between landlords and tenants is key and a partnership approach is certainly the most effective. By working in partnership, we have been very successful at transitioning to green leases with our tenants.  

Often the focus of tenants’ sustainability efforts is on the supply chain, where the large majority of the brand’s carbon footprint comes from, rather than on the retail side. This differing focus can lead to a big gap between the priorities of landlords and tenants and a wariness amongst tenants to landlord initiatives that have the potential to increase fit-out and operational costs. Without tenant cooperation, it is less likely that asset owners can reach their ESG and reduction in carbon footprint goals. Across the industry, there is still a long way to go to resolve the differing priorities of landlords and tenants but, for those working in partnership, it is certainly moving in the right direction. 

For the differing regulatory environments, while the EU is actioning a number of ESG initiatives, for example the European Green Deal and REPowerEU plan, implementation on the ground is not necessarily straightforward across the many different jurisdictions. As an example, the rollout of renewable energy initiatives across our portfolio is slowed down by the fact that regulatory environments are different in each country, and in some cases in each region where Mitiska REIM operates. We have started installing solar panels on our real estate projects in Belgium, the Netherlands and Poland. Building on this experience, we are currently exploring with our partners ways to move forward in several other markets, while at the same time adjusting to local regulatory requirements in terms of permits, installation, monetization, etc. 

The market is increasingly viewing resilience and profitability as two sides of the same coin, with a premium attached to those properties with strong ESG credentials. This is a trend that will continue to gather momentum, fuelled by the demands of institutional investors and the desire of companies to become greener, and government initiatives to combat climate change. Rising energy costs have further boosted the increasing interest from all stakeholders towards sustainable and resilient assets. 

Green loans are a good example of the link between resilience and profitability as they include climate risk elements in the financing frameworks, linking to factors such as minimum BREEAM scores, CRREM decarbonization pathways, restriction to build in high-flood risk areas and reporting of energy consumption data. Structures can also include things like margin pricing in relation to BREEAM scores obtained, therefore creating a financial incentive to maximize BREEAM ratings.  

Green loans are an important aspect of our ESG programme as we look to increase access to green loan financing across our convenience real estate investments.  

Poland is a major market for Mitiska REIM and has been for the past 6 years. Working in a strategic joint venture partnership with our Polish partner Karuzela Holding, we have created a portfolio of 11 food-anchored retail parks across Poland, with plans to open further sites in the next two years which will increase the total GLA of the portfolio to 160,000m2 of modern, sustainable and conveniently located retail space.  

As one of the fastest-growing economies in Central Europe, our portfolio of assets in Poland continues to benefit from increasing consumer demand for quick and convenient shopping. The Belgian market is more mature and our focus in Poland is on bringing new retail infrastructure to cities and the surrounding region for both shoppers and retailers alike, where our assets become the most dominant and modern convenience retail destinations in the area. 

This approach has been very successful at attracting retailers and driving shopper footfall. In Poland, we carefully target sites and look for properties where there is the opportunity to refurbish or develop retail parks on strategic urban infill locations, along the main traffic arteries of the cities in which they are located. These are always within walking distance of large residential or office areas, making them a ‘go-to’ destination for daily convenience shopping. Typically, cities are targeted which have a population of between 20,000-60,000 inhabitants and are underserved by modern retail space. 

We have been collaborating on a major investment for Mitiska REIM in Poland on behalf of the MEREP 3 fund, Europa Centralna in Gliwice, which encompasses a retail park with a GLA of 39,700m2 and a galleria of 27,300m2, with parking for over 2,000 cars.  

In line with our value-add investment strategy, Mitiska REIM plans to reposition Europa Centralna as a food-anchored convenience real estate asset and strongly improve its ESG credentials so that it can achieve a “Very Good” score on the BREEAM scale. This asset is an example where we see a significant opportunity to create a modern, futureproof and attractive convenience real estate scheme, leveraging Mitiska REIM’s active asset management capabilities and expertise. 

Pulse by CFE adapted the work to the current requirements of Mitiska Reim and showed full commitment to solving the problems encountered, for example accessing data on the energy consumption of the tenants or the load-bearing capacity of the roof. 

In addition, Pulse by CFE was proactive in suggesting direction for changes to existing buildings, focusing on ROI investment efficiency. These included changes to facades, ventilation systems and types of low-carbon energy sources.