Moorfield believes that optimising process maximises returns
- Sources of Investment Opportunity
- Evaluation of Potential Investments
- Asset Management
The starting point for Moorfield, in its research progression from the principal macro to micro investment factors, is the Global economy and its impact on Europe – and then most specifically the UK.
Various expert third party opinions on key Global, European and UK economic drivers are assimilated and then from these, together with Moorfield’s own collective experience and knowledge, an economic outlook is originated as the platform for the investment strategy. The recognition that real estate is a commodity and a function of the economy lies behind many of the investment decisions made. Through the broad contact and skill base that we have in the economic, political, financial and real estate markets, all Moorfield personnel are encouraged to assit in collating opinions and formulating our overview of the economic environment.
This enables collective agreement as to the likely outlook and hence for the potential economic and real estate market cycles to be ascertained and correlated from the perspective of many rather than a few, hence helping to identify likely opportunties and threats as well as ensuring a united approach.
Moorfield has developed a proprietary method to proactively source potential investments.
Moorfield has an extensive list of contacts made up from a variety of different business groups, such as leasing and investment agents, real estate sector and subsector specialists, specialists in individual cities and towns, debt providers/banks, equity providers/co-investors, accountants, venture capital and private equity firms, lawyers, and other professionals.
As well as sourcing opportunities through Moorfield’s own introductory sources, Moorfield has an extensive joint venture partner network. These partners offer sector and/or geographic specific opportunity flow, contacts and expertise as well as providing local and sector specific advice and asset management assistance.
In addition to the regular contact programme, Moorfield’s acquisition and asset management professionals regularly visit (outside of activity related to existing or new investments) many cities and towns across the UK to keep abreast of current market activity and conditions, and take account of recent and potential future trends etc.
Stage 1 – Initial Analysis Once an interesting investment opportunity is identified, one of Moorfield’s acquisition professionals will promptly put together an initial summary and analysis of the opportunity from an asset and financial perspective (the origins of the Business Plan) using internal information and knowledge with limited external advisory involvement.
Stage 2 – Preliminary Investment Committee Review If the initial feedback from Stage 1 is positive, an internal and external team (comprised of 2-4 Moorfield professionals with at least one external investment agent) (“Transaction Team”) is assembled to undertake additional due diligence on the opportunity, prepare a more detailed Business Plan, and make an initial recommendation to Moorfield’s Investment Committee for preliminary approval.
Stage 3 – Due Diligence Phase If the potential investment obtains Preliminary Investment Committee (PIC) approval and preferred bidder status (or is short listed), a larger Transaction Team is established, comprised of additional external specialists (normally from existing Moorfield relationships) that add greater knowledge and experience to the evaluation process. Throughout the investment evaluation process, Moorfield continues to develop, maintain and refine a comprehensive Business Plan where all relevant details and assumptions are constantly stress tested. In addition to the comprehensive Business Plan analysis, the Transaction Team also performs extensive asset analysis. This involves numerous site visits, evaluating local market rental and sales comparables, identifying competing assets within the relevant markets, performing structural and planning (zoning) analysis, co-ordinating legal and environmental due diligence and establishing all relevant tax issues. Moorfield also works closely with its potential/proposed debt providers, matching and comparing their capabilities and pricing to source the best value debt financier.
Stage 4 – Final Investment Committee Once the Transaction Team is satisfied with the results of the due diligence process, the potential investment is presented again to the Investment Committee, with a suggested acquisition price (revised or otherwise from the PIC), for formal approval. Implementation of the Business Plan will begin as soon as the investment is within the control of Moorfield.
A key element of Moorfield’s asset management strategy is for each asset to have its own fully appraised Business Plan to focus upon real estate, operational and financial management opportunities, thereby identifying where to ‘add value’ and enhance income and capital returns.
At least two asset management professionals are involved in the due diligence and underwriting phase of an acquisition, as such, the implementation of the Business Plan for each asset is a seamless process post acquisition.
As well as real estate specialists Moorfield also has a team of operational and financial experts who monitor its operating businesses and their financial covenants. The Business Plan for the majority of the investments acquired will be made up of three phases.
The first phase will be where immediate and invariably low cost improvements can be made for the benefit of the existing tenants (or operator) and/or the presentation of the investment to attract new occupational interest and hence ultimately improve the investment value.
The second phase will likely be higher cost or more complicated and longer term initiatives where the value enhancement impact to the investment will be materially greater than those of the first phase. These second phase initiatives will be asset, operational and financial management of the investment acquired. The value impact of the first two phases will be accounted for in the target returns of the Business Plan.
The third phase will not be accounted for in the target returns of the Business Plan because the initiatives are considered to be too speculative. However, it will be the goal of the Asset Manager to achieve the third phase initiatives if at all possible/viable. It is the third phase that will invariably be responsible for the ‘super-returns’ sometimes achieved. On acquisition, the implementation of the Business Plan becomes the responsibility of two Moorfield Asset Managers and they will act as ‘lead and wing’ for each investment.
Moorfield considers that there are two closely related but differing areas of responsibility when managing an asset/investment. There is: (i) the asset management role – principally the creator, owner and supervisor of the Business Plan; and (ii) the property management role – principally the implementer of the Business Plan at the asset level. The two roles need not be undertaken by the same team, although the Asset Manager must always take responsibility for the actions of the property manager.
In all its investments, Moorfield is always the Asset Manager and sometimes the property manager. As such the Moorfield Asset Managers can effectively act as project managers in overseeing the implementation of the Business Plan – by assembling and directing a team of leading real estate professionals such as, leasing agents, rent review and rating specialists, architects and planning consultants and any others that are either specialists in a particular real estate sector or geographic market and are required for the task (including real estate management ‘JV partners’). The Asset Managers are in constant communication with this team and meet frequently and regularly to ensure that all the Business Plan initiatives are addressed and implemented in a timely and appropriate manner.
Moorfield believes that a Business Plan should be considered a tool by which to maximise value and returns and should be continually appraised and updated, changing it where necessary to suit market (or investment specific) conditions and circumstances.
Moorfield’s acquisition professionals are also their sales professionals. Whether a sale results from a Moorfield initiative or as a result of an approach from a potential purchaser, the sales team leader for an investment will work with the two Asset Managers who have been responsible for the Business Plan implementation. The Asset Managers will provide the majority of the information needed for the purchaser’s due diligence.
In advance of an exit, Moorfield’s team will always ensure that an asset is properly prepared for sale. Thorough consideration is given to the presentation of information and any issues that may delay or hinder a sale process are minimised and dealt with (or at least made known) in advance, in order that the sale process is as quick and problem free as possible. If possible, the original Moorfield acquisition team leader and the professional team previously appointed to purchase the investment for Moorfield will be appointed again on the sale.
Knowledge of the investment improves deal efficiency, including both time and cost. Moorfield will use various methods of asset sale, including sole or multiple agent private treaty, ‘off-market’ to a special purchaser, open and closed tender and public auction. There is also the possibility of sale through the capital markets, such as, IPO, securitisation, corporate formation, or trade sale. The possible exits for an investment are always closely considered prior to purchase and are monitored throughout Moorfield’s ownership period.