Portfolio Management Strategy
We continue to split our overall real estate portfolio into the “Strategic” portfolio, which focuses on value-enhancing property management using the “Operate” and “Invest” approaches on the one hand and, on the other, into the “Recurring Sales” portfolio, which is intended to be sold to tenants, owner-occupiers and capital investors, and the “Non-core Disposals” portfolio, which includes locations and properties that are not absolutely essential to the Group’s further strategic development.
In the “Operate” subportfolio of the “Strategic” portfolio, we aim to further increase the value of the properties by carrying out sustainable maintenance measures, increasing rents and reducing vacancy levels. In the “Invest” subportfolio, we are generating additional added value by implementing an extensive program of investments that responds to climate protection concerns and focuses on investments in energy-efficient renovation. Most of our investments are in heat insulation for facades and roofs, as well as in new windows and heating systems. When it comes to investing in our apartments, our measures to improve residential standards are based on our customers’ needs. As well as modernizing or renovating bathrooms, installing new flooring and offering modern electrical installations, this also includes the demand for senior-friendly fittings.
We want to continue to create new living space in our portfolio in the future as part of our densification strategy. The first set of new construction projects has already been successfully completed and others are in the planning stages. These also include moves to add extra stories to existing buildings. New construction and vertical expansion projects are frequently realized using a standardized series construction system with the help of pre-configured segments, making them much quicker to complete. Modular construction using pre-configured elements allows standardization and scaling at a low cost, while ensuring reliable project implementation at the same time.
Thanks to the acquisition of BUWOG, the portfolio management strategy also includes the activities of the development business in Germany and Austria on land purchased specifically for this purpose, adding another profitable element to Vonovia’s value chain. The acquisition also results in the transfer of substantial expertise between the development business and Vonovia’s established new construction and vertical expansion activities. The development business includes the construction of owner-occupied apartments for sale to private investors and owner-occupiers, as well as the construction of rented apartments to be managed by the company itself. These activities will continue to be performed under the established BUWOG brand in the future.
In the “Recurring Sales” portfolio, our focus is on generating additional added value by selling owner-occupied apartments and single-family houses at a premium compared with their fair value.
The “Non-core Disposals” portfolio includes locations and properties that are not earmarked for privatization, are likely to have below-average development potential in terms of rent growth in the medium term and are located in areas that can be described as peripheral compared with Vonovia’s overall portfolio and in view of future acquisitions. Properties in this portfolio are reviewed on a regular basis and offer further sale potential.
The properties in Austria and Sweden are combined in the “Vonovia Austria” and “Vonovia Sweden” portfolios respectively.