Investment

The quality of our real estate portfolio plays a particularly large role. Accordingly, it is important that our properties are in good structural condition. We also strive to expand our portfolio through new construction, targeted modernization measures to improve energy efficiency and holistic neighborhood development projects, as well as acquisitions and sales.

Maintenance and Modernization

Through maintenance, we preserve and take care of our building stock. We include the corresponding expenses under routine and partially long-term planned economic expenses. Continuity helps to prevent order peaks and to distribute capacities evenly.

Modernization measures are long-term and sustainable value-enhancing investments in housing and building stocks. Upgrade Apartments measures involve upgrading facilities within a self-contained living area. Where required, the floor plans are altered to meet changed housing needs.

We use modernization and maintenance measures to make ongoing investments in our portfolio. As a leading residential real estate company, we have specific opportunities open to us when it comes to using standardized procedures and materials to achieve economies of scale in our investment activities. Wherever it is appropriate and technically feasible, we use standard products for our maintenance and modernization measures. The volumes we can generate as a result enable us to agree on special conditions with our suppliers, allowing us to either receive higher-quality goods for the same price, or to purchase the material to be used at a lower price. The fact that the construction work is executed almost exclusively by our technical service also allows us, thanks to the large number of recurring orders, to shape the service processes in such a way that the necessary measures can be performed with shorter construction times and optimum resource use. This saves additional costs or increases revenue because apartments can be relet more quickly.

Investments in the “Invest” subportfolio relate to measures designed to improve the standard of comfort of our properties, a process that often also involves senior-friendly conversion work. As a result, we implemented modernization measures accounting for a volume of more than € 265 million in this subportfolio in 2018. If technically feasible, conversions were carried out according to the standards of the KfW program 159 “Senior-friendly Conversions.”

We make decisions about portfolio investments for both operating and strategic reasons. The investments cover the entire stock in the corresponding subportfolios and the whole of Germany. As far as its technical measures are concerned, Vonovia endeavors not only to adhere to the latest technical standards and the applicable requirements at all times, but also to anticipate future developments, and to implement them where possible.

Maintenance and modernization (incl. new construction) worth around € 1.5 billion was carried out in 2018. The focus was on energy-efficient modernization and the creation of new living space. The funds provided by KfW-Bank or the European Investment Bank (EIB) provide key support when it comes to refinancing the energy-efficient modernization measures.

New Construction and Development

The most pressing challenge facing the real estate industry in Germany is the creation of affordable living space in central locations. Vonovia is playing an active role in creating this new affordable living space.

As far as its new construction activities are concerned, Vonovia makes a distinction between undeveloped and developed land on the one hand, and between new land to be acquired and acquired land on the other.

New Construction

On developed land, we create new living space by adding extra stories to existing buildings. On undeveloped land, we create new living space by constructing new buildings. What both of these measures have in common is that we always focus on series production based on modular construction.

The term “modular” means that the building is erected using standardized elements produced in the factory that are then transported directly to the construction site. The modules only need to be assembled on site. Vonovia uses three approaches in this regard: Precast concrete construction, wood hybrid and steel skeleton. The company has concluded a framework agreement with a major manufacturer in the area of precast concrete construction. This standardized construction allows both the costs of new residential construction and the construction period to be reduced considerably. This allows Vonovia to create new living space more quickly. What is more, the costs are not only lower – they are also easier to calculate than with other forms of construction. The main advantage is that this more efficient construction method allows the new apartments to be offered at affordable rents as a result.

All in all, the construction of 1,000 new apartments began in 2018, part of which has already been completed. The experience gleaned in recent years will serve as an important foundation for significant expansion of the new construction volume over the next few years. Following Bremen and Dresden, upcoming projects include new construction in Dortmund, Cologne, Berlin, Oberursel and Augsburg.

Development – New Construction on Land acquired by the Company itself

The acquisition of BUWOG allowed Vonovia to expand its value chain to include BUWOG’s long-standing experience in the real estate development business. This business model, in which BUWOG is one of the German market leaders, involves developing properties, either for the company’s own use or for sale to investors or owner-occupiers, by purchasing suitable land at the start of the location development project. The BUWOG brand stands for a high level of customer satisfaction in the real estate development business over a period spanning many years. It stands for trust in the expertise regarding the feasibility of the projects and in reliable quality standards. The strategic target locations are metropolitan regions including Berlin, Hamburg and Vienna in particular. The current project pipeline includes around 11,800 projected residential units with a planned total volume of approx. € 3.5 billion and an expected realization period of roughly 5–6 years. These are broken down into around 6,800 units that are earmarked for sale and around 5,000 to be managed by the company itself. The availability of suitable land is a key prerequisite for the success of the real estate development project. Vonovia’s strategically advantageous financing options can have a positive impact on the real estate development business. These development projects are often tied to urban development contracts and the requirements set out in these contracts. With plans to complete around 2,200 apartments under development every year, Vonovia is making a considerable contribution to easing the shortage of apartments overall.