BUWOG Group pursues various implementation models depending on the relevant market and demand situation (see information in the management report starting on page 116), which are meticulously analysed prior to project realisation. In the privately financed sector, residential projects are implemented for private and institutional investors, owner-occupiers and for the company’s own rental portfolio. In the subsidised residential housing market, the properties are sold as subsidised condominium apartments or they are rented out under the subsidy regulations. These subsidised rental apartments are held in the BUWOG Group investment portfolio for at least ten years before they are monetised in Unit Sales or Block Sales transactions (see the Property Sales business area starting on page 70).
In Austria, BUWOG Group is one of the largest project development companies with around 30,000 apartments realised during the course of the company’s history. An acquisition made in 2012 also enabled BUWOG Group to position itself in the Berlin residential property development market. Alongside a professional team of employees, the acquisition included multiple projects at various development stages, as well as land reserves for new development projects. These include the Humboldt Palais on Hegelplatz, two projects at Pankepark in the BND district and a 100,000 sqm site on Regattastrasse in Berlin-Köpenick. Additional development projects have been prepared or started since then.
RESIDENTIAL UNITS IN THE pROJEcT DEVELOpMENT
2011/12 2012/13 2013/14
n CoMplEtED uNits n uNits uNDEr CoNstruCtioN
n uNits solD 741 713 273 299 819 221 374 655 238
pROpERTY DEVELOpMENT
STRATEGIc pOSITIONING, DEVELOpMENT MODELS, INFLUENcING AND SUccESS FAcTORS
INFLUENcING AND SUccESS FAcTORS
In addition to the company’s long experience and the outstanding expertise of its employees, the success of BUWOG Group in the Property Development business area is primarily due to the specific selection criteria used, non-compromising market proximity when acquiring properties or selling them at the right time, as well as access to project financing at attractive terms. At the same time, the geographic focus on the two federal capitals of Vienna and Berlin has resulted in a favourable risk profile.
SpEcIFIc SELEcTION cRITERIA
Alongside its specific financing and profitability targets, BUWOG Group also has strict selection criteria, such as: - Project size
- Quality of the location - Accessibility
- Demand situation
- Technical and social infrastructure
for assessing investment decisions in the Property Development business area. IDENTIFYING AND SEcURING MARKET OppORTUNITIES
Thanks to its solid expertise in the Vienna and Berlin markets, and a strong network of partners along the entire value chain, BUWOG Group identifies attractive development projects early on. Due to the transaction security as a result of the company’s size, positive collaboration with the relevant authorities and internal expertise, BUWOG Group is able to secure sufficient land reserves for future projects. Potential project opportunities are analysed by an internal department whose task it is to actively assess sites that are not yet on the market in order to ensure a competitive advantage.
In the Vienna residential market, BUWOG Group particularly benefits from land reserves and a well prepared and structured project pipeline which has been developed and continuously supplemented in recent years. The company mainly focuses on major projects that can only be implemented by a few project development companies with the required financial strength and experience. Although new development projects are only occasionally possible in inner cities due to the high urban density, BUWOG Group is able to utilise these opportunities due to its leading market position and good network. It also focuses on new urban development projects such as the lakeside town of Aspern and the area around the new main railway station in Vienna.
New large development projects are also more often possible in central areas and districts of Berlin than in Vienna due to open spaces and demolition projects caused for historical reasons. Similarly to Vienna, the Berlin residential market also benefits from the continuous growth in the population and the trend to single households (for details see the management report, page 120).
AcTIVE TIMELY MARKETING
Internal experts, the BUWOG Group sales team and selected market-leading external estate agents are responsible for the timely marketing of the apartments for rent or for sale. The insights gained regarding current market demand provide valuable information for the direction and development of new building projects. Due to the general increase in the cost of apartments, there has been greater focus on more compact floor plans, for example, in recent years. Flexible usage and adaptation to changing needs in different life stages are becoming more important.
Energy-efficient buildings, high-quality fittings and fixtures, low-energy housing with appropriate building technology, generous communal areas, convenient underground parking, recharging stations for electric cars and bikes as a contribution to climate protection, and generous open space (balconies, terraces, etc.), modern sound insulation and well-designed bathrooms are additional comfort elements that significantly influence the success of a project.
Early marketing successes that should ideally be achieved in the planning stage also shorten the financing term and, therefore, also reduce financing costs. On average, approx. 80% of the units developed by BUWOG Group are sold; with the remaining 20% being rented out in the long term.
TAILOR-MADE pROJEcT FINANcING
BUWOG Group generally uses its own funds to finance the expenses for the purchase of land or demolition properties, as well as for the planning and approval processes. Tailor-made project financing is agreed for the building and construction costs. On average, around 40% of subsidised apartment construction projects is financed by bank loans and around 30% each by a government subsidy as a fixed amount and financing contributions from tenants, which comprise a one-off contribution to land and construction costs due on occupancy. Due to a lack of attractive subsidy models in Germany, BUWOG Group currently focuses on the development of privately financed rental and condominium apartments in Berlin.
Government subsidies and bank liabilities are capitalised during the implementation stage in accordance with the construction progress on the particular project. Depending on the degree of utilisation, the previously used own funds can be gradually reduced. Due to these different forms of financing, BUWOG Group is not only able to spread the associated risk but also achieves favourable overall terms.
In Austria, government subsidies are used if the associated conditions, such as the upper limits for the value of the land parcel, can be met and the project design or utilisation of the subsidised units is economically feasible. These conditions are generally met by projects located in the outer districts of Vienna.
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