The activities of BUWOG’s Asset Management business area are influenced by various internal and external parameters. Besides efficient structures, which make good use of the expertise and experience of employees, and strict cost management to ensure the profitable management of residential properties, statutory and regulatory provisions on the fixing of rental prices have an influence on the company’s business. The most important effects associated therewith are discussed below. Further details on this topic can be found in the Management Report from page 116 “Property market report” and on page 150 “Risk management”.
ESTABLISHED pROpERTY MARKETS WITH THE pOTENTIAL FOR VALUE AppREcIATION
The standing investment portfolio of BUWOG Group focuses on metropolitan areas in Austria and Germany. Both markets are considered highly developed and intact. Despite the increasing demand and strong investor interest there are still options available to further expand the portfolio, as was demonstrated by the numerous
EFFIcIENT STRUcTURES, cLEAR AREAS OF RESpONSIBILITY
In order to ensure the market-oriented management of the investment portfolio, the Asset Management business area of BUWOG Group is organised by teams with regional responsibilities. In their role as representatives of the owner, the experts on these teams are responsible for maximising the value of the properties. They cooperate with the internal departments such as controlling, property accounting and legal as well as external service providers such as brokers, lawyers and notaries. Their main tasks are to continuousely segment the portfolio, set the property strategies, identify and realise the potential of the portfolio and thus ensure the ongoing optimisation of the cost and revenue structure, the property cash flows and thus the total value of the property – for the benefit of investors, of the standing investment portfolio and the customers of BUWOG Group.
ONGOING OpTIMISATION OF RENTAL INcOME
The main tasks of Asset Management include the ongoing optimisation of rental income, although the current rental restrictions limit the room for manoeuvre here. On a like-for-like basis, BUWOG Group achieved an increase in in-place rent of 1.8% to EUR 4.10 per sqm. On a like-for-like basis, in Austria, growth moderately declined to 1.9% against the previous year’s 4.9% increase in the reporting period. The reason for this is essentially the effect of the adjustments of Maintenance and Improvement Contributions (Erhaltungs- und Verbesserungsbeiträge [MIC]) due to legal thresholds being exceeded. In the previous financial year, the BUWOG Group benefited both from an increase in the MICs to the legally possible maximum rate of EUR 1.62 per sqm in part of the portfolio, and from the adjustment of the maximum rate of EUR 1.54 per sqm to EUR 1.62 per sqm. Fundamentally, the charging of higher MICs (MIC II) depends on when a building was constructed: Charging above the base rate (MIC I) is first possible in the tenth year after construction; the increase to the maximum possible rate is only possible from the twentieth year after construction. Depending on the respective market compatibility, BUWOG in the future plans to also take full advantage of the corresponding rent increase potential for the respective parts of the portfolio.
In Germany, it was possible to raise the base rental price (excluding utilities) on a similar basis by 1.6%, which is due to increases in rent in the Berlin portfolio. For the Verdi portfolio, it was only possible to raise the base rental price (excluding utilities) slightly due to rental price restrictions on publicly funded residential construction. For the Tempelhof/Spandau portfolio, it was possible to raise the base rental price (excluding utilities) by 2.8%. Base rental prices for the previous year (30 April 2013 compared with 30 April 2012) in Germany grew 3.4%, which was purely due to the Tempelhof/Spandau portfolio on a similar basis. According to a weighted valuation over a two-year period (CAGR), the development of base rental prices on a similar basis for the BUWOG Group was 3.4%.
STRIcT cOST MANAGEMENT
The efficient and proactive planning of necessary maintenance measures by BUWOG Group’s asset management results in significant cost savings. The efficient use of resources is supported by bundling order quantities and the coordinated awarding of service contracts by central purchasing to ensure that the required services are provided at a favourable price.
To some extent the cost of maintenance affects the amount of rent (cost-covering rent). Regular inspections of standing investments by the local property manager prevent the backlog of necessary maintenance work and ensure the timely correction of defects as well as the bundling of larger measures with corresponding cost advantages. Following the economic and financial crisis, the maintenance expenses were increased in the 2011/12 and 2012/13 financial years in comparison with prior years. With total costs for ongoing maintenance and capital expenditures of EUR 13.2 per sqm in the reporting period, the level of the previous year was nearly reached.
10.6
2.6 MAINTENANcE AND cApEX
per year and sqm in EUR
2012/13 2013/14
n MAiNtENANCE Costs n CApEx 8.4
ASSET MANAGEMENT
SERVIcES
The various areas of BUWOG Group also provide services to third parties. These services range from traditional property management (residential properties and entire third-party properties in the residential segment) to apartment rental.