15 years in Styria), but that also means very high occupancy. Most of the projects are fully let. In addition, the renter pool reduc- es the risk of vacancy and safeguards secure, regular rent. Builder-owner models with private capital create social and affordable housing, investors benefit from attractive subsidies, and the general public profits from more affordable housing.
What after-tax yields can investors expect?
After-tax yields can exceed 3 % during the first 15 rental years in spite of the subsidised rental income, while the individual tax burden is reduced at the same time. After the end of the subsidy phase, rental yields will rise due to the conversion to conven- tional market rents. “Baumstadt Floridsdorf“, IFA’s current builder-owner model in Vienna, produces a yield of roughly 5.5 % on capital employed when the loan is signed.
What types of properties are suitable for builder-owner models?
Our golden rule for the builder-owner model is densification instead of ground sealing. That means the realisation of builder-owner models, above all, at locations with existing structures – a deteriorated apartment building or an old repair shop in an urban area. Listed buildings are also appropriate properties for builder-owner models.
Builder-owner models are focused on the long term. What happens when an investor wants to, or needs to, exit prematurely?
Builder-owner models are not intended for short-term investment. Premature exit before the total taxable profit is reached can have negative tax effects. This model is designed to support the long-term accumulation of real estate assets – often over several generations. However, there is a functioning secondary market if early sale is necessary and IFA can help with the sale process.
IFA, which is part of your group, seems to have been the main player in builder-owner models for years. Why is there so little competition in this market segment?
The development of a builder-owner model requires extensive know-how – from the selection of the right property to the design of the investment and legal and conceptual realisation up to construction, rental and asset management or ongoing support for investors during all phases. These activities involve experts with great diligence who have compiled market knowledge over many decades. IFA has already implemented nearly 500 models and enjoys the confidence of roughly 8,000 investors – and, in that way, has successfully positioned itself as the market leader.
Hans-Peter Weiss
COO Soravia Group AG
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