1. Management of Housing Companies: Challenges, Success Factors and Barriers 16th Annual European Real Estate Society Conference Stockholm 24-27 June, 2009 Moritz Lohse, Andreas Pfnür Technische Universität Darmstadt 25. 06.2009 | 1

2. Problem: Changing conditions of business environment dare the management of housing companies  Supply side: Two decades ago, implementation of market principles in German housing markets changed the business environment of the whole industry.  Demand side: Expectations for the next decades predict a demographic development which is characterized by accelerated ageing and simultaneously shrinking. Rise of diversification between regional sub-segments may be expected (quality and quantity).  Importance of efficiency and effectiveness in managing housing companies grow. Same is true for knowledge about capabilities for optimization and the right strategies in housing. 25. 06.2009 | 2

3. Problem: Changing conditions of business environment dare the management of housing companies  Supply side: Two decades ago, implementation of market principles in German housing markets changed the business environment of the whole industry.  Demand side: Expectations for the next decades predict a demographic development which is characterized by accelerated ageing and simultaneously shrinking. Rise of diversification between regional sub-segments may be expected (quality and quantity).  Importance of efficiency and effectiveness in managing housing companies grow. Same is true for knowledge about capabilities for optimization and the right strategies in housing. 25. 06.2009 | 3  Which challenges housing companies are faced with?  Which success factors are relevant to advance housing business models?  Which barriers of success can be identified? Crucial points for housing management

4. Agenda 1.Problem and aim of the study 2.Concept of the study 3.Challenges of housing companies 4.Success factors 5.Barriers of success 6.Conclusion 25. 06.2009 | 4

5. Concept of the study: Empirical research  Telephone interviews with executives in housing companies – accomplished by a professional call center  Questionnaire: Design of a success factor concept for the housing industry which considers challenges, success factors and barriers  Modus operandi: 5 steps of execution  Initiation: Fixation of objectives, content and theory of the research  Definition: Population of the survey, methodology, pretest  Field period: Identification of executives, commissioning of the market research institution  Statistical analysis  Interpretation: Conclusions and implications 25. 06.2009 | 5

6. Concept of statistical data analysis  Descriptive statistic  to get first impressions of data  to characterize the participated housing companies  Factor analysis  Identification of major success factors  Identification of barriers of success  Four steps of data analysis 25.06.2009 | 6 Characterization Descriptive statistics Focused on housing comp. Challenges Descriptive statistics Focused on business environment Success Factors Explorative factor analysis Discover hidden interrelations Barriers of Success Explorative factor analysis Discover hidden interrelations 1 1 2 2 3 3 4 4

7. Research design: Standardised questionnaire 25. 06.2009 | 7  Part A: Structure characteristic of the housing company (e.g. type, size, structure of portfolio, expectations of the corporate owner etc.)  Part B: Requirements of the business environment (Situation dependent challenges)  Part C: Success factors of housing companies (resources, processes and products)  Part D: Barriers of influencing the identified success factors (detection of the potential for optimisation of resources, processes and products)  Questionnaire contains over 80 items divided in 4 survey sections  Example: “In our company the used IT-solution has a high relevance for success.”  Answers may range from [1] „absolutely agree“ to [6] „ don‘t agree at all“  Results are partly illustrated by the Top-2-Box-Value: Sum of all Companies who answered with [1] „totally agree“ or [2] „agree“

8. Structure characteristics of the participated housing companies Contacted housing companies: 1038 Conducted interviews: 304 Participation rate: 29,3 % Average duration of Interview: 27 Min. 25. 06.2009 | 8

9. Besides residential tenancy: Important elements of housing business models 25. 06.2009 | 9  The most housing companies apply a multi- purpose business model  Majority functions in office renting, own development and property management  Real estate trading do a quarter of housing companies (e.g. development for sale, privatization of properties)

10. Agenda 1.Problem and aim of the study 2.Concept of the study 3.Challenges of housing companies 4.Success factors 5.Barriers of success 6.Conclusion 25. 06.2009 | 10

11. Expected competition on regional housing markets 25. 06.2009 | 11  Round about half of the housing companies expected a clear rise of competition  Differences between categories of housing companies are comparatively small – whole industry is affected  Only a abundantly clear minority will be exposed to low competition

12. Exerted pressure from stakeholders on the housing business 25. 06.2009 | 12  Every third housing company expect an increasing pressure from the most important stakeholders (politics, owners and tenants)  Every fifth housing company expected more restrictive banks  A growing dependence of suppliers (e.g. construction firms) can’t be assumed.

13. Objectives of owners: Equity return vs. social return? 25. 06.2009 | 13  Social, sustainable and non-economical target systems still dominates the housing industry  Nearly half of the housing companies have no problems with equity return entitlements of the owner  But: 17 % are forced to escalate their efforts concerning equity return in the future  On the other side 22% of all questioned housing companies must generate a clear defined social return, which is difficult to achieve by trend.

14. Top 5 challenges of housing companies 25. 06.2009 | 14 Over all 17 challenges were queried Important differences  Municipal housing comp. are more effected by operating escalations  Housing companies affected by private investors are more concerned by changing demand but less by sustainable aspects  Challenges through maintenance and modernisation affect every group on the same level

15. Agenda 1.Problem and aim of the study 2.Concept of the study 3.Challenges of housing companies 4.Success factors 5.Barriers of success 6.Conclusion 25. 06.2009 | 15

16. Factor analysis: Identifying success factors of housing companies 1/2 25. 06.2009 | 16  Used method: Explorative factor analysis 1.…to identify unobserved variables in data (called factors) 2.…to reduce complexity of comprehensive data  Used items… 1.46 queried success factors of the questionnaire 2.e.g. “In our company the right IT-solution has a huge relevance for success”  Fitness of results… 1.Measure of sampling adequacy (MSA) (>0,5):0,872 (“meritorious”) 2.Significance (Bartlett):0,0000(highly sign.) 3.Explained total variance (>50%):61,3%(OK) Explorative detected success factors satisfy the statistical requirements

17. Factor analysis: Identifying success factors of housing companies 2/2 25. 06.2009 | 17

18. Agenda 1.Problem and aim of the study 2.Concept of the study 3.Challenges of housing companies 4.Success factors 5.Barriers of success 6.Conclusion 25. 06.2009 | 18

19. Factor analysis: Identifying barriers of success of housing companies 1/2 25. 06.2009 | 19  Used method: Explorative factor analysis 1.…to identify unobserved variables in data (called factors) 2.…to reduce complexity of comprehensive data  Used items… 1.33 queried barriers of success of the questionnaire 2.e.g. “In our company information about tenants are absent”  Fitness of results… 1.Measure of sampling adequacy (MSA) (>0,5):0,916 (“marvelous”) 2.Significance (Bartlett):0,0000(highly sign.) 3.Explained total variance (>50%):64,3%(OK) Explorative detected barriers of success satisfy the statistical requirements

20. Factor analysis: Identifying barriers of success of housing companies 2/2 25. 06.2009 | 20

21. Agenda 1.Problem and aim of the study 2.Concept of the study 3.Challenges of housing companies 4.Success factors 5.Barriers of success 6.Conclusion 25. 06.2009 | 21

22. Conclusion  Perception of high intensity of competition only regards a part of the housing industry.  Legitimization of business activity towards the general public becomes more and more meaningful.  Compared to equity return, the focus of external presentation is more important – relationship to key stakeholders, adequate quality of portfolio and stable quarters and the image of the housing company have to be managed proactive.  Sustainable aspects of housing supply defines successful operations – especially ecological modernization, reduction of operating escalation.  Highly trained and educated members of staff will be a growing bottleneck for housing businesses.  Improvement of relationship management, especially towards the tenants, should be realized.  Information transparency and the supporting IT-systems are weak points. 25. 06.2009 | 22

23. Management of Housing Companies: Challenges, Success Factors and Barriers Thank You very much for Your attention! Contact details: Moritz Lohse Technische Universität Darmstadt lohse@bwl.tu-darmstadt.de 25. 06.2009 | 23