INTERVIEW | VanWonen, born out of the previous housing crisis, is one of the few developers that continues to invest despite all the turbulence in the market. The area developer, that has its roots in Zwolle, has just acquired a housing developer from the Randstad and wants to double its housing production in the medium term. Alfred Bolks, VanWonen founder and director, on how to operate in a difficult market and boost the housing production nationwide.
Not a week goes by without Minister of Housing and Spatial Planning Hugo de Jonge launching a new plan. Bolks, a down-to-earth ‘Tukker’ (inhabitant of the region Twente), respects and admires his boundless energy and hard work. ‘That is contagious. But just pedalling harder against the wind won’t cut it. De Jonge calls for a massive scaling up of the housing production. Everything must make way for it. But at the same time he introduces rules that will make that impossible. Every housing project must consist of 70 percent social housing, affordable and under 355,000 euros. That may sound sympathetic towards housing consumers, but it leads to completely unfeasible projects. Investing in area developments will become impossible. The consequence is that nothing will happen at both the bottom and the top.’
Bolks knows all too well what that means. During the severe housing crisis of 2008-2013, everyone stopped investing, which laid the foundation for the current housing shortage. At the time, he was a board member of BAM subsidiary AM and responsible for the Northeast region. The euro crisis, the double recession and a house price drop of more than 30 percent hit BAM’s real estate operations full force. An investment freeze, the merger of BAM Vastgoed and AM, and write-downs of hundreds of millions on AM were not enough. Their real estate operations had to shrink as well. It was decided that AM would from then on focus only on the economically strong core areas. The development positions in ‘its’ Northeast region had to go.
"The housing market recovering in Randstad only, but not north-east of the country, made no sense."
‘Exclusively the Randstad and some cities in Brabant, so not beyond Amersfoort’, Bolks recalls. ‘I understood the strategy. But emotionally, I found that retreat difficult. I come from Twente myself, know the culture and have a good relationship with the people there. In the meantime, there was no progress in the planned sales. Around 2014, people stared in disbelief at you if you offered development positions in the northeast. At the end of that year, I started thinking about turning the portfolio into a spin-off myself. It did not make sense that the housing market would recover in the Randstad but not in the northeast, an area with 7 million people. Moreover, after twenty wonderful years at BAM, the freedom of running my own business appealed to me. Entrepreneurial blood is in my veins; I come from an entrepreneurial family. No more endless meetings and discussions, but presenting creative ideas to your team and executing them right away.’
That Christmas break, he started doing calculations and working out an approach. ‘No longer the large-scale BAM method, but a small-scale, phased approach with local parties. An area developer with conceptual brainpower that puts residents first. After coordination within AM, I submitted my plan to Herman Hazenwinkel, former chairman of the board of VolkerWessels, and Laurens Elmendorp, also ex-VolkerWessels. They owned a private equity company with a number of partners. They and their investors, all former entrepreneurs, believed in it. I then introduced them to AM, presented the plan and we went to BAM, where they were also enthusiastic. We agreed that I would purchase 47 housing development positions in the northeastern Netherlands for €34 million, as BAM reported at the time. However, it took until the end of 2016 before the sale was complete.’
Bolks left for Zwolle in early 2017. He was joined by 12 AM colleagues. ‘The purchase included, at my request, the former Schrale’s Beton building in Zwolle, the only office building that Gerrit Rietveld designed. I had been working there for years since 1999, first as regional director of HBG and after that of BAM Vastgoed. In 2017, we restored it to its former glory and turned it into VanWonen’s headquarters. My first task was to visit all the municipal councils. They had to approve the acquisition for each individual project. Their reactions were positive. Great that you’re here, we’re going to help you, but you have to be present in person, was the response in Groningen. I was suddenly a local and no longer that representative of a big player from the Randstad.’
Lots of opportunities for local builders
He encountered a playing field that had been recast by the crisis. ‘Up till 2016, most major parties had moved away to the Randstad. Only local, developing builders stayed. This created a lot of space for us. Besides the development portfolio - mainly development rights for about 5,000 homes - we acquired new land positions and participated in tenders. The first major contract we won was Hart van Waalsprong in Nijmegen, a joint development with AM consisting of over 500 homes and 11,000 m2 of commercial property. The collaboration with AM has always been good. As a partner, but also as a competitor in invitations to tender. We also purchased a development portfolio from Bouwinvest. We were very fortunate, as we suddenly had the wind in our sails. From 2017, the prices and demand surged - also in the northeastern Netherlands. We also benefitted from the lifestyle changes brought about by the coronavirus crisis. With working from home becoming the new normal, people from the Randstad have rediscovered the green countryside. Zwolle is now the new eastern edge of the Randstad.’
Taking over NU Projectontwikkeling
Just six years after VanWonen was launched, the property developer has grown into an established player with seventy employees. The growth is partly due to the new shareholder, Bolks points out. ‘In 2020, a large European asset manager, ActivumSG, acquired the stake of our first shareholder. Thanks to them joining us, we can step into bigger projects. In Eindhoven, we have taken a substantial position in inner city development Knooppunt XL. Next year, at that location, we will start building a 100-metre-high residential tower with 250 apartments. And towards the end of 2024 we are going to build a 120-metre-high residential ensemble with 383 apartments in the Nijmegen railway station area. This brings us very close to our goal of becoming a top-5 area developer in the Netherlands. Furthermore, we acquired The Hague-based NU Projectontwikkeling in late 2022, having previously purchased their UrbanParks project in Rijswijk.’
The acquisition did not happen overnight, as NU Projectontwikkeling was named in connection with an alleged bribery case involving Richard de Mos. ‘However, NU Projectontwikkeling was not a defendant in this case. We had the situation investigated by external specialists before we made a decision. Besides, the suspected co-director had already left the company in 2020. Michel Zaadhof, the current director of NU, will remain in his position and has the trust of both the project partners and the municipalities involved. With the acquisition, we are expanding into the Randstad region, reducing concentration risk and increasing our housing production. In our peak year 2021, we sold over 900 homes. Our aim is to more than double our housing production, after the current dip, towards 2,000 homes a year in the coming years.’
However, given the current market, that number is unfeasible for now, Bolks adds right away. ‘This year we will fall back considerably, below 1000. If in the coming years the sector manages to build half of the 100,000 homes annually that the government aims for, we will be very lucky. Besides the changed market conditions, the government policy is the biggest culprit. The regulation of the mid-market segment has created a great deal of reticence among investors. Most of the foreign investors who often purchase large projects have backed out. Because of the risen initial yields and high construction costs, it is increasingly difficult to place rental properties in the mid-market rental segment into a fund. VanWonen is trying to do its part. With project UrbanParks in Rijswijk, we are developing about 600 apartments and 4,400 m2 of commercial space. The zoning plan procedure has been initiated and a contractor has signed up. But it is going to be challenging to find an investor for it.’
"Now the alderman is afraid of being penalised"
Projects fail at the municipalities
Hugo de Jonge’s housing deals and his new directive role are unfortunately not going to move the housing market forward, he expects. ‘Those housing deals are agreements between the national government and regional governments; the market has not been included or heard enough. The directive role comes down to the government setting production quotas and designating locations for new construction. The municipalities, however, are responsible for the execution, and that is where things go wrong. In the past, I only had to deal with a municipal project manager who coordinated everything with his alderman. In the current situation, aldermen are afraid of being blown the whistle on by the bench of Mayor and Aldermen or the electorate, and you stumble over the many parties that are involved. Whether it is about nitrogen, noise, health, architecture or sustainability, every department turns it into its showpiece. Also, many projects stagnate for no reason because municipalities spend so many years working out area concept plans in great detail.’
Freedom of action
So what needs to be done to avoid a construction standstill like the one we saw between 2008-2013? ‘First of all, the government must stop putting up barriers. De Jonge’s task is not to remodel the market, but to help housing consumers. This can be done with incentives, an SVn loan for first-time home buyers, or subsidies for zero-energy homes. Once the market has its freedom of action back, we can leverage our creativity to invest, develop and build. There are enough locations for new construction. What we need are officials and administrators who are not afraid to cut the Gordian knot. The role of municipalities is to outline the contours of an area development, not cast it in concrete. The developers involved should then quickly be given the green light to realise their subprojects.’
How does VanWonen manage to keep building in times like these? ‘We are not dependent on a parent company from the construction or banking sector and have the backing of our shareholder. Moreover, our portfolio still consists largely of ground-oriented housing. These types of projects allow us to phase more easily. As a developer for the mid-market segment, we are constantly working to make homes financially feasible. That means building smaller, more standardised, phased and simpler. We are also developing concepts with multiple raised ground levels and stacked housing to increase the density and yield per project.’
The area developer still manages to attract investors, says Bolks. ‘In January, we started the construction of Nelson, a residential tower in Arnhem with 93 apartments. After many meetings, we found an investor willing to buy half of the apartments. This enabled us to hedge part of the risk. We expect to sell the remaining apartments over the course of the construction period. In this difficult market it is important to develop only housing for which there is real demand. Very expensive homes are no longer wanted. We build affordable ground-oriented houses in expansion locations and inner-city apartments. And we develop concepts in line with demographic changes. The ageing population and the increase in the number of single persons mean that we will build more assisted living homes, more live-work concepts and fewer multi-family properties.’
New price explosion
Anyone waiting for big price drops – from raw materials to houses – will be disappointed, according to Bolks. ‘In the new-build market, it is difficult to get the cost price down. Land positions have been bought at high prices. Even if a recession hits, the market should not pin all its hopes on a big drop in construction costs. The cost of raw materials will come down, but not that of labour. And as for the energy prices, they will never return to the old low levels. After a limited fall in prices that lasted a few years, the prices are rising again. The housing shortage is climbing to 400,000. With 100,000 newcomers a year – last year even over 200,000 – the pressure on the market continues to increase. In this respect, new housing development has a huge advantage over existing housing. The energy bill is virtually zero and maintenance is almost not needed for the first ten years. Therefore, VanWonen keeps its eyes open for opportunities, whether from land positions, portfolios or developers.’