What it Means to be Vertically Integrated

 

You’ve probably seen or heard about the Haverkamp Group’s vertically integrated structure. Perhaps you’ve wondered "what does this mean?” Or “how does this apply to me as an investor?”

I can assure you, it has a huge impact on our acquisition & development process, investment decisions, and ultimately, you as an investor. As you read along, I’ll explain what vertical integration is, what it does for our company, and what it means for our stakeholders and investors.

What Is Vertical Integration?

“Vertical integration is a strategy that companies use to streamline their operations. It involves taking ownership of various stages of its production process. Companies achieve vertical integration through mergers or acquisitions or establishing suppliers, manufacturers, distributors, or retail locations rather than outsourcing them. Vertical integration often requires significant initial capital investment.
” — Investopedia

The definition above would apply to many different types of businesses. In real estate, true vertically integrated companies own and manage various stages of the real estate development and investment process, such as land/property acquisition, construction, property management, and asset management.

That said, many real estate companies may claim to be vertically integrated, but would fall short of the true definition. For example, a real estate investment company could say they’re vertically integrated because they “manage all stages of the real estate process,” but they actually rely on third-party property management companies or contract with an unaffiliated general contractor to manage the budgeting and construction of their development projects.

These types of third-party relationships certainly can work, but they inherently lead to misalignment of interests/incentives, and often create inefficiencies or oversights which can negatively impact an investment.

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How Haverkamp Group Does It Differently

 

 

Haverkamp Group is about as vertically integrated as a real estate company can be. Practic Design, Haverkamp Construction, and Haverkamp Properties all fall under the Haverkamp Group umbrella, where the Acquisition, Investor Relations and Asset Management functions live as well.

This structure, where all the respective companies are motivated towards the same goal, provides for meaningful risk mitigation and value creation along the entire lifespan of a real estate investment.

 

Our vertically integrated structure directly (and positively) impacts my day-to-day role, and assists in risk mitigation and value creation on new acquisition and ground-up development opportunities.

For example, if I’m reviewing an acquisition opportunity in the Des Moines Metro, I can walk down the hall and discuss a prospective business plan with our Des Moines Property Management team. What are they seeing in the market? How many property management staff would we need on site? How would we maximize occupancy and revenue?

If we’re reviewing a ground-up development opportunity, we immediately collaborate with Practic Design and Haverkamp Construction on everything related to property design, construction viability, compliance with relevant building codes and zoning regulations, and formulation of a development budget.

As an investor in Haverkamp Group acquisition or development projects, you can rest assured that our company is highly motivated and aligned to produce the best results for investors by building and managing properties where residents love to live.

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