Dq1 assignment karl

Real Estate and Urban Development Lecturer: Prof. Karl Kluegel, Urban Development Student: NGUYEN DAN QUYNH VGU 2010-2011

Real Estate and Urban Development – Lecturer: Prof.Dr.Karl Kluegeld

Student: Nguyen Dan Quynh VGU 2010-2012 Page 1

CONTENTS

I. INTRODUCTION ………………………………………………………………….….2

II. THE RESON OF RESEARCH………………………………………………….…. 4

III. METHO OF EVELUATION…………………………………………………………4

IV. EVALUATION………………………………………………………………….….5

1. Design and Image analysis___________________________5

2. Parking___________________________________________6

3. Traffic____________________________________________6

4. Marketing_________________________________________7

5. Economic_________________________________________9

6. Social __________________________________________ 13

7. Inveronment_______________________________________13

8.

V. In conclusion…………………………………………………………………..15

Reference



I. INTRODUCTION:

1. The main function of building

The high-rise building - Sabeco World Trade Center, located on 2-4-6 Hai Ba Trung Street, Ben Nghe Ward, District 1 is Complex Building included Hotel sixth star, Grade A International Standard Office for Rent, retail service convention hall commercial center and basement using for parking elevators related utilities. However, the number of apartments for rent is limited just about 5%- 7% area of building. The architectural planning criteria:

+ Lot size: 6044 m2 + Number of storey : 40 storey (without basement, mezzanine, and

terrace) + Maximum building height: 170 m. + Maximum of Building density- space for development: 3626,40 m2 ( 60%) + Plot ratio : 15 (regardless of building floor area of basement garage and

technical level) + Minimum building Setback 4m. + Estimated construction cost: $160 million.

2. Describes the building:

The building is design by 2 principal component – one is a high-rise tower with 40-storey, another is a podium block with 5-storey, which is separate by a walking street. This is an important design which creates difference of the building. The design emphasizes simplicity in form and function in the midst of a cluttered architectural environment. According to describe of the designer, the building has a triangular shape with a large floor plates at the center of the tower. With the shape like this, a triangle shape is chosen because it could province 20% more of the office area with river views as compared with conventionally-shaped buildings. Internally, the tower transforms to accommodate different space requirements. The hotel is located at upper floors to command better views while the lower levels house the offices. The residential component is located immediately below the hotel component so both components can share some recreational facilities. In addition, the wedge-shaped site has influenced the design of the retail and convention podium block to take on a trapezoidal shape. All the retails and F&B Functions are concentrated in the lower floors of the podium block while the upper level of the podium block houses the international conferences and seminar rooms. The overall simplicity of the building's form has a richly textured cladding system



made up of glass and metal, providing another beautiful skyscraper for Ho Chi Minh City.



2-4-6 HAI BA TRUNG, DIST1, HCMC II. THE REASON OF RESEARCH:

The objective of this paper is to analyze about the real estate in Ho Chi Minh City, particularly District 1 through towers are building and will be built. To doing that,each members in class will choose one project in District 1 reported by CBRE, Vietnam Real Estate to reported. Besides that learning how to evaluate a building - it is necessary for developing society and economic.

III.METHOD OF EVALUATION:

A set of criteria which was discussed and collected from all of the ideas of the members in class choose the appropriate criteria for this paper. And then the end seven criteria were selected such as design and image, parking capacity, traffic, market analysis, economic, social, environment. (Table 1)



Using the proper availability of information about Sabeco Tower from Design Company and the Departments and the real estate webs such as: CBRE, Viet Nam national real estate association, Vietnam economic forum and Skyscraper Asian analysis.

Collecting reports about the real estate in Ho Chi Minh in recent years is to evaluate some criteria such as marketing, designing.

Using some technical calculation to estimate some criteria such as parking and economic analysis

IV. EVALUATION:

Table 1: Real estate assessment criteria

No. Criteria Notes on method Assessment 1 Design Social harmony

Social status Beautiful and luxury interior and exterior decoration

2 Parking Capacity Motorbikes Cars

Not have information to assess however according the calculate the parking will be enough if it was build 2 basement

3 Traffic Accessibility Mobility

Easy – not have traffic jam in the peak hours.

4 Market analysis Faced to a lot of challenges. 5 Economic Calculation

Rent cost/total cost Face to a lot of challenges because price for lease always change due to economic crisis.

6 Social impact Analyze at 500m radius

Provide for the real estate a huge area about office, retail, hotel…

7 Environmental friendly

Be interest in about environment in design.

1. Design and Image analysis:

The building which is one of important points in city takes part in huge skyscrapers in CBD to create a magnificent Melinh square. Comparative with current building with 2-3 stories belong Sabeco beverage, the new Sabeco Tower will be change the face of area around also is linking point between district 1 and district 2-Thu Thiem District.



Now the building is not built however the license and advertise has been done. However, there is the International Architecture Design Contest Sabeco in 2008. Currently, the HOK Company – Hongkong was an experience company about high- rise building designed it. According to design, to have a integrate shape and transitional space between areas around, the designers is take care of environment by the way that they create a walking street in a building friendly with residents. It makes building become unique and more luxury.

However, architect Dan (2008) criticized that this building will overwhelm the buildings around by a large scale of project. Another person said that with the glassy design of building is again effect to the harmony between traditional material and new material building. In my opinion, this is a beautiful project and combines with nearby skyscrapers which will create a landscape harmony for Bach Dang Quay and Me Linh square.

2Parking capacity:

Being lacking of information about the area for the parking, this paper will calculate the number traffic in this building to estimate the number of basement ones depend on the Viet Nam Stander for designing. If the number of basement is about one or two floor, it will be easy to accept.

Supposing that whole area 6044m 2 (1) using for parking and technique

Area for parking per car 18 m2

Area for parking motorbike, bike 2.5 m2

Area for technique 10 %- 604.4 m2 (2)

Parking area (1) –(2)= 5440 m2 (3)

+ Gross rental revenue at 100% occupancy : 70.026.652 + The area for each floor 2266.5 with 5% using for auxiliary block such as

toilet, passage-way the space for development 2153 m2 65 apartments

With 4 apartment/1 car, 1apartment /3 motorbike+ bike 16 cars and 195 motorbike 775,5 m2 (a)

Office and retail for lease 1923 m2* (20+ 5) stories

With 100 m2/ 1car 480 cars 8.640 m2 (b)



Hotel grade A 272 rooms estimate

With 8 rooms/1 car 34 cars 612 m2 (c)

The area for parking (a) + (b) + (c) 10.027,5 m2 (4) In conclusion: Comparison (3) and (4), the project needs to build 2 basements to adapt a number of car and motorbike in building.

3.Traffic: The tower is located at Melinh square and surrounded by Hai Ba Trung, Thi Sách, Dong du so it have many benefits for traffic in the time construction and using it. Between two block of building, the design have a walking street and the all area of basement using for parking so the access for residents and transport is easy. Besides that, although this is a CBD but traffic jam in the peak hours rarely happen. This is also an importable point for the investor and user when they choose this tower to work. In addition, in case of unexpected things such as fire is the user have many the street to escape because four face of building is contiguous with many street. Moreover, the Sabeco tower is near many the bus station, which makes people have a lot of change to access the building. It is also easy to connect with district 2 by Thu Thiem tunnel and district 4 by Khanh Hoi Bridge. All of assessment above, the accessibility to tower is good.

9. Marketing:

According to the function of the Sabeco building, it will provide for the market real estate: A m2 for apartment, b m2 for office for lease, room A for leases, C m2 for retail. To assess this criteria, the rent price of building will comparison with available data from CBRE in Q2-2011 to analyze the benefits and challenges of project



Office market

Firstly, rents throughout all grades of office softened during the quarter, albeit at a slower rate than Q1 2011. Renting Grade A in CBD decreased 1.3% quarter-on- quarter. The average occupancy in second quarter decreased from 79.8 % at the end of Q1 2011 to 82.5%. However, the grade A was still slower at approximately 66% than Grade B,C at over 80%. In addition, according to Trang Le, Manager of DTZ Occupier Services department commented that the office landlords for all grades are still facing challenging times at the end of the first half of 2011.

Residential for sale market

Also like the office market, the residential for sale market continued to decline in quarter of 2011. The number of new launched in the second quarter went us by 12.5% q-o-q



with a total of 4,926 units being launched. Therefore, many projects will be delay to look for uptick in market sentiment.

Retail market

Besides that although consumer confidence has fallen in the first half of 2011, a relatively stable retail property market in Q2 2011. CBD department store rents went up to 5.8% q-o-q to US$ 109.35 in the second quarter. According to the forecast, if the economic recovery around in next four quarter, rents prime in CBD could still increase due to short of available space. In short, in front of this situation, this building cans unavoidable difficulties about rent price and high vacancy rate. The first thing to overcome is try to introduce for user the best services such as an increasing rent-free and fit-out periods, stepped rents or complimentary parking spaces.

5. Finance:

Economic Feasibility: + Estimated construction cost: $160 million + Gross rental revenue at 100% occupancy with the space for development

2153 m2 65 apartments level A 2.153 * 3 floors *35 USD/ apartment (1) *

12 months 2.712.780 USD

Office for lease 2.153 m2* 20 stories *20 USD/m2 *12 months

10.334.400 USD

Retail for lease 2.153 m2 *5storeies *150 USD/m2 *12 months



19.377.000 USD

Hotel grade A 2.153m2 * 12storey = 272* 400 USD/ day * 356 days. 38.732.800 USD

+ Gross rental 71.156.980 USD

+ 10% Vacancy Rate 7.115.698 USD + 35 % Operating Cost 24.904.943 USD

Net operating Income 39.136.339 USD

Break Even ROR 38.523.209/ 160.000.000 24.46 %

Items Amount( $)

Project Cost 160.000.000

Gross Retail revenue at 100% Occupancy 71.156.98

10 % Vacancy Rate 7.115.698

25% Operate Cost 24.904.943

Net Operate Income 39.136.339

Break Even ROR

Table 2. Rough Estimate of Economic Feasibility Conclusion:

- Project is economically feasible if investor require ROR ≤ 24.06 - Project is economically not feasible at 25% since 39.136.339/0.25 =

155.545.356 income value < 160 million USA 3.454.644 loss - Project generates substantial Development Profit at 23% required ROR=

(39.136.339/0.23) – 160.000.000 = 10.157.995 USD This build belong to Sabeco Beverage – one of the biggest company beverage in Viet Nam.

year 1 2 3 4 5 6 7 8 9 10

Total cost for the building ( $ millions)

160,000,000

Construction schedule 0.50

0.25

0.25

Total cost for the building ( $ millions)

80,000,000

40,000,000

40,000,000

Equity ($ millions) 40% 32,000,000

16,000,000

16,000,000

Bank loan 60% 48,000,000

24,000,000

24,000,000

Loan 96,000,000

48,000,000

72,000,000

96,000,000

Debt payment 14,000,000

14,000,000

14,000,000

14,000,000

14,000,000

14,000,000

12,000,000

Debt at the end of year 82,000,000

68,000,000

54,000,000

40,000,000

26,000,000

12,000,000

-

Interest rate 20 %

Interest 8,160,000

12,240,000

16,320,000

13,940,000

11,560,000

9,180,000

6,800,000

4,420,000

2,040,000

-

Table 3 The Project Finance

year 1

2

3 4 5 6 7 8

9

10

Gross Rental Revenues (95%)

67,599,131

Vacancy Loss (%) 15% 15% 10% 10% 5% 5% 5%

Vacancy Loss ($) 10,139,870

10,139,870

6,759,913

6,759,913

3,379,957 3,379,957

3,379,957

-

-

-

-

-

-

-

Net Rental Revenues 57,459,261

57,459,261

60,839,218

60,839,218

64,219,174 64,219,174

64,219,174



Expenses 6,759,913

6,759,913

6,759,913

11,491,852

11,491,852

12,167,844

12,167,844

12,843,835 12,843,835

12,843,835

Interest and debt 8,160,000

12,240,000

16,320,000

27,940,000

25,560,000

23,180,000

20,800,000

18,420,000 16,040,000

12,000,000

Cash flows In years before taxes

142,463,846 (14,919,913)

(18,999,913)

(23,079,913)

18,027,409

20,407,409

25,491,374

27,871,374

32,955,340 35,335,340

39,375,340

Corporate Income Tax -

-

12.5% 12.5% 12.5% 12.5% 25% 25% 25% 25%

Cash flows In years after taxes

(14,919,913)

(18,999,913)

(20,194,924)

15,773,983

17,856,483

22,304,953

20,903,531

24,716,505 26,501,505

29,531,505

Equity 64,000,000

(64,000,000)

(14,919,913)

(18,999,913)

(20,194,924)

15,773,983

17,856,483

22,304,953

20,903,531

24,716,505 26,501,505

29,531,505

IRR 24.18%

Return on Equity -23.3% -29.7% -31.6% 24.6% 27.9% 34.9% 32.7% 38.6% 41.4% 46.1%

Break Even Occupancy Rate

68.6% 64.5% 58.1% 54.2% 48.7% 45.0% 38.7%

IRR 24.18%

Table 4 Cash Flows and IRR According to calculation, the result shows IRR of building is higher than interest rate assumption. It means the project will operate effective. However, in the economic crisis, the company always stands avoidable risks due to increasing interest rate, decreasing number of the resident renting.

6. Social impact: The building locates at center of city therefore it has many benefits: - Security condition is always important criteria for building so the user can believe when using this building. -This area belongs Sabeco Beverage cooperate company without residents living so it is not change the living of residents in this area. Besides that designing of building also create pleasant for user by convenient and spatial relaxing. - Besides that this building also provide for office, retail for lease makes stability prices and create jobs for resident in city. However, the number labor work at Sabeco will have to move to another place. It means the changing function of building also adversely affect to living of worker. - One of the points that the building locate at the best exorbitant place of city. So an increasing number of investor comes to this area, which will affect to real estate market.

7. Environment impact:

This maybe is a first building in CBD which is interest in environment inside the project. Between two blocks is arranged a lot of trees created a green environment for user. However, Viet Nam is one of countries in ASIA is offered hardly by change climate so with the design cover glassy affect directly to environment of city. In addition, lack of information about using energy, water and material for construction which make the assessment become more difficult. Thus, we can hope that the expert company about designing skyscrapers and many projects care about using effective energy and environment, which will make the tower, become friendly building.

V. CONCLUSION

No. Criteria Ranking

1 2 3 4 5 Good Bad

Score

1 Design 1 2 3 4 5

2

2 Parking Capacity 1 2 3 4 5

2

3 Traffic 1 2 3 4 5

1

4 Market analysis 1 2 3 4 5

3

5 Economic 1 2 3 4 5 4



6 Social impact 1 2 3 4 5

2

7 Environmental friendly 1 2 3 4 5

3

Total 15

This is an important building in center of city however in that time, the information is very limit such as planning design, office space, hotel, apartment for lease. Several the information is collected for internet so the accuracy have to limit, which make the assessment of project meet a lot of difficulties. However, standing at situation of investor, this is a good project to invest. It locates at a beautiful sight so building will attract a lot of people coming to rent, work. Reference Changing tack http://news.vneconomy.vn/20110805104543528P0C4/changing-tack.htm The Market View Ho Chi Minh City In July 2011. Mid Year Market Review, July 5, 2011. Real Estate Market Get Nearer To Real Value http://vnre.blogspot.com/2011/08/real-estate-market-gets-nearer-to-real.html DTZ Vietnam Released Property time quater1-2011 http://vnre.blogspot.com/2011/04/dtz-vietnam-released-property-times.html http://www.cbrevietnam.com/loadpage.php?page=homepage: Sabeco Tower information: http://www.skyscrapercity.com; Document No 3212QHKT-QHKTT, 12/01/2010 from Ho Chi Minh Department of urban planning Diễn Đàn Doanh nghiệp- Business forum http://dddn.com.vn/20110818082034574cat168/nhieu-ngan-hang-giam-lai-suat-cho-vay-xuong-17nam.htm