VGU-UDP 2010-2012 BIDV TOWER EVALUATION Hoang Anh Real Estate market Prof. Karl Kluegel 30/08/2011
Hoang Anh, BIDV tower – Page 2 TABLE OF CONTENTSAbstract page 3I. Introduction page 3 1.Project overview page 3 2.Current situation of Real estate in Ho Chi Minh city page 3II. Methodology page 4III. Evaluation page 5 1. Building assessment page 5 2. Feasibility assessment page 9IV. Conclusion page 10References page 12
Hoang Anh, BIDV tower – Page 3Abstract The monetary tightening from the Government to control inflation affected on Viet Nameconomy generally and the real estate specifically, especial on the office for rent. The appearanceof high rise building more and more has contradicted with the falling down of the emptypercentage and the decrease of price in three office type A, B and C1. Analyzing the BIDV aboutthe location, architecture style, construction, capacity lease, parking capacity, and the connectionwith the other buildings surround, environment, etc, will help us understanding about thefeasibility of BIDV project in the Ho Chi Minh real estate. This article has 4 parts: the first part isBIDV introduction and the situation of Ho Chi Minh real estate, second part is the methodology toget information; third part is the analysis, building feasibility assessment and final is theconclusion.I. INTRODUCTION 1. Building overview In recent years, there have been many high rise buildings which be built in Ho Chi Minhcenter city, such as Vincom Center, Sky City Tower or Sea Bank tower… BIDV is one of highestoffice buildings with 40 storeys which will be built in 2010. The investor of this building is Bankof Investment and development of Vietnam (BIDV), with the Partners are DP Architects Pte Ltd,Beca PCM Pte Ltd, Bescon Consulting Engineers Pte, KPK Quality Surveyors Pte Ltd andVietnam CDC Consulting Corp. As designed, the project will be 152-metre high, comprised of 40 storeys and 4 basements.The Tower will be built in a site area of 2.374,90 m2, in which gross floor area of building isabout 43.590,78 m2, basements area is about 10.339,76 m2 and building density of 65,94%.Locating in the important place of center city, the BIDV is not only great building in 2010 butalso contribute the change of real estate in office for rent. 2. Current situation of Real estate in Ho Chi Minh city As overall real estate market report in the first quarter in 2011 was announced by twospecializing companies in market research in Vietnam real estate are Savill and CBRE, the marketis equivalent with the last months of 2010 and the demand for office-rent is increasing2. If inquarter 4/2010, CBRE leased 6.000 m2 floors, the result in this quarter are doubled with 37.000m2, most of which are class B, because it is good standard but the price could be accepted by thelessee.1 CBRE report in quarter 2/20102 Rudolf Hever, the deputy director of research and consultancy CBRE Vietnam
Hoang Anh, BIDV tower – Page 4 Some companies in management and office leasing brokers generally identified that thesupply of office in the near future 2012 -2013 will continue to increase, at least several hundredthousand square meters. Most of the office building projects will be put to use in the next fewyears will be deployed during the peak of the market in 2007 -2008. In addition, the vacancy ratestands at 20%, or about 200.000m2. Thus, office space for rent within 3 years could be up to thehalf a million square meters, approximately 40% of the total office supply in the city so far. Assupply continues to increase will cause significant pressure on the price for rent. (Figure 1). Figure 1: Vacancy rate and Asking Rents in Ho Chi Minh city in quarter 2/2011 (Source: report of CBRE Vietnam in quarter 2/2011).II. METHODOLOGY 1. Collecting, searching the information about the BIDV. Searching the building information from the internet with the key word “BIDV”. Connecting with the Departments and the Companies which have the necessary documents about this building. 2. Finding out and researching the real estate market in Ho Chi Minh city in recent couple of years. Depend on the exercise requirement, searching the information which related with real estate from the internet, especially from the real estate webs such as: Savill, CBRE, Viet Nam real estate, Viet Nam national real estate association, Vietnam economic forum etc. 3. Defining the criteria following the requirement of the exercise After finding out the characteristic of Ho Chi Minh real estate, class conferences, and the real estate lecture, chooses the criteria which can be used, such as: the technical parameter, design, construction, location, etc. 4. Analyzing, assessing the criteria above to make clear the technical and economic feasibility of building.
Hoang Anh, BIDV tower – Page 5III. EVALUATION 1. Building assessment: There are many factors when analyzing building. Depend on some Vietnam constructionstandards, the reality and the purpose of research, choosing 4 criteria to make clear the value ofBIDV project. Table 1: Assessment criteria of building No. Criteria Notes on method Assessment Recapitulate 1 Location -Where - In main street in CBD with high value of land -Traffic accessibility - In corner of 2 streets, easy to access by 2 -The building surround sides - Most of them are office building, model style, should be same height 2 Design - Architecture-planning -Accepted by City People’s Committee standards -Architecture style - Modern style with simple form, focus on open space -Construction - New technique, save energy, environmentally friendly 3 Parking -Design -1 basement for motorbike, 3 basements for car Capacity -The car/motorbike - Capacity about 1000 motorbikes, 500 cars number 4 Environment -Social impact -Open space, Public space for pedestrian -Landscape -Friendly, harmonious 1.1. Location: BIDV Tower is located at No.117-119 Nguyen Hue Boulevard and No.16 Ton That ThiepStreet, District 1. The contiguity: North is Nguyen Hue street, South is SunWah Tower, East andWest is Ton That Hiep street and complex building Kim Do. This area belong a part of blockwhich be limited by 4 streets: Nguyen Hue, Le Loi, Ton That Thiep and Pasteur. In addition, thearchitecture-planning standards of this block have been accepted by City People’s Committee.
Hoang Anh, BIDV tower – Page 6Therefore, when designing the BIDV, the consultant and architect have to depend on thosestandards to make project is suitable with the other building surround. On the other hand, locating in CBD with Nguyen Hue Street, the main landscape axis of cityto make this area become one of the places which has highest land price, about 160 millionVietnam dong per m2 (about 8000USD/m2). Thus the value of BIDV could be compared withthese other building as Sunwah or Vincom Tower after project finishing. Moreover, with the convenient traffic condition, on the corner of two streets: Nguyen Hue(64m) and Ton That Thiep (20m), the accessibility from outside into building is easier and moresafety by 2 sides (Figure 2). Figure 2: Location of the site
Hoang Anh, BIDV tower – Page 7 1.2. Design: By the agreement of the Peoples Committee of Ho Chi Minh city, Department of Planningand Architecture, based on space-oriented region and urban design in detail for blocks of land, theland for BIDV building has identified the architecture-planning standards as follows 3: 1. Land area: approximately 2.734,9 m2 2. The function of land use: the Finance-Trade-Services 3. Density: up to 65,94% on the boundary of land suitable project planning 4. Project scale: 40 storeys (not including the basement, mezzanine floor and roof technology). Maximum height: 152m (to roof peak) 5. Coefficient of land use: 16 According these standards, BIDV organized a design competition to choose the best project.Although it has been simple, the win project was high evaluated because the harmonization andconnection: - Firstly, the height has same level with KimDo and Tax building - Secondly, the podium was researched to create the connecting space with next buildings without barriers. - Thirdly, the building setback on Nguyen Hue and Ton That Hiep street has been similar with neighbor building and make the gap space for pedestrian – this is the main point which BIDV directorate focused on: the open space will be not only a connected place but also a place where outdoor activity happen as meeting, concert, party, etc, under canopy 4 - Fourth is the architecture form. BIDV is not so impress because it has to ensure harmonious environment and not cover the direction of the main building: City People’s Committee office. The architects only use hexagonal glasses to deal with the sunlight and create the convexo-concave elevation to make the glisten for building. In addition, the entire auxiliary (elevator, escape lift, toilet, etc) will concentrate in East andWest. This is the save energy solution and shelter from the light. Beside that, by the semi-unitizedcurtain wall aluminum frame, BIDV building will save 20-30% electric cost for the lights and air-conditioner system. (Figure 3)3 Document No 2294/SQHKT-QHKTT, date 24/06/2008 from Ho Chi Minh Department of planning and architectureto Bank of Investment and development of Vietnam (BIDV), providing planning-architecture criteria for BIDVbuilding4 Ho Viet Vinh – architect, juryman in BIDV building design competition
Hoang Anh, BIDV tower – Page 8 Figure 3: Site Layout plan 1.3. Parking capacity: If in London or the other developed urban, parking is not the main element in evaluation orclassification, it could be very important in Viet Nam. According design, BIDV has fourbasements with 10.339,76 m2: first basement is motorbike parking (with 2.584,94 m2, capacityabout 1000 units), 3 other basements is designed for car (with 7.754,82 m2, capacity about 400units). In general, BIDV is successful to deal with the demand for all staffs and customers whencoming to transact business (about 5000 staffs with 9m2/person and 7000 customers with6m2/person in 43.590,78m2 total floor area). However it is hard to say that this parking can servefor neighbor.
Hoang Anh, BIDV tower – Page 9 1.4. Environment: As assessment above, although the architecture style of BIDV building is not sophisticated, the new materials application such as hexagonal glasses, aluminum, saving energy materials created synchronism with the building around and harmonization with the environment and landscape. Moreover, the open space for pedestrian created friendly for this building. It is the positive factor which affect on social relationship. If most of buildings have been self-contained before, nowadays it has changed as BIDV tower is not only used for costumers but also for the pedestrian, tourists by the appropriate setback in 4 sides, canopy and podium design. 2. The feasibility assessment: In technical and economic feasibility, BIDV could be satisfied all the criteria to become one of the successful office building projects: 2.1. At technical issue, we can summarize the building technical information in two tables as: General informationLocation No.117-119 Nguyen Hue Boulevard and No.16 Ton That Thiep Street, District 1.Lot size 2.734,9 m2Floors 40 storeys above ground 4 storeys below ground (parking) 10.339,76 m2 (5m2 per 18,58 m2 office surface = 11.730 m2 – by construction law)Usages Finance-Trade-ServicesStructure Reinforcement Concrete Frame and Stainless SteelBuilding area 1.803,47 m2 Percentage buildable (density) 65,94%Gross floor area 43.590,78 m2Leasable floor area 32.313,60 m2 Percentage leasable 74,13%Coefficient of land usage 43.590,78/2.734,9 = 16
Hoang Anh, BIDV tower – Page 10Area Table Section Building (m2) Usage Basement 4F 2.584,94 Car park lots Basement 3F 2.584,94 Car park lots Basement 2F 2.584,94 Car park lots Basement 1F 2.584,94 Motorcycles parking lotSub total 10.339,76 1F 1.416,50 Office, cafeteria, Shop, Substation, Bin center 1Mezzanine F 1.208,00 Office of BIDV bank 2F 1.070,61 Office of BIDV bank 2Mezzanine F 1.204,52 Office of BIDV bank 3F 1.243,21 Office of BIDV bank 4F 1.792,42 Office, Auditorium 5F 994,59 Office, Auditorium Technique F 950,40 Lounge Area, M&E 6F-39F 32.313,60 Office for rent 40F 870,09 Restaurant Roof F 526,84 Restaurant, M&E, HelipadTotal 43.590,78 According the technical numbers and the building characteristics which are analyzed above,we can assess the technical feasibility as: First is the location: consider in both of sides: relativity (in CBD) and absolutely (in themain streets), BIDV is one of the buildings which has the best location in center with highestvalue of land and convenient traffic. Second, although the architecture style is simple, by the appropriate design, newconstruction and saving energy materials, this building has been harmonious and friendly withneighbor, especially the space for pedestrian. All these elements make this building become oneof the main views in region, and is classified as office type A. Third is the density and coefficient of land use, BIDV tower used most of land with thecoefficient is 16 but ensuring the setback and suitable density (65,94%). As the economists said,building has high coefficient will make great economic efficiency because it used most ofinvestment scale.
Hoang Anh, BIDV tower – Page 11 Fourth is the parking capacity, as analyzing above, parking of BIDV can satisfy the largenumber of motorbike and car of the staffs and customers. Following the Vietnam constructionstandard, an average area for one motorbike lot is 2m2, for one car is 15m2, thus the needed areafor building which has 43.590,78m2 office area is 1000m2 motorbike parking, and 7500m2 carparking (with 5000 staffs and 7000 customers). Hence these numbers are equivalent with thebuilding design: 2.584,94 m2 motorbike parking and 7.754,82 m2 car parking. The final in technical assessment is the environment, with the favorable location, goodinfrastructure and radius service, beautiful view and landscape, BIDV will develop maximumcapacity to become one of typical building by the bank and finance function. 2.2. Beside the good technique, to analyze the economic feasibility of this building, we haveto put it in the current situation of Ho Chi Minh real estate: As a design, the leased office area is 32.313,60m2; if using an average price of type A in HoChi Minh in current time is 34,21USD/m2 (CBRE report in quarter 2/2011), the economicfeasibility can be analyzed that: -Construction cost: 1.359 billion Vietnam dong = 67,95 billion USD -Purchase Price for Lot: 441 billion Vietnam dong 5 = 22,05 billion USD -Project cost: 1.800 billion Vietnam dong 6 = 90 billion USD -Gross rental revenue at 100% Occupancy: 32.313,60 m2 * 34,21USD/m2 * 12 months =13.265.379 USD -5% Vacancy Rate: 5% * 13.265.379 = 663.268,95 -35% Operating Cost: 35% * 13.265.379 = 4.642.882,65 -Net operating income: 13.265.379 - 663.268,95 - 4.642.882,65 = 7.959.227,4 -Break even ROR = 7.959.227,4/90.000.000.000=0,0088% In Conclusion: Project is economically feasibility if investors require ROR =<0.0088% Project is economically not feasibility at 0.009% since 7.959.277,4/0.00009 = 88.436.415.555,55 income value < 90.000.000.000 project cost , i.e. 1.563.584.444,45 Loss Substantial development profit at 0.00008: 7.959.227,4/0.00008 - 90.000.000.000 = 9.490.342.500 profit5 Document No 1166/CV-HĐQT, date 25/11/2009, from Bank of Investment and development of Vietnam (BIDV toPeople’s Committee of Ho Chi Minh City, Purchase Price for BIDV Lot6 Website of Bank of Investment and development of Vietnam (BIDV), http://bidv.com.vn/
Hoang Anh, BIDV tower – Page 12IV. CONCLUSION In generally, BIDV building could be seen as one of greatest project of city in 2001; inarchitecture issue, Colin Wafd – an English architect said that this is a design has a modern style,unique planning which be suitable with region “after building, I believe BIDV tower will be animportant architecture point in center city”; in society-economy, this building could be seen as asymbol of social development with 100% funding from domestic investment, an impeccableinfrastructure, high technique, represented a new level in servicing for citizens and tourists. However, as reported by two CBRE and Savills Viet Nam, the real estate market, officeleasing in the future is still under pressure, due to a reduction in rent even though rates in early2011 a slight increase (Figure 4) and the vacancy rate in the high-rise office, Although in recentmonths that rate has been reduced, it still remains at very high level (especially Grade A 38.1%).All those have happened because the supplies become more and more, in HCM City, more than 1million m2 of office space is expected to enter the market from 2012 onwards mainly in District 1.It accounted for 48% of all future projects will be great pressure for investors to find customers,and BIDV is not outside this circumstances. USD/m2/month Capacity leased Average price for rent Figure 4: The rental rates have increased slightly, prices continue to decrease (Source: Savills Vietnam). In Investor’s view, one can say that BIDV is a product which is invested on a large scaleand high economic value. However in recent real estate, BIDV will continue to increase thenumber of offices in Ho Chi Minh when it is put into operation (expected in 2012). It makes apressure on rents and finding tenants. Therefore besides ensuring ROR is always lower than0.0008%, the investors have to create policies and strategies for marketing to attract the lessee.
Hoang Anh, BIDV tower – Page 13Reference1. Internet: - Vietnam real estate: http://www.vietrees.com; http://vnre.blogspot.com; http://rol.vn/; http://batdongsanninhbinh.com - Ho Chi Minh real estate associations HOREA : http://www.horea.org.vn - BIDV information: http://www.skyscrapercity.com; http://www.diaoconline.vn; - Others: http://wedo.com.vn/Quy-Hoach-XD; http://vietnamnet.vn/vn/kinh-te http://kinhtexaydung.gov.vn2. Document: - CBRE Ho Chi Minh City Market View in quarter 2/2010, 1/2011, 2/2011 - Document No 2294/SQHKT-QHKTT, 24/06/2008 from Ho Chi Minh Department of urban planning and architecture to Bank of Investment and development of Vietnam (BIDV) - Document No 3533/SQHKT-QHKTT, 01/12/2006 from Ho Chi Minh Department of urban planning and architecture to City People’s Committee