Prof. karl's assignment


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Prof. karl's assignment

  1. 1. Vietnamese German UniversityMaster course of Urban Development and Planning REAL ESTATE PROJECT EVALUATION Benthanh twin towers Technical and Economic feasibility Advisor: Prof. Karl Kluegel Student: Nguyen Dinh Khoa HCM - 9/9/2011
  2. 2. Vietnamese German UniversityOUTLINE I. Introduction II. Building Overviews III. Methodology of evaluation a. Methodology b. Criteria IV. Evaluation a. Location b. Transport Analysis c. Design and Image d. Technical Analysis e. Economic & Market Analysis f. Financial Analysis g. Social Analysis h. Environmental Analysis V. Conclusion VI. ReferencesBenthanh Twin Towers – Real Estate Project evaluation Page 2
  3. 3. Vietnamese German University I. Introduction The twin processes of urban planning and urban development are inextricably linked – it’s not possible to carry out a development strategy without an understanding of the planning process, and equally planners need to know structure of real estate market with its essences. This assignment for helping students understanding about the procedural and practical aspects of developing land from the point of view of both planner and developer. One real estate project is chosen in the category of 32 key projects in development of HCM city. The student analyzes the entire project in many aspects such as technical, economic, social, environmental, etc. Results of the analysis will show the feasibility and economic of projects. In this paper, BTT was selected with its set-off essences. II. Methodology of evaluation This assignment includes two sections: class section and individual section. In the individual section, each person will give out their evaluations, analysis and sentiments about their selected project. In the group section, a group of criteria were selected carefully, reasonably by all class members. The projects will be justified based on a comprehensive review of these criteria and every criterion will be ranked from good to bad correlatively 1 to 5. Fifteen projects will be compared together based on these figures of projects. The project is justified based on a comprehensive review of the following criteria: Rating (good – bad) Criteria Note 1 2 3 4 5 Location Advantages and disadvantages of its location. Transport Traffic, mobility and accessibility 1 Design & image The appearance of the building and its architecture 1 Technical the technical solutions, new technology applied 2 Economic Real estate market and its influence 2 Finance Finance & feasibility of economic based on the real 1 estate market report of CBRE Social social issues which have a connection with the project 3 Environmental Energy and Environmental issues 2 Figure 1: List of criteriaBenthanh Twin Towers – Real Estate Project evaluation Page 3
  4. 4. Vietnamese German University For accurately evaluation every criteria of the project, many variety methodologies are used.Each criterion is suitable with one or more methodology. For example, Visiting site and observation isused for analysis location, transport. Calculation and analysis data is used in Market Analysis andFinancial Analysis. III. Building overviews Location: this BTT is located at the historical Ben Thanh Market plaza, where four streets meet, namely Le Thi Hong Gam, Calmette, Pham Ngu Lao, and Pho Duc Chinh. BTT is also sit on top of future city Metro Center. Investors: Bitexco group Bitexco is one of Top Corporation in Vietnam, an internationally enterprise. Bitexco has invested in many sectors such as Mining, hydropower, real estate, ect. Functions: serviced apartment, office, commercial centre. Investment: 300 billion US dollar. Land area: +/- 8,600 square meters Height: 240 meters Gross construction area: +/- 180,000 square meters Scheduled construction period: 2011 – 2015 IV. Evaluation a. Location In a real estate project, the attribute of location always plays an important role. The location effects to the business effectiveness and the convenience of the building in the future. Located in the central business district of one of the world’s fastest growing economies, BTT stands at the heart of HCM’s financial centre. Situated at front of Quachthitrang square, it is strategically positioned to attract leading financial, banking, insurance and legal companies, both local and global. This area is also considered as the historical and culture area of HCMC. Within five minutes of walking, you can reach many key location of HCMC such as Benthanh market, 23.9 parks, Hochiminh museum, the building of Hochiminh committee, etc. Therefore, this area is the most attractive place forBenthanh Twin Towers – Real Estate Project evaluation Page 4
  5. 5. Vietnamese German University tourists particularly foreigners. There are more than 4 million visitors come to this area every year for visiting and making stay. It is expected to bring a lot of income from rental and retail. BTT is considered to be at the center of district 1 specifically and HCMC generally. With regard to the “location, location, location” rule in real estate. BTT’s location seems second to none. Grade: 1 b. Transport BTT is also located in the best location in terms of transport. Three sides of BTT are surrounded by four streets namely Lethihonggam, Phamngulao, Phoducchinh, calmette and the main side faces to Quachthitrang square. In the future, congestion in rush hours could be not occurred because vehicles could access to the building from all four sides. With its central location and accessibility from the rest of the city, it is well connected to the Saigon Bridge, thuthiem tunnel, tanthuan bridge, and it close proximity to the tansonnhat international airport. Apart from being a major hub for the network of city buses serving Ho Chi Minh City, Quachthitrang square (Ben Thanh market) is planned to be a hub for several lines of the planned Ho Chi Minh City Metro; Line 1, already under construction, would connect Ben Thanh with Suoi Tien Park and Long Binh in District 91. Other lines would connect Ben Thanh with Tham Luong in District 122, and with Cholon and Binh Tan District. Grade: 1 c. Design and Image1 "Ho Chi Minh City breaks ground". Railway Gazette International. February 28, 2008.2 "Plans for HCMCs second metro route submitted". Thanh Nien.newspaper. May 14, 2010.Benthanh Twin Towers – Real Estate Project evaluation Page 5
  6. 6. Vietnamese German University In the viewpoint of an architect, I would like to particularly analysis the architectural aspect. There are many proposal of BTT were submitted, the most romantic idea was chosen which belong to Arep Architectural consultancy company. The project includes two towers which are connected by a podium. The 55-storey West Tower contains office floors in the lower half and a hotel in the upper half. The 48-storey East Tower contains the residential apartments, serviced by the hotel through the podium and basement. The architectural design has a cultural context as it refers to the Vietnamese myth of the Two Dragons. The podium represents the coiled tails, while the two dragons rise from the land. The cantilevered tops represent the dragons heads. The glass cubes are figurative depictions of Vietnamese pearls in the mouths of the dragons. Figure 2: Perspective images The image will provide a powerful reminder to current and future generations of both the Vietnamese myth and the symbolic representation of the citys fame as the Pearl of the Orient. Although, the rectangular shape of the building is quite harmonious with the surrounding architecture. But it looks very tangled with two small blocks and the extension (set-off) part on the top. The podium is positioned very near street with small set back space. Its huge figure really overwhelmed any crossing passengers. Even though, the architecture designed the podium with theBenthanh Twin Towers – Real Estate Project evaluation Page 6
  7. 7. Vietnamese German University image of a dragon’s tail, but its shape is not lissome at all. Its appearance with glaze vertical façade is indeed tedious. Grade: 3 d. Technical Analysis Because of this building has not been built. Therefore, all the evaluations, analyses base only on the project’s proposal and its perspective images. Specifically, Some sub-criteria which are analyzed: Parking capacity, ventilation and lighting, structure solution and earth quake prevention.  Parking capacity Having a very large basement with 24.000 m2 gross area, it could provide 933 car parks and 1.867 motorbike parks and a noticeable parking area on the ground. But its capacity nearly satisfies the TCVN standard about parking. However, the calculation below bases on the condition of fully occupied. In reality, the building is not often being in the state of fully occupied. Apartment Office Commercial Total Capacity TCVN 3 1.5parking/apartment 1parking/ 100m2 1parking/ 100 m2 500 apartments 45.200 m2 28.000 m2 Car parking 334 452 280 1066 933 Motorbike 225 1642 1867 1867 parking Figure 3: Parking calculation3 National technical regulation of construction 04/2008/QĐ-BXD. April 03, 2008.Benthanh Twin Towers – Real Estate Project evaluation Page 7
  8. 8. Vietnamese German University  Ventilation and lighting The data about ventilation and lighting are not available in the project proposals. But the perspective images clearly show the glaze cover of the building. It gives tenants a modern office environment which not only allows for stunning views of Ho Chi Minh City but also enables natural sunlight to reach all the floors. However, glazing all the building will restrict natural ventilation. Alternative Costly solution is using air conditioner system.  Structure solution After Finance tower, BTT is the second building of HCMC which applies the new structure solution – Steel outrigger and belt truss4( Figure 4). This structure has many advantages to effectively control the excessive drift due to either wind or earthquake load. Moreover, it could make large interior spaces with long- span beams. In this instance, the choice of steel resulted in a lighter structure and speedier construction. Figure 5: Illustration of the Structure4 “The outrigger and belt truss system is one of the lateral load resisting system in which the externalcolumns are tied to the central core wall with very stiff outriggers and belt truss at one or more levels”Benthanh Twin Towers – Real Estate Project evaluation Page 8
  9. 9. Vietnamese German University  Earth quake prevention Fortunately, Vietnam is not in the pacific ring of fire – area often occur earth quakes. But the earth quake prevention need to be considered in every building, especially in high rise buildings such as BTT. Because of applying new structure solution - outrigger and belt truss, BTT could subject to the earthquake load, about 18 % reduction in maximum displacement can be achieved with optimum location of the outrigger truss placed at the top and the 33rd level5. Grade: 2 e. Economic & Market Analysis In this criterion, the factors economy generally, market specifically are analyzed to indicate their effects to the feasibility of the project. It includes both negative effects and positive effects. In the two first quarters of this year, HCMC’ real estate market was quite gloomy, because of many reasons such as economic crisis, inflation, state policies. Not only HCMC’ market but also Vietnam’s market is effected by policies of the government. The investment from national budget has reduced significant because of the monetary tightening policy. High interest rate and high inflation are the key issues of the economy. The inflation stood at 12.8% in the end of March and rising sharply to hit the peak at 20.82% in June. Meanwhile, the high interest rate is always above 21%. In March 01, 2011, the state bank promulgated a directive about the lending limitations particularly in the real estate sector6. This directive has largely impact in both individual investors and big enterprises. They are more caution in investment especially speculators who are most affected by this directive. Transactions are less than before. Consequently, prices dropped slightly but still haven’t returned to the true and reasonable value as recognized by quantitative factors. Moreover, the real estate enterprises have faced with the increase of constructional material. Constructional material price has increased 15% - 30% since early this year because of increase the current exchange USD/VND. The investors now must to pay more for imported material. It means they5 Dimensi Teknik Sipil, Vol. 3, No. 1, Maret 2001, 36-41 ISSN 1410-95306 Directive 01/CT-NHNN. March 01, 2011.Benthanh Twin Towers – Real Estate Project evaluation Page 9
  10. 10. Vietnamese German University have less profit than before. In this situation, the investors must to delay their projects to waiting for the decline of price of construction material. Some projects have been behind the schedule. But due to the rapid two-digit growth of Ho Chi Minh City in particular and dynamic economic development of Vietnam in general, the construction of office buildings in Ho Chi Minh City has been rapid. BTT will help to ease the demand for office space in this city, especially in prime grade offices. Figure 6: office market analysis7 The next two quarters of 2011 are expected to see absorption levels remain stable. While Grade a vacancy is expected to drop which are typically at least 95% occupied, the scarcity of supply in this prime grade offices is a good sign for the development of BTT in the future. The rents fall in all grades, average Grade A asking rents declined 1.9%, to US$34.21 psm per month. This is the seventh straight quarter of Grade A rental declines. But the decline is gradual and slow. Most of real estate experts judge that the rents will increase next year, particularly in Grade A.7 CBRE research and consultancy, Hochiminh city market report. Q2, 2011.Benthanh Twin Towers – Real Estate Project evaluation Page 10
  11. 11. Vietnamese German University Retail market Serviced apartment market Figure 7: Retail market and Serviced apartment market. Grade: 3 f. Financial Analysis The project’s investment capital is about 300 million dollar in which is from two main sources Legal capital and Loan capital with the ratio 7:3. The interest rate is very attractive at 16%/year by a foreign bank. (Figure 8) SOURCE OF CAPITAL TOTAL INVESTED CAPITAL 299,850,130 1 Legal capital 89,955,039 Percentage in total invested capital 30% 2 Loan capital 209,895,091 Percentage in total invested capital 70% Interest rate 16% (Borrowing in foreign currency from foreign bank) Figure 8: Sources of capitalBenthanh Twin Towers – Real Estate Project evaluation Page 11
  12. 12. Vietnamese German University In the construction section, the building is divided into three part Basement, Commercial floors (podium) and the above floors. The cost of construction (USD/m2) is referenced from buildings which have same scale. (Figure 9) INVESTED CAPITAL TOTAL INVESTED CAPITAL 299,850,130 Including: 1 Construction cost 132,689,600 a Basement 24,840,000 no 4 Conruction area 6,900 Construction cost (USD/m2) 900 b Comercial floor 21,000,000 no 5 Comercial storeys 5 Conruction area 6,000 Construction cost (USD/m2) 700 c Above floor 86,849,600 no 55 storeys (resident) + 48 storeys 103 (office) Conruction area 1,054 Construction cost (USD/m2) 800 2 Compensate & clearance 94,000,000 3 Consultancy service fee 6,634,480 equivalent to 5% of Construction cost 4 Designing & managing cost 6,634,480 equivalent to 5% of Construction cost 5 Equipment 19,903,440 equivalent to 15% of Construction cost 6 Construction cost of internal road, 181,250 Landscape 7 Contingencies 39,806,880 equivalent to 30 % of Construction cost Figure 9: Invested capitalBenthanh Twin Towers – Real Estate Project evaluation Page 12
  13. 13. Vietnamese German University According to CBRE, the data about rate of occupancy, monthly rental cost are calculated basing on the last report of CBRE (Q2). The annual income and annual expenditure are also calculated. (Figure 10) REVENUE 1 Office leasing GFA for office 58,000 Leaseable area 45,240 Leasing ratio 63.80% Rental (USD/m2/month) 34.20 2 Comercial leasing GFA for office 35,000 Leaseable area 28,000 Leasing ratio 93% Rental (USD/m2/month) 109.35 2 Residental Leasing GFA for Resident 58,000 Leaseable area 43,500 Leasing ratio 91.70% Rental (USD/m2/month) 37.16 Figure 10: Revenue The project’s NPV is about 153,358,430 meanwhile IRR is 16.6%. This project is valuable. TOTAL CASHFLOW (35,982,016) Discount rate 1 Present value of cash flow (35,982,016) Net Present Value (NPV) 153,358,430 Internal Rate of Return (IRR) 16.6% Discounted Payback Period (years) 12.0 Discounted rate 8% Simple Return of investment ROI (after 50 years) 101 Figure 11: Cash flow Grade: 2Benthanh Twin Towers – Real Estate Project evaluation Page 13
  14. 14. Vietnamese German University g. Social Analysis BTT will be built on the historical are of HCMC where contain many evidences of Saigon in the past. The city is partly losing its particular values such as architecture, culture. It is a pity especially with elders and Saigon beloved. The result of my interviews with several tourists shows that BTT with it strategic and sensitive location will badly effect to Hochiminh tourism. Most of my interviewees are disappointed with the appearance of BTT. They said that this location and surrounding are needed to persevere to keep its historical image. The clearance of 8.600m2 will effects to 124 households. There are just 34 households which accept with the compensation of the investor. The others will not accept till the investor could satisfy their demands. At this time, this is the most complicated problems of the Project. Grade: 2 h. Environmental Analysis Nowadays, a growing tendency of Investments is to build green buildings or environmental friendly buildings instead of usual buildings. Although, the establishment cost of such the green buildings are higher than usual but with its considerable advantages, green buildings are been being built widely. BTT is not the exception. In the first stage of planning and design, BTT’s investor had asked to build a “green building” in the future. Some solutions are considered for instant double glazing, LED lighting, using unburned construction materials, etc. Windows and other glazed external surfaces have a significant impact on the energy efficiency of a building especially with high rise building. BTT is covered all four sides by glazing. If it is glazed by double glazing, BTT could save a large amount of electricity for air conditioners. Lighting is one of the major energy consumption. The selection of LED lights instead of the classical types will saves up to 85% on the investor’s energy-bill. Not only saving energy but also LED lights have many advantages such as: Long timelife Average 20 years, no mecury, no UV- radiation, no warm up, direct 100% light output, Safe to touch, etc. For being a green building or environmental friendly building, besides these above solutions, the building must to deal with many others requirements which are maintenance of landscape, energyBenthanh Twin Towers – Real Estate Project evaluation Page 14
  15. 15. Vietnamese German University efficiency, environment protection, quality of the environment, protection of water resource and design. But he relevant data is inadequate thus the assessment the building at this time is less correct. Grade: 3 V. Conclusion Beautiful designed and very convenient in trasportation are the wonderful advantages of BTT. Its not only a place for living but also a good place for business that can respond to any requests of customers and visitors. When completed, BTT, with its iconic design and strategic location, is expected to represent the new and dynamic Vietnam and will be a new city landmark in the future.Benthanh Twin Towers – Real Estate Project evaluation Page 15
  16. 16. Vietnamese German University VI. References 1. "Ho Chi Minh City breaks ground". Railway Gazette International. February 28, 2008. 2. "Plans for HCMCs second metro route submitted". Thanh Nien.newspaper. May 14, 2010 3. National technical regulation of construction 04/2008/QĐ-BXD. April 03, 2008. 4. CBRE research and consulting, Market reviews of Q1, Q2 2011. 5. Http:// 6. Http:// C%C3%A1c-H%C3%A0m-T%C3%A0i-Ch%C3%ADnh&p=58306#post58306Benthanh Twin Towers – Real Estate Project evaluation Page 16