Ptb sjc cùi bắp_tower


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Ptb sjc cùi bắp_tower

  1. 1. VIETNAMESE GERMAN UNIVERSITYUDP_2010Subject: Urban planning and Real estate markets------------------------------------------------------Lecturer: Dr. Karl KluegelStudent: Phan Thanh BinhAugust 31th, 2011REAL ESTATE MARKETS AND DEVELOPMENTS(Case study: SJC Tower – District 1, Ho Chi Minh city) 1
  2. 2. AbstractsIn the last decade, with the bubble growth of land and apartment price, real estate market wasa fertile land for capital investors and individual speculators. SJC Tower project is concernedas whether investment of speculation when the project has been started since 2004. After 7years, this project is still under procedure and there is no construction activity is implemented.This paper will use criteria which is related to real estate market to evaluate the project of SJCTower in role of investors. Through the evaluation in this paper, the final conclusion will begiven to decide whether this project should be continued or stop investment. In conclusionpart, the final advice will be given to investors of the project.INTRODUCTIONFrom the years of 1990s, Vietnam experienced significant increase of economy with high rateof economic growth and urbanization tempo. There was hot increase of real estate market inVietnamese cities. Vietnam became a attractive destination of international propertycorporations, which come from more advanced countries. In the last decade, real estate washighly profitable industry, which brought huge profit to property corporations.However, the development of real estate market in Vietnam was uncertain and unstable suchas land price and property price in Hanoi and Ho Chi Minh city, which rapidly increased inthe end of 1990s and beginning of 2000s. Especially, there was rocketed increase of estateprice in the years of 1997/98 and 2005 to 2007. The growth of the real estate sector has beensigned the presence of speculation. More building projects have been approved which werenot based on actual demands. Simultaneously, there have been discrepancies between thegrowth of the real estate market and the urban development policies. Additionally, since 2008,real estate market in Hanoi and Ho Chi Minh city has faced to challenges under economiccrisis and the two digits inflation in Vietnam. There have been signs of decreasing attractionof real estate factor in these cities.This paper will try to analyse the change of property market in the relation with urbandevelopment through a specific case study, which is SJC tower in District 1 – Ho Chi Minhcity and also concern about the impacts of real estate factor to the macro economics and viceversa. With this study, the paper would like to emphasize the importance of macro economicorientations and issuing of urban development policies through real estate industry.CASE OVERVIEWSJC tower is planned to be built at the plot, which is covered by Le Loi – Nguyen Trung Truc– Nam Ky Khoi Nghia – Le Thanh Ton streets, those are in Ben Nghe ward, District 1, HoChi Minh city. Total land area is 3,792 sq.metres. Saigon Jewelry Corporation was adopted asthe investor of the project. This project was approved in principle in 2004. In 2007, Ho ChiMinh city people’s committee regulated this project will be mixed functions tower, those areoffice for rent, apartment, hotel, and shopping mall.The initial scale of this project, which was given in 2007, was 45 levels and not included 6basements. Since October of 2010, the scale have been proposed to justify up to 54 levels and6 basement levels. Funding for the SJC tower is calculated up to US$137 million. At thecurrent time, the project is still under procedure for renting land. 2
  3. 3. Main indicators of SJC tower 1: - Commercial /Retail area: 17,150 sq.metres (including 2 basements) - Hotel area: 8,575 sq.metres - Living apartments area: 19,722 sq.metres - Renting apartments area: 20,760 sq.metres - Total building area: 65,563 sq.metres - Land area: 3,792 sq.metres - Coefficient of land use: 16.5.METHOD OF EVALUATIONIn order to draw consequences and impacts on economy that resulted by real estate market,this paper try to look into and analyse factors that directly and indirectly influence toconstruction and building market. Thus, the relative interactions between real estate and otheraspects of urban areas would be identified. Finally, on the standing of investors, should theproject be invested? Whether could the project bring profit?To determine the efficiency of a invested project, the analysis of this paper will be based oncriteria, which will be given below. The criteria include internal indicators, which wereconstituted from the design of the building, and external factors, which are brought from thecity and external impacts of the project to society. The data, which gave basic informationabout functions and design of the building is collected from legal documents in Department ofPlanning and Architecture. In the assessment of real estate market to determine socialdemands and supply capacity of the project, the view of this paper will be based on researchand reports of CB Richard Ellis (Vietnam) Company (CBRE – Vietnam) about Ho Chi Minhcity’s real estate market.Economic efficiency of this project will be calculated based on research data of CBRE andsome of assumption, which information can not collected accurately and adequately. Table 1: List of criteriaNo. Criteria Notes on method Applied1 Design Social harmony Social status2 Infrastructure Drainage Water supply Electricity supply3 Parking Capacity Motorbikes Cars4 Traffic Accessibility Mobility5 Market analysis6 Internal Return Rate?? (IRR) Calculation *NPV () Rent cost/total cost7 Social impact Analyze at 500m radius8 Environmental friendly1 Document No 25/ CV – SGKC, June 15th, 2011 of Saigon Jewelry Corporation. 3
  4. 4. EVALUATION1. DesignThe initial design of SJC tower was 45 level and 6 basements building, in the 4th quarter of2010, Saigon Jewelry Corporation gave justified design with 54 levels and 6 basements.Along Le Loi street, there are several projects, which are proposing as high rise building withsimilar architecture style with SJC tower. Therefore, in general observation, the architecturalharmony along Le Loi street is relatively achieved. However, there is no green or open spacesarranged between skyscrapers. It may reduce landscape value of this area. In another aspectwith wider view in District 1, where is considered harmonious landscape with oldarchitectural style. There are many historically valuable building around District 1 andmodern skyscrapers have been breaking the architectural and landscape harmony. Figure 1: Panorama front view along Le Loi streetSource: Investor’s report of justified planning of SJC TowerIndependently, this building is still under procedure and the final design is unknown, so it isreally difficult to evaluate aesthetic and architectural value of this tower. Nevertheless,according to subjective assessment, the idea of this paper is that the style of SJC tower is notrelevant to the style of other buildings around it and it is not really beautiful as expected. Figure 2: Latest design of SJC Tower 4
  5. 5. Source: Investor’s report of justified planning of SJC Tower2. InfrastructureThis project is in District 1, therefore supply capacity of infrastructure such as water supply,electricity, and drainage could be provided sufficiently. However, there is no adequateinformation about infrastructure system around site of project, but, according to the currenttransport system, which was set up decades ago, high rise buildings inside the centre will puthigh pressure on old road network. The more skyscrapers are built, the more space needs fortransportation, but there is no space to widen streets, traffic system will suffer more trips,which will be brought by skyscrapers, especially in the research area, the density ofskyscrapers will be relatively high.3. Parking capacityAccording to latest concept design, parking capacity inside the building was given includingthree basements, with total number of seats for parking is equivalent to 272 seats for car,otherwise, there is no spaces for parking around the building site.There are 163 apartments, 5 floors for hotel with 150 rooms, and 9 floors for retail andcommercial purpose in the building2. By preliminary calculation, if the building is full rented,there might be equivalent one seat of carpark for each apartment and about 1 seat for every 5hotel rooms. There might be hopefully sufficient spaces for parking which serve for SJCindependently.2 According to the design of KENT LUI TACTICS Limited, the date of 28th, September, 2010 5
  6. 6. 4. TrafficTraffic criterion should be measured by the two main indicators, those are accessibility andmobility. The building is covered by the four streets as mentioned, in which Nam Ky KhoiNghia and Le Thanh Ton is one-way streets, therefore accessibility from these two sides is alittle limited and not very convenient. The front of the building at Le Loi street is narrow, soaccess from this side also inconvenient. Only from the side of Nguyen Trung Truc street,accessibility is relatively easy. However, this street is too narrow to serve a very big buildinglike SJC tower.Traffic flow around this area is assessed rather well. Though, density of transportation meansat peak time is relatively high, particularly on Nam Ky Khoi Nghia street, but there is noserious congestion within the radius of 500m. However, the situation might be worse whenthis tower be built and full rented. Figure 3: Location of SJC Tower5. Market AnalysisAccording to the report of investor, SJC tower will bring apartments and shopping center intoreal estate market. This project concerns about residential and retail market and ignores officemarket in CBD. Market analysis in this paper will focus on residential, hotel, and retailmarket, which was drawn from research and analysis of CBRE (Vietnam). 6
  7. 7. Table 2: Change of classified residential segmentsSource: CB Richard Ellis Vietnam – Market review Ho Chi Minh city, July 2011There is a clear decrease of accommodation market in Ho Chi Minh city, while all grade ofapartment went down. The most significant grade, which went down more than a quarter, isluxurious group compared to the same period of 2010. From the table above, residentialmarket in 2011 almost stay standing with only small units of mid-end accommodation werebrought into the market. The apartments price has almost unchanged during a year with priceslightly decreased. Figure 4: Asking price on residential market Source: CB Richard Ellis Vietnam – Market review Ho Chi Minh city, July 2011 7
  8. 8. According to the chart, after dramatically increasing price in secondary market in the period2005 - 2007, residential market still stayed and was not as a good field as before to invest ofreal individual speculators. Table 3: Change of retail marketSource: CB Richard Ellis Vietnam – Market review Ho Chi Minh city, July 2011In retail market segment, the table 3 indicates that the real demands on department stores isstill available with vacancy rate at 0%. The growth of renting price compared to the sameperiod of 2010 with more than 13% can show that investment into shopping center, especiallyretail stores is still feasible. Table 4: Occupancy rate of exist building in District 1Source: CB Richard Ellis Vietnam –Ho Chi Minh city tenants, June 2011From table 4, except Bitexco Tower, which has just opened in October 2010, Vincom, GreenPower, and Maritime Bank Tower, other high rise building were occupied with dramatic rate(more than 90%). It shows clearly that District 1, Ho Chi Minh city is a really good place forinvestors in real estate business.Hotel business in the last two years is shown on figure 5 based on CBRE research. The chartshows an optimistic trend on hotel business with from more 55% to almost 70% of occupancy 8
  9. 9. rate in first quarter. Especially, at upper grade in march of 2010, the occupancy rate went over80%. Figure 5: Asking price on residential marketSource: CB Richard Ellis Vietnam – HCMC hotel market, 2010From the market research of CB Richard Ellis Vietnam, particularly focus on District 1, theproject are going on right way of investment.6. Internal Return Rate – Economic FeasibilityEconomic calculation for this project should be based on basic information, which was givenin Document No 25/ CV – SGKC, June 15th, 2011 of Saigon Jewelry Corporation. Otherwise,the price of this calculation is based on the market research of CBRE. According toinformation on internet, funding for SJC Tower project is around $137 millions. There is noinformation about which grade of apartment this project concentrate, this paper will make anassumption which is grade B apartments to calculate. Table 5: Criteria for economic calculation Type of business Units Price Total Occupancy rate (%)Retail area US$/sm/month 124.96 17,150 (sm) 95Hotel US$/room/night 130.00 150 (rooms) 60Renting Apartments US$/sm/month 12.00* 20,760 (sm) 95Living Apartments US$/sm 1,016 19,722 (sm) 100(*): This price is assumption.Calculation do not include living apartment, which will be sold and have its operation fee. - Thus, funding for commercial purpose in the SJC tower: 137,000,000 – (1,016 * 19,722) = 116,962,448 (US$) 9
  10. 10. - Total annual revenue of commercial with 100% occupancy rate: [(124.96 * 17,150) + (130 * 150 *30) + (12 * 20,760)] *12 = 35,726,208 (US$) - Operation cost: 35% total annual revenue: 35% * 35,726,208 = 12,504,173 (US$). - Net income with occupancy rate, which is given above: [(124.96*17,150*95%) + (130*150*30*60%) + (12*20,760*95%)] *12 – 12,504,173 = 18,978,725 (US$) - Break even ROR: 18,978,725 / 116,962,448 = 0.1622The project will be feasible if ROR ≤ 16.22 %Sustainable profit at 16% is: 18,978,725/16% - 116,962,448 = 1,654,582 (US$)7. Social ImpactsThe criteria social impacts should look at architectural style, congestion situation in the future,and occupation.The appearance of District 1 has been changing, with many financial and constructionprojects are under investment. Modern architecture style is bringing new appearance to CBDin Ho Chi Minh city. However, there are many old valuable building in District 1, manyvaluable historic building are threatened by new skyscraper projects such as Vincom, BitexcoFinancial Tower etc.In other aspect, skyscrapers like the SJC Tower with very high coefficient of land use (whichgo up to 16.5) will put very high pressure on old network of streets in CBD. Number oftransportation means will significantly rise when more than 20 new projects within the radiusof 1000 metres around the SJC Tower. However, in the aspect of occupation generating, theseprojects will generate thousands jobs inner District 1.8. Environmental friendlyThis criteria would like to evaluate the construction solutions, energy, and material which willaffect to micro climate around the building. There is no report and information aboutconstruction solution will be implemented to construct this project. According to a forecast,this building will not use materials which transfer solar energy in order to reduce energyconsumption. In addition, the building will use massive glass to cover the building, this willtrap the heat inside area. The micro climate in this are will be affected by environmentalunfriendly buildings like SJC Tower.CONCLUSIONThe SJC Tower is a big project with the funding go up to $137 millions. After seven yearssince the project has started, it still under final procedure (according to the report of SaigonJewelry Corporation). Under economic crisis, this project has been delayed and there was atransition of investors. Kinh Do Corporation drawn and transferred its shares to SaigonJewelry Corporation in 2010, which has affected to the process of the project. 10
  11. 11. With this project as well as more than twenty other projects with in the radius of 1000 metres,social problems such as traffic congestion, increase of energy consumption, and urbanlandscape will be significantly affected. Additionally, strategies of Ho Chi Minh city, that isto develop Thu Thiem to modern financial center of Ho Chi Minh city as well as Vietnam willgo inaccurately.However, in the standing of investors, according to the assessment of CB Richard Ellis –Vietnam and the orientation of Saigon Jewelry Corporation into real estate segments, there areopportunities for investor to get profit from this project. With investor’s view, this projectshould keep continue and speed up process of investment.ReferencesCB Richard Ellis (CBRE) Vietnam, (2011), Market View Ho Chi Minh cityCBRE Vietnam, (2011), Ho Chi Minh city Tenants Evening Q2CBRE Vietnam, (2011), Inflation, Interest, and Investment Midyear reviewCBRE Vietnam, (2010), Ho Chi Minh city Hotel Market – Past, Present, and FutureSaigon Jewelry Corporation (2010), Document No 103/CV-SGKC, 25 Oct, 2010HCMc Department of Planning and Architecture (2011), Document No 479/SQHKT-QHKTT, 23 Feb, 2011Saigon Jewelry Corporation (2011), Document No 25/CV-SGKC, 15 June, 2011Drawing Design of Kent Lui Tactics Limited (2010)Saigon Jewelry Corporation (2010), Report of Justified Planning of SJC Tower 11