Real Estate Class - HCMC University

1. A boutique real estate firm, we partner
with hotel and resort developers to
deliver alternative real estate products.
Property Market Classes
Prepared for: University of Economics of HCMC
Prepared by: Alternaty - Alternative Real Estate
April 2014

2. Alternaty is a boutique real estate firm providing
a suite of consulting services throughout the
development lifecycle. Headquarter in HCMC
Vietnam, with associates in Thailand, Myanmar
Indonesia and the Maldives.
Our team has 17 years of combined experience in
the real estate industry with an extensive track
record in hotel and resort advisory in Indochina
Region
More than 40 hotel and resort valuations in
Vietnam, Lao and Cambodia.
More than 35 feasibility and market studies.
12 Operator selection advisory assignments.
Vast experience in mixed used residential
resorts, rental pool structure and fractional
ownership.
Alternaty
Alternative Real Estate
April 2014 2

3. April 2014
The Various Stages of the Property Lifecycle
Our scope of services
Land Planning
Market research
Feasibility study
Valuation
Hotel operator
selection
Development
recommendations
Highest and best use
analysis
Due diligence
Investment
Construction
Design review (from
operation stand point)
Pre-opening budget
Interior design review
(from operation stand
point)
Facilities review
Positioning and
branding identity
(operation stand point)
Operator and
consultant selection
Organization chart
review
Pre-opening
Interim GM service
(pre-opening GM)
Sale and marketing
review
Tailoring of hotel
standard operating
procedures (SOP)
Hiring and training
Pre-opening check
list review and
implementation
Operation
Owner representation
service
Periodic operational
review and critical
points analysis
Training program
Sales and marketing
review
Budget control and
targets
Online reputation
control and review
Upgrade
Reposition
Hotel operations
review
Inspection and
operational analysis
Service upgrade
implementation and
training
Mystery guest service
At any stage of the development process, hotel owners can benefit from professional advice.
3

4. Our Scope of Services
About Alternaty
• A boutique real estate firm providing a suite of consulting services throughout the development lifecycle.
Investment
Services
Feasibility study
Cash flow modelling
Highest and best
use analysis
Development
recommendations
Valuation
Sales & Marketing
Exit strategy
execution
Alternative Real
Estate
Hotel Operator
Selection
Understanding the
Client’s objectives
Consideration of
management options
Preparation of
biddings documents
Collection of EOIs
Comparison matrix of
candidates
Shortlist of suitable
options
Negotiation of
commercial terms of
MOU, TSA and HMA
Villa
Management
Resort style
management of
second home
projects
Website bookings
and reservation
engine
Villa Brand
Standards
Standard Operating
Procedures
Butler Services
Hotel Pre-
opening Services
Functionality &
Facilities Review
Branding and
Service Concept
Hotel operation
forms & tailored
amenities list
Organization chart
and staff positioning
Hiring and training
Tailoring of hotel
standard operating
procedures (SOP)
Hotel Operations
Review
Tailored monitor of
hotel performance
Inspection &
operational analysis
Full operational
review of each
department
Departmental
recommendations
Implementation of
Standard Operation
Procedures (SOP)
Monthly Supervision
April 2014 4

5. Class Schedules

6. Class Schedules – 2014 Alternaty
1. Property Business and Development Cycle
2. Project Feasibility Study
3. Property Investment – Structures and Financing
4. Property Valuation – Land and Income Producing Assets
5. Property Market Analysis
6. Cash Flow Analysis for Hotel and Resorts
7. Cash Flow Analysis for Mixed Use Development Projects
8. Retail Development Stages
9. Hotel Development Stages
10. Township Development Stages
11. Case Studies Series 1 – Operator Selection for Grand Hyatt Hanoi
12. Case Studies Series 2 – Township Development in Phnom Penh
13. Case Studies Series 3 – Minority Investment and Operation Control for Mixed Use project in Hai Phong
April 2014 6

7. Property Business and Development cycle
First Class - Property Business and Development Cycle
1. Alternaty Introduction
2. Real Estate Market Introduction
3. Real Estate Various Assets Class
• Residential - Prime
• Commercial
• Hotel, Resorts and Serviced Apartments
• Residential – Vacation Homes
• Industrial Property
• Mixed Use
4. Property Investment Stakeholders
• Investors
• Banks
• Consultants
• Community
• Tenants
• Operators/Brands
April 2014 7

8. Property Business and Development cycle
First Class - Property Business and Development Cycle
5. Property Investment Stages
• Planning
• Financing
• Implementing
• Construction
• Pre-Opening/ Pre-Sale
• Operation
• Building Sale
6. Property Ownership
• Full Ownership
• JV Partnership
• Leasing
• Fractional Ownership
• Management Only
7. Case Studies
April 2014 8

9. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Real Estate?
Real estate "consists of land and the buildings on it, along with its natural resources such as crops,
minerals, or water” and it is an immovable property of this nature.
Real estate refers to land, as well as any physical property or improvements affixed to the land, including
houses, buildings, landscaping, fencing, wells, etc.
Central focus of Real Estate is ... The Land
What makes land so valuable? Its scarcity!
Land is in fixed supply, plus is Unique and Indestructible!!
Various type of Real Estate, the main three categories are:
• Residential
• Commercial
• Industrial
April 2014 9

10. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Residential
Arguably the most well-known real estate asset class
Everybody needs a roof (...)
There are two main categories of residential:
1) Primary Residential – used as owner occupied properties
2) Second Home or Investment Home – used as investment or land banking
April 2014 10

11. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Primary Residential Types
High Class Condo
• Typically full facilities including parking,
restaurants, swimming pool, good
management, highly trained security.
• Average size, 80-120 sqm, two or three
bedrooms.
• Central districts
High Class Villas
• Typically located in prime residential
areas
• Can be Detached or Semi-Detached
• Outdoor, Garden and Swimming pool
are usually included.
April 2014 11

12. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Shop Houses
• Extremely common in Vietnam (not in
other countries) due to the land
subdivision policy.
• Opportunity for a Retail in the
ground floor
• Standard interior design with large
internal staircase.
Primary Residential Types
Low Income Housing
• New “trend” in Vietnam but very common
in other countries as landed houses are
more expensive.
• Size is usually small (40-60 sqm)
• Located in densely populated area
• Strong pre sale marketingApril 2014 12

13. Primary Residential Types
Township Projects
• “Phu My Hung” Type
• Strong residential components with some
commercial included
• In some cases land subdivided and sold as
small plots to end buyers.
Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
April 2014 13

14. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Second Home or Investment Home
Why invest in Real Estate?
• Highly Tangible Asset Value
Unlike stocks and, to some extent, bonds, an investment in real estate is backed by a high level of
brick and mortar.
• Attractive and Stable Income Return
• Require limited management
• Portfolio Diversification
• Less correlated to other asset class
• Inflation Hedging
The Drawback: Illiquidity
Two type of Income from Residential Investment:
1.Operating income – Rental
For example a Tenant occupied condo or house
2.Capital Gain – Value/Price appreciation
For example a beach front land or off the plan acquisition
April 2014 14

15. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Commercial - Office
Categories of Income producing properties
Different categories of Offices
• Grade A
• Grade B
• Grace C
• Owner occupied
Why invest in Office Buildings?
• Attractive stable cash flow (long tenancy)
• Less complexity in development
• Operating Costs paid by the Tenant (Service charge)
From Investor view point, the indicator of performances:
• Effective Rental Rate (Rental – free lease period- other free incentives)
• Occupancy
April 2014 15

16. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Grade A - Saigon Center Grade B – Me Linh Point Grade C – Empire Tower
April 2014 16

17. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Example of suggested Tenant division
April 2014 17

18. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Commercial - Retail
Different categories of Retail
Shopping mall (Community centre, Regional Center, Superregional Center)
• Single Shops
• Department Store
• Food Court
• Entertainments
• Supermarkets/Hypermarkets chains (Big C)
• Convenience store chain (FamilyMart and CircleK...)
• Specialty retail stores chains (Electronic store...)
• Franchise (Coffee Bean, McDonald..)
• Single Independent Shops
• Markets
April 2014 18

19. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Shopping Mall Franchise
Convenience Store
April 2014 19

20. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
April 2014 20

21. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Commercial - Retail
Indicator of performances: Rental Rate, Occupancies, Turnover share
Rental highly depended on floor level
Brand standard and image is extremely important, certain brand require specific space, for example
Will only move to prime streets in core CBD
They could not find any suitable space for the brand
design had to “build it from ground”. Same for the first
property of
April 2014 21

22. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
One of the Most Expensive Retail Space in Asia...
Rental price over $800 per sqm/month!!April 2014 22

23. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Several Different types of Hotel
• Star Grading ( From 1 to 6)
• Full Service or Limited Service
• Target Short Term or Extended
Stay (serviced apartments)
• Design (standard or boutique)
• Independent or Part of a Hotel
chain
• Target Leisure or Business
Guess (conventional centre)
• Hotel or Destination Hotel (for
example with Casino)
Hotel and Resort
Main characteristic is the extremely short tenancy and complexity in
management.
April 2014 23

24. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
April 2014
City Five Star
Boutique
24

25. Budget Hotel
First Class - Property Business and Development Cycle
April 2014
Economy Hotel
Various Asset Classes of Real Estate
25

26. Serviced Apartment
First Class - Property Business and Development Cycle
Hostel
Various Asset Classes of Real Estate
April 2014 26

27. First Class - Property Business and Development Cycle
Timesharing Resort
Various Asset Classes of Real Estate
Destination SpaLuxury Resort
April 2014 27

28. First Class - Property Business and Development Cycle
Theme Park
Various Asset Classes of Real Estate
April 2014 28

29. April 2014
Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
• Highly competitive marketplace with several
similar product
• Developer seeks to increase rates and occupancy
• Developer seeks to reduce operating costs
• Residential component in need of an identity
• Residential component to increase trust of
buyers
• Developer with low experience in the hospitality
field
• Developer seeks low or no involvement in daily
operations
• Bank requesting developer to involve a
professional management company
Why may an international brand be required?
29
Hotels

30. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
Industrial
Importance for Economic Growth, first driver of economy in Developing Countries.
Some of the Industrial Real Estate are under:
1. Industrial Parks
2. Warehouses – production, storage,
3. Ready build factories
4. Logistic Park
Industrial park business:
• Land Sublease
• Ready build factories
• Build to Suite Factories
• Mixed use complex offering office or hotel
Specialized IP: Data It , Green, Export special economic zone
April 2014 30

31. Various Asset Classes of Real Estate
First Class - Property Business and Development Cycle
April 2014 31

32. First Class - Property Business and Development Cycle
Mixed Use Project
Most common are commercial:
A combination of residential, commercial, cultural, institutional, or industrial uses, where those
functions are physically and functionally integrated, and that provide pedestrian connections.
• Strong synergy among components
• Difficulty in single asset disposals
What are the common Mixed-Use ?
1. Office + Retail Podium - win win
• Benefits for the office tenant are usually access to F&B, Gym, coffee shops
• Benefit for retail tenant is flow from office worker or visitors
2. Hotel + Office + Retail
3. Serviced Apartment + Office
4. Residential + Retail
5. Residential + Resort (Condotel)
Various Asset Classes of Real Estate
April 2014 32

33. Kumho Asiana Complex
First Class - Property Business and Development Cycle
April 2014 33

34. Bitexco Financial Tower
First Class - Property Business and Development Cycle
April 2014 34

35. Hyatt Regency – Danang
First Class - Property Business and Development Cycle
April 2014 35

36. Property “People”

37. Property “People”
First Class - Property Business and Development Cycle
Who is involved in the property business ?
• Investors
• Banks
• Consultants
• Community
• Tenants
• Operators/Brands
April 2014 37

38. Property “People”
First Class - Property Business and Development Cycle
Property Developers
Companies specialized in Property Business
In charge of the overall development project
Planning-Building-Sale
Strong in-House Team
Clear Exit Strategies !
• Build and Hold
• Build and Sale
• Build and Lease
• Lease and Sublease
• Refurbishment
April 2014 38

39. Property “People”
First Class - Property Business and Development Cycle
Property Developers Case Study:
JV-Build-Lease-Sell
• Centre Point is Vietnam’s first
environmentally friendly office building in
June 2009 and it has been positioned as Ho
Chi Minh City’s most sophisticated and high
profile office buildings.
• Since opening the 30,000 sqm project has
attracted many international companies
including Toyota, Bayer, Merck and Kimberly
Clark, underlining the appeal of Centre
Point’s strategic location, strong green
credentials and excellent value for money.
• Refico exited this project in June 2011
April 2014 39

40. Property “People”
First Class - Property Business and Development Cycle
Property Investors
Investor only or Investor/Developers
Different Type of property Investors
• Property fund
• Pension Fund
• REITS
• Investment Fund with property mandate
• Private Equity
• Family office
Usually passive player, do not develop, only participate
Favour Existing Asset without the “headache” to build!
Best favoured asset:
Operating Office Building with a good tenancy structure (mixed tenancy, international companies)
April 2014 40

41. Property “People”
First Class - Property Business and Development Cycle
Firms and Companies (property not core business)
Why they invest in Real estate?
Extra Profit to invest (investment diversification)
Ownership of lands and expiring period to develop
Business Diversification (Sacom Cable)
Authorities relationship
Relocation of Office Building (headquarter)
April 2014 41

42. Property “People”
First Class - Property Business and Development Cycle
Government and Relevant Authorities
The most important player
• Decide land allocation and city planning
• Decide taxation on land holding
• Decide relocations price
April 2014 42

43. Property “People”
First Class - Property Business and Development Cycle
Banks
Extremely important contribution to the Real Estate
Main contribution is lending but they are also investing as developers (headquarters)
They have strict limitation as developers
Two main type of Lending:
Private Household – for single individual to buy primary residences
Project Financing – for developer to finance the project
There are several different types of loan, some of the main ones are:
• Construction Loan – used from “day 1” for the construction, usually collateral is the land value
• Bridge Loan – used to complete the buildings or in special situation where additional capital is
needed to reach certain threshold
• Refinancing – used usually upon completion of the building or after some years of operation when
the operation risk is lower and thus the interest rate offered.
April 2014 43

44. Property “People”
First Class - Property Business and Development Cycle
Consultants:
Companies specialized in Property Business, some of the main ones are:
• Design Consultants (Architects, Interior, Master plan..)
• Engineering (Civil)
• Legal Firms
• Property Independent Brokers
• Marketing and branding (Quo or Red)
• Property Valuation Companies
• Real Estate Consultants (Alternaty)
• Hotel Operators
• Property Management
• Marketing and Sale consultants
All come at different stages of the development process
April 2014 44

45. Development Stages

46. Development Stages
First Class - Property Business and Development Cycle
Are you ready to start your project?
Your next steps will be:
• Planning
• Financing
• Pre-Construction
• Construction
• Pre-Opening
• Opening
• Sale
April 2014 46

47. Planning Stage
First Class - Property Business and Development Cycle
Planning stage:
From the Idea to the Building
The development period and complexity should depend on the type of building and size.
However in Vietnam it depend much more on:
• Financing
• Company Internal Structure
So, when to start? Look at the Property Cycle!
April 2014 47

48. Planning Stage
First Class - Property Business and Development Cycle
Step 1 - Identify main investment criteria
Those can include:
• Location (Country or city or specific area or street..)
• Type of Asset (Land, Under Construction, Distressed, Operating)
• Enter and Exit Strategy (Operate, Lease, Sale the Asset upon completion)
• Investment Budget and Return Criteria (IRR, Trophy Asset)
• Asset Identification
Step 2 – Due diligences on the land or building
This can include:
• Legal ownership on the land (lease hold, free hold, tenures, ownership structures..)
• Permitted use (commercial, residential, density of construction, height limits..)
• Surrounding Infrastructure (electricity connection, sewage system, road, water plumb)
April 2014 48

49. Planning Stage
First Class - Property Business and Development Cycle
Step 3 - Identify Highest and Best Use - Feasibility Study
Those can include:
• What assets to build (Residential, Commercial, Mixed use..)
• What market positioning? (Luxury, Grade A, Low income housing)
• What size and facilities? (100 condo or 50 villas? 50 or 400 hotel rooms?)
• What sale structure and sale prices?
• What construction cost? What operating costs?
Result of the study: “What development is commercially feasible?“
“What is the expected IRR?“
Who does it? External Consultants or in house team of analyst
Step 4 - Valuation of land or building
Valuation can be for different purpose, is this case is for acquisition.
April 2014 49

50. Planning Stage
First Class - Property Business and Development Cycle
Step 5 - After identifying the development directions – Development Details
This can include:
• How many car parking in the condo building?
• Where to locate the swimming pool?
• How many elevators for the Grade C office?
• How many restaurants in the four star hotel?
• Which floor for the Cinema in the Retail podium?
This Report became a “ Design Brief” to hand to the Architects or Master planer
Step 6 – Design and Master Plan
• Concept Design (first stage of design)
• Maser Plan
April 2014 50

51. Financing
First Class - Property Business and Development Cycle
When all the documentation are ready:
• Legal ownership due diligence
• Feasibility Study
• Master Plan and Concept Design
• Valuation Report
Applying for Loan
April 2014 51

52. Financing
First Class - Property Business and Development Cycle
Several different source of financing, the main options are:
• Equity (expected return: 35% - 100%)
• Mezzanine fund (expected return:10% - 20%)
• Senior debt (expected return: 5% - 12%)
• Pre sale (expected return: 15% - 25% on completed price)
Do I need an Investment Memorandum? What is an IM?
April 2014 52

53. Financing
First Class - Property Business and Development Cycle
1) Case Study – Alternaty Hotel in Nha Trang
35% is land value
800,000
400,000 Equity
150,000
350,000 Pre Sale
Bank Loan
April 2014 53

54. •Equity
•Pre Sale / Sale
•Bridge Loan
•Operating Loan (Refinancing)
•Opening
•Building Top up
•Pre Sale
•Land acquisition
Financing – Case Study
First Class - Property Business and Development Cycle
2nd case study - Central Vietnam
Condotel – Residential - construction start in 2010
1.000.000
6.000.000
2.000.000
2.000.000
April 2014 54

55. Pre Construction
First Class - Property Business and Development Cycle
Select your Best Team
Design and Construction
Building Operation and Management
Sale Team
Legal Team
April 2014 55

56. Pre Construction
First Class - Property Business and Development Cycle
Large Developers have In-house Team Smaller Developers Outsource
April 2014 56

57. Pre Construction
First Class - Property Business and Development Cycle
Select your Best Team
Construction and Design:
• Architects Exterior – Main Task (Exterior Design, Design supervision)
• Architects Interior – Main Task (Interior Design, Interior Material Selection)
• Master Planner – Main Task (Master Plan design and circulation)
• Landscape Designer – Main Task (Landscape design and greenery)
• Project Management – Main Task ( Coordination and Supervision)
• Civil Engineer – Main Task (Design and Supervision of building structure)
• Mechanic Engineer – Main Task (Design and Supervision of mechanic structures)
• Quantity Surveyor – Main Task (Survey of Construction Costs) and Supervision of mechanic
structures
• Construction Manager – Main Task (Supervision Construction)
April 2014 57

58. Pre Construction
First Class - Property Business and Development Cycle
Select your Best Team
Marketing Team
• Marketing Team – Task include (pricings, branding, sale organization, general marketing direction..)
• Sale Team (Brokers) – Task include ( sale, sale, sale and sale following up..)
• Digital Marketing Team – (website, social media, direct emails..)
• Event Organization – (pre launch event, press conferences)
April 2014 58

59. Pre Construction
First Class - Property Business and Development Cycle
Example of Schedule
April 2014 59

60. Construction
First Class - Property Business and Development Cycle
Appointment of Main Contractor (tendering process)
Stages:
1- Land Preparation (site flatting, earthwork, demolishing buildings, removing trees, site boundary..)
2- Buildings Foundations (excavation and timbering, building foundation..)
April 2014 60

61. Construction
First Class - Property Business and Development Cycle
Make sure your initial 2 steps are done correctly ...
April 2014 61

62. Construction
First Class - Property Business and Development Cycle
Construction- Superstructure (flooring, slabs, roofing...)
April 2014 62

63. Construction
First Class - Property Business and Development Cycle
Fitting Out and Completion
Well done! --- but now you need to make money out of it
April 2014 63

64. Pre Opening - Operation
First Class - Property Business and Development Cycle
Pre Opening period used for training and pre operation control.
• The first man on the job is the GM (for hotel) or PM (for commercial) – 6/12 months
before opening
• Second are the Head of Departments (HR, S&M, Finance, Maintenances...)- 2/4
months before opening
• Third are the staff – 1/2 months before opening
This period is used for implementation of SOP (Standard Operation Procedures)- which is
a guideline of operational procedures for each department and each staff.
The Head of Department is in charge of the training based on the SOP.
April 2014 64

65. Pre Opening - Operation
First Class - Property Business and Development Cycle
Sample of Hotel Staff Chart
April 2014 65

66. Standard Operating Procedures (SOP’s)
April 2014 66
First Class - Property Business and Development Cycle

67. Pre Opening - Operation
First Class - Property Business and Development Cycle
Managed by Owner Third Party Management Head Lease
•Owner
•GM (or PM)
•Head of
Departments
•Staff
•Owner
•GM (or PM)
•Head of
Departments
•Staff
•Management Company
•Owner
•Head Leasee
•GM (or PM)
•Head of
Departments
•Staff
April 2014 67

68. Case Studies

69. Thank You
Disclaimer: This document has been prepared in good faith and for general informational purposes only. Nothing herein contains investment, legal, tax
and/or other advice and investors should seek independent professional advice before making any investment decision. While reasonable care has been
taken to ensure that the sources of information herein are reliable, no guarantee is provided to the accuracy or completeness of such information (and
the same may not be independently verified or audited) and no liability is accepted for any inaccuracy or omission.