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

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

Student: Nguyen Dan Quynh VGU 2010-2012
Page 1


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

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

Page 3


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)

Page 4


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 Beautiful and luxury interior and
Social status exterior decoration
2 Parking Capacity Motorbikes Not have information to assess
Cars however according the calculate the
parking will be enough if it was build
2 basement
3 Traffic Accessibility Easy – not have traffic jam in the
Mobility peak hours.
4 Market analysis Faced to a lot of challenges.
5 Economic Calculation Face to a lot of challenges because
Rent cost/total cost price for lease always change due to
economic crisis.
6 Social impact Analyze at 500m Provide for the real estate a huge
radius area about office, retail, hotel…
7 Environmental Be interest in about environment in
friendly 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.

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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)

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 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

Page 7


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

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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
(1)
 65 apartments level A 2.153 * 3 floors *35 USD/ apartment *
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
Page 9


 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.

Page 10

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 3 4 5 6 7
1 2 8 9 10
Gross Rental Revenues 67,599,131
(95%)

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

Vacancy Loss ($) 3,379,957 3,379,957
10,139,870 10,139,870 6,759,913 6,759,913 3,379,957

- - - - - - -
Net Rental Revenues 64,219,174 64,219,174
57,459,261 57,459,261 60,839,218 60,839,218 64,219,174


Expenses 12,843,835 12,843,835
6,759,913 6,759,913 6,759,913 11,491,852 11,491,852 12,167,844 12,167,844 12,843,835
Interest and debt 18,420,000 12,000,000
8,160,000 12,240,000 16,320,000 27,940,000 25,560,000 23,180,000 20,800,000 16,040,000
Cash flows In years 142,463,846 32,955,340 39,375,340
before taxes (14,919,913) (18,999,913) (23,079,913) 18,027,409 20,407,409 25,491,374 27,871,374 35,335,340
Corporate Income Tax 12.5% 12.5% 12.5% 12.5% 25% 25% 25% 25%
- -
Cash flows In years 24,716,505 29,531,505
after taxes (14,919,913) (18,999,913) (20,194,924) 15,773,983 17,856,483 22,304,953 20,903,531 26,501,505

Equity 64,000,000

24,716,505 29,531,505
(64,000,000) (14,919,913) (18,999,913) (20,194,924) 15,773,983 17,856,483 22,304,953 20,903,531 26,501,505
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 68.6% 64.5% 58.1% 54.2% 48.7% 45.0% 38.7%
Rate
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.

Page 12

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 Score
1 2 3 4 5
Good Bad
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

Page 14

Dq1 assignment karl

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