Project # 7

Name: City Centre Apartments (option 6)

Land size: 1500 sqm

Plot location: This plot of land is located a few hundred metres from our favourite plot and
walking distance from my familys home. This site will certainly get a 10 out of 10 in
terms of location and accessibility. There is a new apartment that is being built right
next to the site and a few other developments that are currently taking place. I have
been told that we can build a maximum of 10 floors on this plot. The site can be
seen on the Google image titled as Project # 7. I have located this site in relation to
Project # 1 and my familys home so you can easily locate or get a feel for the
location of the site in relation to a location that we have already established.

Current status: The site is practically empty and is currently rented out to a car dealer. The area is
quite busy being developed. It is in the heart of the city of Addis Ababa, and I
accessible from anywhere in Addis. There are a few restaurants, office blocks and
sports grounds in the vicinity of the site. Because the site belongs to the same
people as project, most of the information below will remain the same.
 Evaluation Criteria
Working model that landlord will be interested in if investors are coming in to finance the
development
Value that the landlord is looking for the land
Costs of development
Access to utilities (drainage, water supply, electricity, telecom, sewer etc.)
Future development in the vicinity of the site location
Existing regulations on the property (maximum floor height etc.)
Road network around vicinity of site
Cost of design
What materials can be procured locally and what should be procured from abroad
Potential margins expected
What type of development are we looking at (apartment, offices, mixed use etc.)
Data on similar developments (cost of development and margins upon sales)
Evaluation
The landlord wants to get into a partnership agreement with investors. The landlord wants to contribute the
land in kind and is also willing to inject cash but prefers not to. He is also willing to discuss any other working
model that we can propose.
This is negotiable.
This will depend on the scale and quality of the development. Generally we are looking at 500 to 700 USD per
sqm
All utilities in this area are available. The main road, which leads to the airport has had a major facelift in the
recent past and all utilities have been installed i.e. Bole road and this road is what is used to access the site.
The city will provide all the necessary utilities up to the site. Anything beyond the site will the responsibly of
the developers.
There area is relatively developed. Parcels of land in the vicinity of the site have been leased to other
developers. As a result of this, there is quite a bit of construction activity taking place around the site.
The maximum number of floors that is allowed to be built on this site is ground +9 (10 storeys) (35 metres
above street level this is based on a 3.5 metres between floors).
The site has a very good network of access roads. This is better appreciated on the attached google image
Cost of design will vary o the scale of the project. It will however be in the region of 2 to 6% of construction
cost. That being said, as we are looking to form a partnership, this cost will certainly be negotiated and can
even be seen as our contribution to the venture.
Almost all items that we need are available locally with varying qualities. It is however in our interest to
import all finishing materials from abroad ourselves as we can save a great deal of money in doing so and we
are in control of the quality of the materials that we procure. The experience of Dietrich will be useful in this
regard.
The landlord is interested in selling the apartments that will be developed on this site. Of course we can
negotiate the terms of investment if we have other ideas like renting etc. Assuming we decide to sell the units
that we develop we are potentially looking at a margin of 120 to 150%
Apartments with other communal facilities that add value to the development is what I suggest. The landlord
is thinking of apartments and is also willing to negotiate other idea that we may have if any. I believe this site
has a serious potential for high quality luxuries apartments. The Saudi Embassy is the next door neighbour
for this site. They are always in the lookout for apartment and office spaces. We can therefore target their
needs to and sell directly to them.
Current practise in the country is that developers dont finish the apartments and/or villas that are
constructed. They live the finishing part to the buyer. The argument here is that buyers have different tastes
and everyone is given the freedom to install whatever finishing they prefer within their budget. The developer
will only install exterior windows and entrance door and finish the common areas like the circulations and
corridors outside the apartments. To get to this point the developer would have spent about 350USD per sqm
and would sell the unfinished apartments at a price of 1600USD. The buyer will still have to spend another
200 - 300USD per sqm to finish the apartments. These prices will of course also depend on location but
generally these are the margins that currently exist. Please bear in mind that the margins I gave above are
based on costs that we would incur up to finishing that the apartments and also based on the prices that the
unfinished apartments are currently going for. I did this in an attempt to be conservative to see the types of
margins we will be making. That being said all developers in Ethiopia are financing their projects by selling off
plan. This is something we will not do. We will have the finances for the project ready from the very beginning
and we will be selling the keys to complete apartments. This will no doubt raise our margins significantly to
ranges of about 200 to 300%.
Parking requirements There are basic parking requirements set by the city. This is based on total square metre of development and
is not something we cant achieve in a cost efficient manner.
Current practises and standards The focus ins on quantity and not quality
Quick gains is what drives the market instead of a far sighted investment
Infill walls are built using inefficient techniques such as hollow cement blocks and cement mortar
plastering
Poor quality finishes
Poor workmanship
Almost zero fire rating (fire related accidents are becoming more frequent as Addis is slowly
becoming a metropolitan city and population is significantly increasing (both local as well as
international community. Design and construction doesnt allow for this
Very high maintenance design and construction techniques
Poor parking facilities and zero communal facilities
Little or no allowances made for lifestyle in apartment units
No apartments have been developed with gardens on the apartments themselves on various levels
Client base Ethiopians working and living abroad. These people are also prepared to pay cash outside of Ethiopia
Ethiopians owning businesses and in the Ethiopia and working for multinationals
Upper middle class society and upper class nationals
Educated Ethiopians who are quickly becoming high earners both within the country and abroad
Multinational companies that have set base in Ethiopia that want to own property for their staff at
managerial levels
The landlord is willing to guarantee sales of the apartment through his contacts. He has assured us
that he will be accountable and responsible for selling a great majority of the apartments that we
develop
Legal framework of investment The investment made will have to come through the national bank of Ethiopia with an investment license
obtained from the investment agency of Ethiopia. The land will be a leasehold land as it will change hands as I
have explained in the email
Current zoning rights of each plot The property under consideration in zoned in an area demarcated for mixed development.
Neighbor rights and restrictions Depending on which way the natural gradient of the site is, neighbours have the right to access storm
drainage pipes through our site
We are not allowed to make any openings on neighbours side unless the development is at least two
metres away from the shared border with the neighbour
If we build right on the border the developer has to have the neighbour sign a document as part of
the planning process. This is just a formality and not difficult to achieve
It is the developers responsibility to have excavation protection in place to make sure that any
excavation does lead to landslides and disrupt neighbours
Lease length of plot The property has a lease period of 60 years
Soil expertise This is available locally and will be involved at an early stage of the project. There are various companies that
we work with and have developed good working relationships with
Debt Financing Costs Local banks are willing to finance such projects especially when there is foreign investment involved. The
current cost of financing is 14 to 16%. The landlord is prepared to take a loan for a portion of the investment
and is also prepared to be responsible for paying back the loan and will not be a part of the investors liability.
This may make this project a bit more interesting as it reduces the burden of investing a great deal of
resources on a single project and we can attempt to diversify our portfolio
Building space as GFA and lettable / sellable area The site has a gross area of about 1500sqm. If we develop 70% of the plot and build the maximum allowable
number of floors we can have GFA of 10,500 sqm. Assuming we have a circulation of 15% we have sellable
area of 8,925 sqm of apartments.