Course: Urban Planning and Real Estate Markets Lecturer: Prof. Karl Kluegel Student Name: Nguyen Ngo...
LIM TOWER9-11 Ton Duc Thang District 1 Ho Chi Minh City Nguyen Ngoc Anh – LIM TOWER – 1 | 16
Table of ContentsI. INTRODUCTION ....................................................................................
I. INTRODUCTIONThis paper is an individual part of the UDP2010-2012 class assignment. The objectives of theclass ass...
III. METHOD OF EVALUATIONA set of criteria was discussed and finalized in class, when all 15 members agreed on therelev...
IV. EVALUATIONTable 2: General information 1Items ValueLand area ...
2011). The Vietnamese characters are losing, when replacing by new skyscrapers. ArchitectChung (2011) criticized that rapi...
3. TrafficThe LIM TOWER is located at the conjunction of Ton Duc Thang St, Nguyenn Huu Canh St,and Le Thanh Ton St. The bu...
4. Market Analysis The LIM TOWER is classified as office building Grade B. Currently, from CBRE July 2011 report 3 ,...
market. The rental rate for Grade B are now at level not seen since 2003 5 , and there is nopromising view for the substan...
Table 6: Bank loan during the construction period and repayment Total 2011 20...
Table 7: Revenue and expenses 2013 2014 2015 2016 ...
Table 8: Profit and loss Note 2011 2012 2013 2014 ...
Table 9: Cashflow and Internal Rate of Return (IRR) 2011 2012 ...
The more in depth analysis show the Internal Rate of Return of the LIM TOWER project is at22.32%, which is a relatively ri...
the City. There is no information available showing clearly the construction of the LIM TOWERachieves any significant figu...
REFERENCESBinh, X. (2011) Đô thị vô tính (Cloning Urban). The Sai Gon Times Online.http://www.thesaigontimes.vn/Home/diend...
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N.anh lim tower

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  • 1. Course: Urban Planning and Real Estate Markets Lecturer: Prof. Karl Kluegel Student Name: Nguyen Ngoc Anh Student Number: 2010-UDP-M-02CLASS ASSIGNMENTIndividual Essay: Real Estate Market and Developments Due date: August 30, 2011
  • 2. LIM TOWER9-11 Ton Duc Thang District 1 Ho Chi Minh City Nguyen Ngoc Anh – LIM TOWER – 1 | 16
  • 3. Table of ContentsI. INTRODUCTION ................................................................................................................... 3II. BUILDING OVERVIEW/DESCRIPTION ................................................................................ 3III. METHOD OF EVALUATION .............................................................................................. 4IV. EVALUATION .................................................................................................................... 5 1. Design ................................................................................................................................ 5 2. Parking Capacity ................................................................................................................ 6 3. Traffic ................................................................................................................................. 7 4. Market Analysis .................................................................................................................. 8 5. Economic Analysis ............................................................................................................. 9 6. Social Impact.................................................................................................................... 14 7. Environmental friendly ...................................................................................................... 14V. CONCLUSION ..................................................................................................................... 15REFERENCES ........................................................................................................................... 16 Nguyen Ngoc Anh – LIM TOWER – 2 | 16
  • 4. I. INTRODUCTIONThis paper is an individual part of the UDP2010-2012 class assignment. The objectives of theclass assignment are to analyze the impacts of a number of real estate projects on District 1and on HCMC as a whole. To begin with, fifteen (15) projects are selected from the pendingproject building presented in Vietnam Real Estate Update and Market Overview; Indigestion inthe Property Market by Townsend, M (2011). To the extent of this paper, the evaluation of theLIM TOWER will be presented. II. BUILDING OVERVIEWThe LIM TOWER is located at 9-11 Ton Duc Thang Street, at the conjunction of Ton Duc ThangSt, Nguyenn Huu Canh St, and Le Thanh Ton St, District 1, Ho Chi Minh City. The investmentcapital is 37 million USD, and the developer is Mai Thanh Limited Company. The Tower will has02 basements, 34 storey, with total building floor area is 33.300 m2, functioning as servicedoffice building. It is estimated that The LIM TOWER project will completed in 24 months byQuarter IV 2012. Figure 1: Location map of the LIM TOWERSummary information about the project is provided below: - Investment Capital: 37 million US$ - Design: CASA Vietnam LTD. - Management: APAVE Vietnam & ASIAN - Constructor: COTECCONS Group - Monitor: COTEBA (France) Nguyen Ngoc Anh – LIM TOWER – 3 | 16
  • 5. III. METHOD OF EVALUATIONA set of criteria was discussed and finalized in class, when all 15 members agreed on therelevance and effectiveness of these criteria. Moreover, the availability of information also affectthe selection of criteria for analysis. Seven (7) criteria were selected, showed in Table 1.Methodologies to assess the LIM TOWER with the selected criteria are flexible for eachcriterion. Literature reviews, current market reviews for critical comments is mostly used for allcriteria. Field observation is also applied for criteria: Design, Traffic, and Social Impact. Forcriteria Parking capacity and economic analysis, the paper uses some technical calculation forassessment.Table 1: List of criteriaNo. Criteria Notes on method Applied Ranking Good Bad1 Design & image Social harmony 1 2 3 4 5 Social status2 Parking capacity Calculation: 1 2 3 4 5 Motorbikes Cars3 Traffic Accessibility 1 2 3 4 5 Mobility4 Market analysis Rental rate, occupancy 1 2 3 4 5 rate forecast5 Economic analysis Calculation 1 2 3 4 5 ROR, ROI, IRR6 Social impact At 500m radius 1 2 3 4 57 Environmental friendly Presence or not any 1 2 3 4 5 environmental standardsEach criterion, after being analyzed, is then given a ranking score, based on ranking of 5. Thiswill be one section of the general assessment of combined 15 projects. Nguyen Ngoc Anh – LIM TOWER – 4 | 16
  • 6. IV. EVALUATIONTable 2: General information 1Items ValueLand area 1,917 m2Plot ratio 16GFA 33,300 m2Parking - base 3,044 m2Parking- upper 3,300 m2Leasable GFA 30,000 m2Office-1 17,000 m2– secured leased by TechcombankOffice -2 13,000 m2– open to marketTotal development cost 37,000,000 m2(including land cost)Owner Equity 11,100,000 Million US$Bank loan 25,900,000 Million US$Interest rate per annum (2011) 20% 1. Design & Image The fist assessment is social harmony, including harmony with close environment, culture representation, and general likeliness. The LIM TOWER is located in the boundary of the CBD of Ho Chi Minh Center. With the height of 126m and glassy design, it is a very typical office building. Together with a number of other high buildings in the area, the LIM TOWER contributes to the business and finance cultural representation. However, there have been many critiques about the emergence of many office buildings in Ho Chi Minh City to the landscape and urban planning of the city. Some architectural analysts expressed that these buildings now constitute to the “cloning urban” (Binh,1 Official letter No. 1893/SQHKT-QHKTT. Department of Planning and Architecture. July 15, 2010. Nguyen Ngoc Anh – LIM TOWER – 5 | 16
  • 7. 2011). The Vietnamese characters are losing, when replacing by new skyscrapers. ArchitectChung (2011) criticized that rapid urbanization and no-clear-plan for high building, skyscrapershas destroyed the architectural landscape of Ho Chi Minh City, which are critically valuable.Finally, I believe that the LIM TOWER itself is not the only one building to blame, but togethernearby skyscrapers are responsible to break down the landscape harmony and historical valueof the area including the Ba Son Port, Bach Dang Quay, and the riversides.Score: 4 2. Parking CapacityAccording to the building design, LIM TOWER will have two basements for car parking and fourstorey for motorbike parking. Moreover, the construction of car parking will have technology fortwo layers for each basement. The total area available for parking is summarized in table 3.Table 3: Parking capacity at LIM TOWERType Number of Area Capacity storey (Car equivalent)Car parking 2 6,088 m2 195Motorbike parking 4 3,300 m2 128Total 365According to the TCVN 276:2003, Office Building-Design Standard 2 requires 300 car parkingplots for 30,000m2 office floor area. For that calculation, the LIM TOWER will provide efficientparking area, for both the use of the building and surrounding area.In 2011, it is reported that in HCMC there are approximately 500,000 cars (30% of total inVietnam) and 4.5 million motorbikes (15% of total in Vietnam). Furthermore, there are about60,000 cars and 1 million motorbikes form other provinces travelling in HCMC. The need forparking is essential important, and the construction of new buildings can contribute to theparking area, while the existing area for parking can supply only 0.6% of the demand (Dung,2011). Therefore, the LIM TOWER is one of a few office buildings in HCMC provide goodparking service.Score: 22 TCVN 276:2003 requires 1 car parking plot per 100m2 floor area Nguyen Ngoc Anh – LIM TOWER – 6 | 16
  • 8. 3. TrafficThe LIM TOWER is located at the conjunction of Ton Duc Thang St, Nguyenn Huu Canh St,and Le Thanh Ton St. The building has great advantages for its locations. Because the tower islocated at the boundary of CBD, it is at the hub of transportation to travel to otherdistricts/provinces (Figure 2).The most significant point is that the LIM TOWER is only 200m away from the Station 3 of MetroLine 2: Ben Thanh-Suoi Tien. Metro Line 1 has total 14 stations, and Station 3 is one in 3underground stations on this line.Secondly, from this location, it is only short distances to the Thu Thiem tunnel (completed byend of 2011), and to Khanh Hoi bridge in order to travel to District 2 and District 4. Therefore,the accessibility to LIM TOWER is relatively good.The “bottle neck” conjunction at Le Thanh Ton and Ton Duc Thang is slightly a negative pointfor LIM TOWER. There are usually congestion at this conjunction during rush hours. Peoplebelieve that with better traffic design and better driving behavior is the most effective solution.Finally, Ton Duc Thang, Nguyen Huu Canh are big road used for trucks and containers to travelout of town, however, this may not affect to the accessibility and mobility of the LIM TOWER asthese large vehicles are not allowed in city during office hours.Score: 2 Figure 2: Traffic map from LIM TOWER Nguyen Ngoc Anh – LIM TOWER – 7 | 16
  • 9. 4. Market Analysis The LIM TOWER is classified as office building Grade B. Currently, from CBRE July 2011 report 3 , the average rent for Office building B is $18.72 per spm per month. This section will analyze both pros and cons measures to evaluate the rent and the trend for leasing this project. Pros: As presented in the development plan 4 , the building will provide 30 floors with 30,000 m2 for office leasing. Among these, 17 floors (equivalent to 17,000m2) are secured by contract with Techcombank, and the remaining 13 floors are open to market. Therefore, the LIM TOWER’s occupancy rate is always secured at minimum 57%. Another advantage of the LIM TOWER is its location and parking capacity. These are presented in Section 2 & 3 (Parking capacity and Traffic). These criteria areCBRE, Market View HCMC July 201 the plus for the rental rate for the LIM TOWER, compared to some other buildings at the same grade (Green Builidng, A&B Building). While vacancy rate of Grade A is 34.2%, vacancy rate of Grade B is lower at 15.8%. Moreover, it is forecasted that there will be new promising tenants for Grade B from State own enterprises and local enterprises upgrading from Grade C or below. Therefore, given the lower vacancy rate and larger tenant opportunities, the LIM TOWER can be assumed to have rental rate at 20 US$. Cons: It is forecasted that by the 2013, new office supply in HCMC will be 540,752m2, in which 202,655m2 will be Grade B. There will be more competition among these new building for their tenants. Although leasing rental at the LIM TOWER is forecasted to moderately higher than the average rent rate of Grade B office, the rental will still follow to the trend of the CBRE, Mid Year Market Review, July 2011 3 CBRE Market View Ho Chi Minh City July 2011 4 Official letter No. 1893/SQHKT-QHKTT. Department of Planning and Architecture. July 15, 2010. Nguyen Ngoc Anh – LIM TOWER – 8 | 16
  • 10. market. The rental rate for Grade B are now at level not seen since 2003 5 , and there is nopromising view for the substantial increase in price in the coming years, given the large marketsupply and economic situation. As the changes in rental rate has been reducing since 2008, theescalation rate would be slowly increased only if the recovery of the economy.Study from CBRE also shows that the “new trend” for a tenant requirement is now moving from“location” to “sustainable”, “design”, and “management” 6 . Therefore, having the advantages inlocation and traffic do not necessarily provide the LIM TOWER from having a better rental rateand an escalation rate in the long run.Score: 2 5. Economic AnalysisThe LIM TOWER construction started in 2011 and it is expected to complete by Quarter IV2013. With that plan, leasing will start in 2013. The calculations for evaluation are presentedfrom Table 4 to Table 9 as the following:Table 4: Construction schedule and Capital structure Year        2011 2012  Construction schedule     50% 50% Capital structure (US$)          Total development cost (including land cost)     18,500,000  18,500,000        Owner Equity   30% 11,100,000          Bank loan  70% 7,400,000  18,500,000  Table 5: Rough Estimate of Economic FeasibilityItems  Amount Project Cost (US$)  37,000,000Gross Rental Revenue at 100% Occupancy  8,316,000 - 5% Vacancy Rate  (415,800) - 20% Operate Cost  (1,663,200)Net Operate Income  6,237,000Break Even ROR  17%From the rough estimate of economic feasibility, the project is only economically feasible if theinvestors require ROR ≤ 17%. However, the fact that the interest rate for loan is extremely highat the last 4 months, from 20-26% per annum; thus with the break even ROR at 17%, theproject is not economically feasible. However, this calculation is taken for rough estimation atone year, the more in-depth calculation throughout project years are as below.5 CBRE Market View Ho Chi Minh City, July 20116 Smith, N (2011) What if you build it and they don’t come?, March 17, 2011 Nguyen Ngoc Anh – LIM TOWER – 9 | 16
  • 11. Table 6: Bank loan during the construction period and repayment Total 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Loan at the beginning 7,400,000 27,380,000 32,856,000 34,915,200 29,169,600 23,424,000 17,391,120 11,358,240 5,023,716 -Interest rate 7 20% 20% 20% 20% 20% 20% 20% 20% 20%Interest 1,480,000 5,476,000 6,571,200 6,983,040 5,833,920 4,684,800 3,478,224 2,271,648 1,004,743 -Total payable 32,856,000 - - 4,512,000 5,745,600 5,745,600 6,032,880 6,032,880 6,334,524 5,023,716 - Interest payable 21,615,792 4,512,000 5,745,600 5,745,600 4,684,800 3,478,224 2271648 1004743.2 0 Principal repayment 11,240,208 - - - 1,348,080 2,554,656 4062876 4018972.8 0Loan at the end 8,880,000 32,856,000 34,915,200 29,169,600 23,424,000 17,391,120 11,358,240 5023716 0 0 7 Assume that with the secure contract with Techcombank, the LIM TOWER project can achieve compatible interest rate at 20% per annum Nguyen Ngoc Anh – LIM TOWER – 10 | 16
  • 12. Table 7: Revenue and expenses 2013 2014 2015 2016 2017 2018 2019 2020Leasable area (m2) 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000Escalation rate 0.00% 1% 1% 2% 2% 3% 3% 3%Rent (US$ psm per month) 8 20.0 20.0 20.2 20.4 20.8 21.2 21.9 22.5Occupancy rate 9 78% 90% 90% 95% 95% 95% 95% 95%Total revenue 5,640,000 6,908,400 6,977,484 7,117,034 7,259,374 7,477,156 7,701,470 7,932,514Operating expenses 10 (20% of Total Revenue) 1,128,000 1,381,680 1,395,497 1,423,407 1,451,875 1,495,431 1,540,294 1,586,503BTCFs from property operation 4,512,000 5,745,600 5,745,600 6,032,880 6,032,880 6,334,524 6,334,524 6,334,524BTCFs from selling property 11 63,345,240 8 From Section 4. Market analysis 9 Assume that occupancy rate will achieve 90% in year 2, and increasing to 95% in year 4, due to its advantages in office market 10 According to CBRE assumption and calculation 11 Calculation for selling property at year 8 of operation at 10% Nguyen Ngoc Anh – LIM TOWER – 11 | 16
  • 13. Table 8: Profit and loss Note 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020BTCFs fr. propertyoperation - - 4,512,000 5,745,600 5,745,600 6,032,880 6,032,880 6,334,524 6,334,524 6,334,524Depreciation andamortization 1,924,000 1,924,000 1,924,000 1,924,000 1,924,000 1,924,000 1,924,000 1,924,000 1,924,000 1,924,000 Finishing and facilities 10 years 1,480,000 1,480,000 1,480,000 1,480,000 1,480,000 1,480,000 1,480,000 1,480,000 1,480,000 1,480,000 Building and equipment 50 years 444,000 444,000 444,000 444,000 444,000 444,000 444,000 444,000 444,000 444,000EBIT (1,924,000) (1,924,000) 2,588,000 3,821,600 3,821,600 4,108,880 4,108,880 4,410,524 4,410,524 4,410,524Interest repayment 1,480,000 5,476,000 6,571,200 6,983,040 5,833,920 4,684,800 3,478,224 2,271,648 1,004,743 -EBT (3,404,000) (7,400,000) (3,983,200) (3,161,440) (2,012,320) (575,920) 630,656 2,138,876 3,405,781 4,410,524Cooperate Income Tax 12 25% - - - - - - 157,664 534,719 851,445 1,102,631Net profit (3,404,000) (7,400,000) (3,983,200) (3,161,440) (2,012,320) (575,920) 472,992 1,604,157 2,554,336 3,307,893 12 Vietnam’s Cooperate Income Tax Nguyen Ngoc Anh – LIM TOWER – 12 | 16
  • 14. Table 9: Cashflow and Internal Rate of Return (IRR) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Cash inflows 7,400,000 18,500,000 4,512,000 5,745,600 5,745,600 6,032,880 6,032,880 6,334,524 6,334,524 69,679,764Bank loan 7,400,000 18,500,000BTCFs fr. property operation - - 4,512,000 5,745,600 5,745,600 6,032,880 6,032,880 6,334,524 6,334,524 6,334,524BTCFs fr. selling property - - - - - - - - - 63,345,240Cash outflows 18,500,000 18,500,000 4,512,000 5,745,600 5,745,600 6,032,880 6,190,544 6,869,243 5,875,161 1,102,631Development cost 18,500,000 18,500,000Loan repayment - - 4,512,000 5,745,600 5,745,600 6,032,880 6,032,880 6,334,524 5,023,716 -Cooperate Income Tax - - - - - - 157,664 534,719 851,445 1,102,631Net cashflows (11,100,000) - - - - - (157,664) (534,719) 459,363 68,577,133Return of Investment (ROI) 12.2% 15.5% 15.5% 16.3% 16.3% 17.1% 17.1% 17.1%IRR = 22.32% Nguyen Ngoc Anh – LIM TOWER – 13 | 16
  • 15. The more in depth analysis show the Internal Rate of Return of the LIM TOWER project is at22.32%, which is a relatively risk for the efficiency of the project, given the assumed interest rateis at 20%.Reports show that real estate market has been cold since last year, and has been going downsince May this year. When the Decision No.11 of Vietnam Government is strictly implemented,inflation will come down in early 2012, following the decrease in interest rate. However, “thefund from the bank may not be the miracle for the real estate market” (Lan, 2011). Loan for realestate is reported at 9.94% of the bank outstanding loan, and this figure can get to 30-40% atsome small banks, which is very dangerous for the economy and the real estate market.Moreover, the gold fever these months may also affect to the economy when the input moneyare less in the market, slowing the decrease of the interest rate (VNExpress reporters, 2011).Therefore, the strict monetary policy in bank credit is needed, ensure that the bank will onlyuntie credit to projects that are secure and liquidity.Score: 4 6. Social ImpactThis section will assess the social impact by the LIM TOWER to the radius of 500m. The LIMTOWER is located in the conjunction between three main streets: Ton Duc Thang, Nguyen HuuCanh, and Le Thanh Ton.Food/restaurants and other services are the main possibility for the impact to the surroundingresidence. The fact that Ton Duc Thang and Nguyen Huu Canh are the main big streets, closingto Ba Son Port, with very few residential ling. Therefore the social impact is expected to verylow. Lastly, at the other direction, Le Thanh Ton and other small streets nearby are already thecenter for food and restaurants for the existing surrounding office building. In conclusion, theremay be no negative social impact from the LIM TOWER.Score: 3 7. Environmental friendlyWhether the building is built with an “environmental friendly” rating system is a key assessmentfor this criterion. At first review, the LIM TOWER does not apply any “green construction” or“sustainable building” standards such as LEED or Lotus.Energy is now a critical issue for Ho Chi Minh City. Generally, the emergence of this 34 storeybuilding will require a large energy consumption, which would increase the short of energy for Nguyen Ngoc Anh – LIM TOWER – 14 | 16
  • 16. the City. There is no information available showing clearly the construction of the LIM TOWERachieves any significant figures in sustainable materials, energy and water conservation, etc.This would be the limitation in information access in order to make a stronger assessment forthis criterion.Score: 3 V. CONCLUSIONThe paper has analyze the LIM TOWER, to the extent of seven criteria selected by the groupexercise. Table 10 presents the summary results of the analysis.Table 10: Summary results of the evaluationNo. Criteria Ranking 1 2 3 4 5 Applied Good Bad1 Design 1 2 3 4 52 Parking Capacity 1 2 3 4 53 Traffic 1 2 3 4 54 Market analysis 1 2 3 4 55 Economic analysis 1 2 3 4 56 Social impact 1 2 3 4 57 Environmental friendly 1 2 3 4 58 Total Score 20In conclusion, the LIM TOWER accounts for some advantages in their project, i.e. location,traffic, car-parking capacity, secured occupancy rate. However, with the condition of currenteconomy, such as high interest rate, this project still faces many challenges. Understanding themarket, the economy, improving the quality of the building (sustainable design and/ormanagement) can help the LIM TOWER become more competitive in the office building market. Nguyen Ngoc Anh – LIM TOWER – 15 | 16
  • 17. REFERENCESBinh, X. (2011) Đô thị vô tính (Cloning Urban). The Sai Gon Times Online.http://www.thesaigontimes.vn/Home/diendan/ykien/57171/Do-thi-vo-tinh.html. July 19, 2011.CBRE (2011) Market View Ho Chi Minh City. July 2011.CBRE (2011) Mid Year Market Review, July 5, 2011.Smith, N. (2011) What if you build it and they don’t come?. CBRE report. March 17, 2011.Chung, Q. (2011) Nâng cấp đô thị và chuyện bản sắc (Urban upgrading and the issue of urbancharacteristics). The Sai Gon Times Online. http://www.thesaigontimes.vn/Home/xahoi/sukien/57168/Nang-cap-do-thi-va-chuyen-ban-sac.html. July 15, 2011.Currie, C (2011) CBRE HCMC Market Q2 2011, June 28, 2011.Lan, H. (2011) Vốn ngân hàng không là phép tiên với bất động sản (Bank loan may not bemiracle for real estate). VNExpress. http://vnexpress.net/gl/kinh-doanh/bat-dong-san/2011/08/von-ngan-hang-khong-la-phep-tien-voi-bat-dong-san/. August 21, 2011.Reporter group (2011) Cơn sốt vàng và những thử thách đồi với nền kinh tế (Gold fever andchallenges to the economy). VNExpress. http://vnexpress.net/gl/kinh-doanh/2011/08/con-sot-vang-va-nhung-thu-thach-doi-voi-nen-kinh-te/. August 24, 2011.Si Dung (2011) “Khát” bãi đậu xe (Thirsty for car parking). Vietnam News.http://www.baomoi.com/Home/DauTu-QuyHoach/baotintuc.vn/Khat-bai-dau-xe/6416173.epi.June 9, 2011.Townsend, M. (2011) Vietnam Real Estate Update and Market Overview; Indigestion in theProperty Market. April 4, 2011. Nguyen Ngoc Anh – LIM TOWER – 16 | 16

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