Project # 5

Name: City Centre Apartments (option 3)

Land size: 8000 sqm

Plot location: This plot of land is located very close to the airport. Yes there is the issue of noise
from the airport but this area is one of the most sought-after residential areas in Addis. The vicinity
of this plot has been developed with many residences and recently some warehousing for the
airport. This is clearly seen on the google image titles Project # 5. Again I have shown the location of
this site in relation to Project # 1. The reason why my email has been delayed was because of this
site. I wanted to be certain about the number of floors that we are able to develop on this site. The
information needed was obtained from the Ethiopian Civil Aviation Authority and it took me longer
than I anticipated to get this information. Due to the proximity of the site to the airport, the
maximum we can develop is 5 storeys. However, we can build many blocks each of 5 storeys. I would
give this site again an 8 out of 10. The reason for this is only due to the fact that it is very close to the
airport. That being said, I feel that buyers would prefer this location in relation to Project 1
(Alemayhus site) mainly because the area has huge potential and it is a location sought-after by
many locals.

Current status: The site belongs to siblings who have recently inherited the plot form the late
father. The owner had built a small recreational facility on it called Dolphin resorts and it is no longer
operational. The only challenge I see with this site is we have to negotiate with the siblings and not a
single person. I know from various sources that they have been offered approximately 2million
dollars by local investors to buy the land. However, they have approached me through a common
friend and have told me that they prefer to develop the property in partnership rather than selling it
off.
 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 landlords want to get into a partnership agreement with investors. The landlord wants to contribute the
land in kind and prefer not to inject cash. They are also willing to discuss any other working model that we can
propose.
This is negotiable. However, I dont think they will accept anything less than 2million USD evaluation for their
property as this is the offer that they have gotten. However, since we are only considering the value of the
property and not giving cash, we can push the idea of the value that we will be bringing to the property to
reduce the evaluation of the property as the value of the shares will increase significantly once we invest on
the property. .
This will depend on the scale and quality of the development. Generally we are looking at 500 to 700 USD per
sqm.
I am not sure if sewer lines exist for this plot. It is therefore safe to assume that cesspools may be needed.
The road will be widened in the near future. If sewer lines dont already exist, they will be installed when the
roads are widened. I will find out for certain if they exist or not
The access road will be widened in the near future
The road that lead to the site will be extended to meet the recently finished toll road that lead to
other cities of Ethiopia.
The airport is currently expanding its terminal facility and cargo facility
The maximum number of floors that is allowed to be built on this site is ground +4 (5 storeys)
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 area is
very suited for short stay guests that visit Addis. I believe people who buy these apartments will rent them to
such guests. We can even consider striking a deal with guest house managers to take over and manage the
property, or even sell it to such business operators. Ethiopian Airlines could be a major client. I will
investigate this opportunity further.
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 Ethiopian Airlines
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 current status of this property is a freehold status. Once it changes hands, it will have a 60 year lase
period.
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%.
Building space as GFA and lettable / sellable area This depends on how many blocks we decide to build on this plot.