Project # 1

Name: City Centre Apartments

Land size: 4700 sqm

Plot location: This plot of land is located at a very prime location and in an area where the land
value has soared in the past few years. This increase in land values is due to many
factors but the key fact being that it is located at one of the busiest commercial
centres of Addis Ababa. The main access road to the site has also been given a face
lift hence adding to the value of the land. Due to the newly constructed road, new
and updated drainage network has been installed. The site is surrounded by many
foreign embassies, several grocery stores, various malls and entertainment centres
are located in the vicinity of the plot. There is also an apartment building that is
being developed by Sheik Mohammed Alamoudi (the richest man in Africa) just
across the street from the plot. Various local and international restaurants are also
located in the vicinity of the plot. Generally, I feel this land is ideal for an initial
investment. It ticks most of the boxes in terms of size and location. The latest city
regulations specify that a maximum of 12 storeys above ground level can be built on
this plot of land. Please refer to the picture below to see the location of the site in
relation to some of the landmarks around the plot that you may remember from
your recent visit of Addis.

Current status: Due to pressure from the city administration, the land lord is under a great deal of
pressure to start work on the plot of land. The land lord has approached us to carry
out design work. He is wanting to build apartments to sell. He does not have the
finance required to complete the entire project (I feel this fact is a good negotiating
point). In order to ease the pressure from the city, he is construction of the
foundation on approximately 1/3 of the plot allowing for three basements and has
decided to halt construction soon after completing the foundation for only 1/3 of
the building. If we go with this option we can influence the rest of the design and
negotiate the terms of the engagement with the client and try and create a win-win
situation for all involved.
 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
This is negotiable. However, land values in this area are going for around 1000USD per sqm
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. Access
road to the site is not yet developed. The city has the development of this access road as a priority and As per
the research I have carried out on this site, we expect development of the access road to start within the next
year.
No footprint limitation
Ground + 12 (45.5 metres above street level this is based on a 3.5 metres between floors)
The site has good access from Bole road (Africa Avenue) as well as Ethio-China Street). There are several
access roads that lead to the site that are yet to be developed. These will be developed within the year as per
the research I have carried out.
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%
The landlord is considering a combination of apartments and commercial space. I suggest exclusive
apartments with communal facilities such as tennis court, swimming pools etc. Such things add a great deal of
value to the apartments with very little cost and such methods are not at all practised in Ethiopia. We will
therefore be pioneers in such practises in the housing development sector in Ethiopia.
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 there 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
us above is based on costs that we would incur up to finishing 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 metres of development and
is not something we can 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

Client base Ethiopians working and living abroad. These people are also prepared to pay cash outside of Ethiopia
Ethiopians owning business and in the Ethiopia and working for mutilations
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
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.
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 50 years. The client has assured me that the entire lease period has been completely paid off
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
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 the foot print we go for. The plot is about 4700sqm. We can develop the entire site. The city
does allow for this. And the maximum we can develop is ground + 12 (13 storeys.) Assuming we develop 60%
of the land we have and go for 13 storeys we have 36,660 sqm of GFA and allowing 20% for circulation we
have 29,328sqm of lettable and/or sellable area.