PROJECT PROPOSAL FOR:

MIXED USE MALL AND APARTMENT

PROJECT LOCATION:
BURAYU, OROMIA

PROMOTER:
WEHENET YEGEGU MIXED MALL AND
APARTMENT

JULY 2021
 Contents

LIST OF TABLE.......................................................................................................................................3

LIST OF FIGURE.....................................................................................................................................3

1 EXECUTIVE SUMMARY...............................................................................................................4

2 INTRODUCTION.............................................................................................................................5

2.1 GENERAL BACKGROUND.................................................................................................................5

2.2 OBJECTIVE OF THE PROJECT............................................................................................................6
2.3 PROJECT DESCRIPTION.....................................................................................................................6
2.4 PROJECT RATIONALE......................................................................................................................7
2.5 THE SIGNIFICANCE OF THE PROJECT................................................................................................7
2.6 PROJECT LOCATION........................................................................................................................8

3 THE MARKET STUDY...................................................................................................................8

3.1 MARKET ANALYSIS.........................................................................................................................8

3.2 THE DEMAND-SUPPLY GAP............................................................................................................9
3.2.1 Current supply of mixed use building..................................................................................10
3.3 FUTURE MARKET OR DEMAND OF COMMERCIAL BUILDING RENTAL.............................................10
3.3.1 Target customers..................................................................................................................11
3.3.2 Marketing promotion and strategy.......................................................................................11
3.4 COMPETITION................................................................................................................................12
3.5 THE PROJECT FACILITIES AND SERVICES PLAN..............................................................................12

4 TECHNICAL STUDY....................................................................................................................13

4.1 DESCRIPTION OF THE PROJECT SERVICE/ PRODUCT MIX................................................................13

4.2 LAND USE PLAN...........................................................................................................................14
4.3 CONSTRUCTION WORK AND TECHNOLOGY....................................................................................14
4.3.1 Construction schedule..........................................................................................................14
4.3.2 Architectural Design & Layout............................................................................................15
4.3.3 Structural design..................................................................................................................16
4.3.4 Reinforced concrete.............................................................................................................16
4.3.5 Foundation Design...............................................................................................................16
4.3.6 Construction Plan and process.............................................................................................16

1|Page
 4.4 UTILITIES......................................................................................................................................17
4.5 PROJECT IMPLEMENTATION...........................................................................................................18
4.6 ORGANIZATIONAL STRUCTURE.....................................................................................................18
4.6.1 Organization and management.............................................................................................18
4.6.2 Man Power...........................................................................................................................18
4.6.3 Organizational Structure......................................................................................................18

5 FINANCIAL REQUIREMENT AND ANALYSIS......................................................................21

5.1 FIXED INVESTMENT.......................................................................................................................21

5.2 WORKING CAPITAL.......................................................................................................................23
5.2.1 Operating Expense at full Capacity......................................................................................23
5.2.2 Operating Expenses..............................................................................................................24
5.3 TOTAL INITIAL INVESTMENT COST................................................................................................24
5.4 FINANCIAL ANALYSIS AND STATEMENTS......................................................................................26
5.4.1 Underlying Assumption.......................................................................................................26
5.5 SOURCES OF FUND........................................................................................................................26
5.5.1 Bank loan Repayment Schedule...........................................................................................27
5.5.2 Depreciation Schedule.........................................................................................................27
5.6 FINANCIAL EVALUATION...............................................................................................................28
5.6.1 Profitability..........................................................................................................................28
5.6.2 Ratios...................................................................................................................................28
5.6.3 Break-even Analysis............................................................................................................28
5.6.4 Pay-back Period...................................................................................................................29
5.6.5 Internal Rate of Return.........................................................................................................29

6 ENVIRONMENTAL IMPACT OF THE PROJECT..................................................................29

7 APPENDIX .A.................................................................................................................................30

2|Page
 List of table

TABLE 1 OFFICE SPACE DEMAND FORECAST.............................................................................................11

TABLE 2 BUILDING FUNCTIONS..................................................................................................................12
TABLE 3 LAND UTILIZATION PLAN.............................................................................................................14
TABLE 4 PROJECT IMPLEMENTATION SCHEDULE........................................................................................18
TABLE 5 LAND, BUILDING & CONSTRUCTION.........................................................................................21
TABLE 6 BUILDING MACHINERIES AND EQUIPMENT..................................................................................21
TABLE 7 VEHICLE COST.............................................................................................................................22
TABLE 8 OFFICE EQUIPMENT.....................................................................................................................22
TABLE 9 SALARY EXPENSE........................................................................................................................23
TABLE 10 ANNUAL OPERATING COST AT FULL CAPACITY (YEAR TWO)..................................................24
TABLE 11 INITIAL INVESTMENT COST........................................................................................................24
TABLE 12 SOURCE OF FUND.......................................................................................................................26

List of Figure

FIGURE 13D VIEW OF THE BUILDIN............................................................................................................15

3|Page
 1 Executive Summary

1. Project name: Mixed use Building

2. Project Type : Multipurpose business building
3. Nationality: Ethiopian owned
4. Project Owner: WEHENET YEGEGU mixed mall and apartment private limited
company
5. Project location: Burayu, Oromia
6. Project composition: 2B+G+9 building used for diverse business activities like shopping,
banking & insurance, super market, shops, restaurants, cafés, beauty salon, Pharmacy,
offices and apartments
7. Premises Required: 2,910 m2
8. Total investment Cost: 149,258,416 ETB is required, from this amount 30% or
44,777,524.84 ETB from owner equity and the rest 70% 104,480,891.29 ETB from bank
loan.
9. Employment opportunity: 365 individuals on permanent 301 on casual basis

4|Page
 10. Social and Economic Benefit: provide better Building service, employment opportunities,
generation of income and benefits for the local area and people.

2 Introduction

2.1 General Background

The current fast and dynamic economic growth of Ethiopia especially in urban area necessitates
equivalent growth of building and construction sector. The sector should expand rapidly to
support the overall economic development sustainable.
In the building sector of the economy, the multi-purpose in the one becoming rapidly expanding
in urban areas of the nation since dynamic economic development of urban economy requires the
construction of these buildings in cities to support the growing of business service sectors like
retail outlets, supermarkets, Beauty salon, shops, offices, cinemas, Computer Center, Cafeterias,
restaurant, assembly hall, guest house and other activities. In this regard, mixed used building
expands in the all parts of the country.
Investment and property development play an important role in any emerging markets or
economies. Property generally comprises reside vial houses and commercial real estate property
(mainly mixed use building) developed for rental business and sale. The property investment
market in Ethiopia remained under developed for several years. As a consequence, the supply of
residential houses and non-residential real estate that can be used for residence, office space,
shopping malls and catering services in the urban centers of the country is disproportionately low
to cope with the growing demand in the country spinning from the average growth in GDP of 5.5
percent over the last ten years and population increase. The relatively good performance of the
macro-economy (real growth in GDP, low inflation rate and growth in investment and export
sector) has stimulated unprecedented investment growth in the property sector over the last five
years. The growth of investment in the property market over the last five years in consistent with
the global experience suggesting that investment in the residential and commercial property (real
estate) is greatly influenced by the performance of the macroeconomic conditions. In general, a
stable macroeconomic condition leads to economic and business growth and develops investors’
confidence. This certainly spurs large demand in the property market for office space, shopping
malls, catering services, apartment and residential houses. Following growing demand trends,

5|Page
and with the expectation of high return on their investment capital, large number of land
developers pooled their financial resources and invested in the property market.
To this effect, the owner of the envisioned Mixed Use Building WEHENET YEGEGU mixed
mall and apartment private limited company
who has founders been living for long time in this city, planned to construct in Burayu and
undertaken this project study to check the market, technical and financial feasibility of this
project. The promoter is very ambitious and committed to realize the project. Hence, expects to
get the necessary support from the city administration to make the project to be operational.
Looking at the past trends and permits issues by the Government to the construction of real estate
properties including the mixed use building in the major urban areas of the country especially in
Burayu one can easily conclude that the momentum is more likely to continue.
Besides, the government policies and incentives for the private sector investment are very
promising that motivates the promoter to engage in mixed use building business.

2.2 Objective of the project

The major goal of this project is to contribute towards the growth of the trade sector in Burayu.
Its specific objectives include the following.
 To construct and develop modern shops, offices, and restaurant, bedroom & cafeteria
facilities that enable to provide standard services to visitors.
 To undertake trading and other refuted business activities that enable to generate a reasonable
to the invested capital.
 To develop a modern business center that would provide services of international standard in
order to attract foreign visitors and thereby contribute towards the generation of hard
currency for the country.
 To create employment opportunities for the population in the city and
 Contribute towards the beautification of the city through the construction of modern building
infrastructure and facilities.
2.3 Project description

The long-term goal of the project is become the best choice in Burayu and its surrounding areas
by creating a differentiated experience capitalizing on personal service. The proposed project

6|Page
will have a total area of 2,910 square meter, designed to render a multipurpose giving business,
which will in turn plays significant role towards solving shortage of standard business center in
Burayu.
The relatively modern nature of the city as business unique location has laid a fertile ground for
future promising growth of the city. The owner plans the project to render banking and
insurance, shopping facility, bank and cafeteria services to create high quality class to satisfy the
interest of customers in the city. Based on environmental and other considerations, the
entrepreneur has determined the type and size of the building which is already determined by the
site; conceptual planning and preliminary analysis have been carried out by analysts.
In order to attract its clients to the service, the project will develop high standard shop & banking
rooms and office of best choices and will also save best quality restaurant and café, national and
international dish and various types of soft drinks.
2.4 Project Rationale

Internationally the economic growth this country and specifically the oromia region is
experiencing, the good governance created and even if the city is in its early stage of
development these project are the first in kind in the city are feasible and would be a model
development in promoting and attracting different urban investments.
In order to respond to the created environment the city is in need of a major, basic and feasible
urban projects to be developed.
The existing promising investment opportunities, the demands of service needs along with
relatively sound investment support made by the government in such kinds of feasible projects,
compelled the project promoter to initiate the multipurpose oriented business project to be
established. The mismatch between the demand for and supply of such kind of services in easily
observed in the city.
Therefore, the existing shortage or absence in the supply of these services, along with its
commercial and administrative access, better location and infrastructure access, escalating trend
of urbanization and business activities, thus it is with such reason that this project is identified
and proposed and assumed to be more profitable.
In general, the country’s decentralized state based economy, privatized and free market
economy; good governance creates a favorable environment for the development of investment
for private investors.

7|Page
2.5 The significance of the project

The envisaged project deemed to add to the economic development of the nation in general and
city in specific with following ways:

A. Source of Revenue As public policy of any nation, the government collects different
forms of taxes from different business organizations and individuals. Among the
different forms of taxes, business income taxes, payroll income tax and VAT are
collected from undertaking business activities. Therefore, the building will serve as
sources of revenue for the city as well as for the region.
B. Employment opportunity
One of the problems that our country faced is unemployment. Therefore, the current objective of
the government is working on tackling the problem of unemployment and fostering the
development process either through creating self-employment or employment in other
organization. Hence, this project will hire 365 individuals on permanent 301 on casual basis
individual as casuals during construction and operation.

C. Sources of social service

In addition to serving as a source of employment and income for the region, the project renders
social services for different group of people. Hence, it Is also provide the following services;
 Serve as a source of mental satisfaction for the different users,
 It deemed to minimize the demand for shops and other bundles of services in the area.
Furthermore, it serves as the pilot experience and ground for other investor to enter in to such
kinds of urban development. It also contributes on the efforts made on as a character given
building for physical development pattern of the cityscape.
2.6 Project Location

As aforementioned on the introductory part the envisioned project is intended to be located in

Burayu, Oromia.

8|Page
 3 The market Study

3.1 Market Analysis

There are a number of factors which affects the demand of standardized mixed use building. Of
these factors, the most important to have influence is population growth and the level of income.
The currently expanding service industry in the city and around the city has been inviting skilled
and unskilled labor forces to the city; in addition, the number of both government and non-
government offices has been increasing. Above all the increase in the number of population of
the city increases for the provision of different services. Nowadays, most of the private business
organizations need their own small-medium offices in order to render their services and provide
their products, and they prefer places that are found in the center of the city or close to the road.
As clearly indicated in the introductory part of this proposal. Burayu is dynamically growing
city. Though the market demand gap for mixed use building in Burayu is not clearly understand
there is wider gap for such demand as many merchants, organizations are flowing to the city
every day. From prior business experiences, the demand of mixed use building in Burayu is very
high and hence the demand and the supply gap is very wide.

3.2 The Demand-Supply Gap

Burayu town is situated in the Oromia region of Ethiopia in the oromia special zone surrounding
Finfinne, the very center of Ethiopian service industry. Burayu is also a major business center
and commercial route that attracts thousands of business travelers. These are also the most
important groups of potential customers that include both the local and foreign tourists and the
modern business community who choose services that range from economic to high class
standards. These groups would also choose a healthy comfortable climate that combines a more
traditional type with that of modern shops, offices, bedrooms restaurants and cafeterias. Hence,
the project will solve the serious demand problem in the city.
Over the last decade, there has been a significant growth in the number of local and international
trades across the country. This increase is mainly associated with the stimulation of economic
activity and partly due to an increase in the flow of international and local traders in to the city.
Since Burayu is an important commercial center in addition there is a significant increase in
business activates and hence increasing the number of traders to the city. Even though there is a

9|Page
lack of quantitative estimates that number of traders to the city. Even though there is a lack of
quantitative estimates that deficit the actual demand and also the annual growth rate Hotel
facilities and urban commercial facilities are scarce in the city. So far in the city there is no
development of such kind standard retail building and it is the first of its kind in the city and will
promote other investors from the city and the surrounding areas. As a result there is a large gap
between the developed and that of the supply for modern shops, outlet stores, so, this project
would not face any problem of demand scarcity for it business center and it would provide good
service to customers.

3.2.1 Current supply of mixed use building

Commercial building/office sector has shown a dynamic change in the past few years. The
reason for this could be rapid population and economic growth and a supporting public
infrastructural development. Other factors relevant in the specific case of commercial buildings
are the large increases in national and international businesses, particularly firms in the services
sector.
The business of multipurpose buildings in Burayu in booming highly due to the recent rapid
growth experienced in Finnfine surrounding zones. As a result, a good number of local and
international organizational are coming in place. Government offices which used to operate in
limited spaces all over the city are also concentrating on leasing new and modern buildings.
Increasing numbers of international organization and NGOs which in the past had typically
converted residences into office space are now moving towards renting whole floors or even
multiple floors in modern city-center commercial buildings.

3.3 Future market or Demand of commercial Building rental

The demand for office space is a derived demand because firms rent space as an input to the
production of services or goods they provide to businesses and households in the local regional
or national economy.
Following our survey of office space users in Burayu are mainly firms providing banking,
cafeteria and restaurants, bed room, supermarkets service, computer Center Crevice. The

10 | P a g e
different customers for commercial buildings also include shops and offices that are currently
renting out to provide their goods and services.
Future demand for office space is actually driven from growth in number of offices in the city
which in turn is influenced by the macro-economic growth in the country. Following the
government five year growth and transformation plan (GTP), the Ethiopian economy is expected
to increase by 10% for base case scenario and 12% under the optimistic case scenario.
Assuming that demand for office space is directly related to the growth in the economy, the
forecast for office space demand is shown in the following table;

Table 1 Office Space Demand Forecast

Office space demand under base Office space demand under high case
case economic economic
Years Growth Growth
2020/2021 9,916,543 11,304,859
2021/2022 11,007,363 12,057,416
2022/2023 12,218,173 12,953,878
2023/2024 13,562,173 13,963,577
2024/2025 15,054,011 14,554,534
2025/2026 16,709,952 14,987,431
Source: estimation based on GTP’s forecasted Ethiopian Economic Growth

3.3.1 Target customers

The target customers of this envisaged project include:-

1. Shop business Community
2. Nearby business organization
3. the government bureau
4. small accounts(SOHO) SME
5. Non governmental organizations

3.3.2 Marketing promotion and strategy

In order to penetrate and gain considerable market share, one of the major marketing strategies
for the project is consistently rendering quality service to its tenants. Due emphasis must be

11 | P a g e
placed on improving quality of service and facilities. The major marketing strategies to promote
the project and gain considerable market share include:
 Advertising through different means focusing on the existing service and facilities
 Promote in association to the key location and nearby business
 Working on sustained promotional work.
 Working on public relations to reach and influence key personals and organization with
a capacity of making decision.
 Keeping the quality of its service/ facilities and consistently improving with changing
situations.
 Seasonal discount pricing different others customer centric marketing strategies will be
used by the company.

3.4 Competition

There are different forms of competition that may face the envisaged mixed use building. These
are price and non-price based competition. Moreover, there are different competitors that will
compete with the project either directly or indirectly. But the mixed use building under
discussion has diversified marketing strategies that could enable it cop up with the different
competitors in the market. Moreover it will frequently conduct competitors research which
focuses on, the strength and the weaknesses, the different competitors’ strategies, the techniques
they use in rendering the service, their customer handling methods, and others. Generally the
project has many other projects all over Ethiopia which compete with it.

3.5 The project facilities and Services plan

In order to provide mixed use business center building services of a high standard, it has been
planned to construct and develop the infrastructure and facilities that would viable to meet the
requirements of an international standard business center. Accordingly, various buildings and
facilities will be constructed phase by phase starting with the most needed ones that are essential
to commence the operation of its business activities. With the completion of construction, the
building will provide a combined service such as shops, bedroom, restaurant and café service as
well as modern business center that primarily serve its guests and major clients. The plan is that
the building will be partitioned in to different functions:

12 | P a g e
 Table 2 Building functions

Building Description UOM Unit price in

Birr
Ground Supermarket, Pharmacy, Banking & Insurance M2 2,120
1st floor – Retail stores Beauty salon, shop, Computer Center, M2 8,480
4th floor Cafeteria & Restaurant
th
4 floor Apartment service M2 8,480
-8th floor
8th floor- Luxury Apartment service M2 4,240
9th floor
Basements Parking Service Car 4,240m2/182cars
Total 23,320

Since the project will be engaged in mixed building the main sources of its annual revenue would
be from the rental of building spaces such as shops, offices, and banking, café & restaurant
bedrooms. Therefore, the sources of revenue have been classified in to one category namely the
rental of banking & supermarket, offices, shops, bedrooms restaurant and café based on these
classifications. Based on the market price of similar mixed use building in the area, the
envisioned buildings set the following fair price (Before VAT) for its service, hence when the
building construction fully get operational it is assumed to generate a yearly income of ETB
72.65 Million.

4 Technical Study

4.1 Description of the project Service/ Product mix

The envisioned mixed purpose building will provide different rental services to the different
customer groups for different purpose. The building will have basement, ground and fifteen
floors. The purpose of the building explained as follows;
 the ground floor, first floor and second floor, third floor and fourth floor will be
designed for different business centers like stores, banks, supermarket, beauty salon(man
and women), Computer center, pharmacy, internet café, boutiques, different shops and
other business activities,
 The fourth floor up to the eight floor will be designed Different governmental, NGO &
other offices.

13 | P a g e
  The Eight floor up to the fifteenth floor will be designed as apartments.
Besides, the buildings will have enough parking facility for its customers and green area in its
compound.

4.2 Land Use Plan

The total land required for the envisioned project is estimated to be 2,910m 2. The total area for
the construction of the building will be 2,120m2, as revealed below.
Table 3 land utilization Plan

SN Description Land M2
Basements Ground 1 -4th 4th-8th
st
8th-9th
floor floor Floor
1 Building 2B+G+9) 4,240 2,120 8,480 8,480 4,240
Onsite Parking & Green area 429
Total built up area 23,749

4.3 Construction work and Technology

4.3.1 Construction schedule

The construction project is proposed to be started on august 2022, and is expected to be finished
on January 2024. as seen in the abbreviated construction schedule above, a majority of the
schedule’s time is made up of five major activities; Concrete, building Enclosure, masonry,
mechanical &HVAC and Electrical installations. Concrete activities include processes such as
placing foundations and slab on deck. The Building Enclosure Phase includes erecting the
scaffolding that will allow for exterior sheathing installation and bricklaying and aluminum
works. Mechanical and Electrical install coincide with each other due to the need for
coordination between the two divisions. There are several periods of construction during the
schedule in which there are multiple construction activities occurring at the same time.

The construction site must be organized accordingly as these processes take place. As with any
construction project, the goal of the schedule was to complete all construction activities before
the required Date of completion.

14 | P a g e
This date of completion is practical based on the time of year in which the building will be
completed. The team allowed a two week contingency for any setbacks. Typically, winter
construction tends to cause unforeseen delays that negatively impact a construction project.
These conditions can and will almost undoubtedly impact the project schedule by causing
unforeseen delays and project inefficiency.

Figure 13D view of the building

4.3.2 Architectural Design & Layout

Although functional spaces for the project were laid out in significant detail, the rest of the
building had designated spaces but n set layouts. It was at the discretion of the project promoter
to devise typical layouts for the non-detailed commercial and office spaces. To make sure that
the building’s layouts were practical, the project owner researched typical architectural layouts
for laboratory and executive office spaces.

15 | P a g e
The walls and partitions throughout the floor were congruent with the structural frame and
column locations.

4.3.3 Structural design

One of principle deliverables of our project is the structural design of the building. The structural
elements were coordinated with the layout of the building adjustments were made to the columns
if specific layouts are necessary. The frame was made up of a grid with repeating standard
structural bays. Included in the structural system are bay sizes, shape and size of structural
members, floor compositions and curtain walls. These elements were established to resist gravity
ad lateral loads as appropriate.
The gravity load design was completed for two frames; one of structural steel and one of
reinforced concrete. Reinforced concrete frame was chosen for further design based on cost per
square foot, local availability of material and constructability considerations, such as erection
and casting. The concrete system was then designed for lateral loading with necessary
adjustment being made to framing.

4.3.4 Reinforced concrete

The project group prepared hand structural design calculations for a typical bay of a reinforced
concrete frame. In all reinforced concrete designs, a superimposed dead load of 800kN per
square meter was assumed for mechanical equipment, floor coverings and ceilings.
Similarly, the design of the typical bay accounted for the use of different commercial space, in
which a live load of 300 kilos per square meter was assumed. Loads were calculated based on the
requirements of the minimum Design loads for Buildings and other Structures.

4.3.5 Foundation Design

Since foundation design are site and material specific, the promoter is holding off on the design
of the foundations.

16 | P a g e
4.3.6 Construction Plan and process

The project team developed a coordinated project schedule and construction plans that would
reflect the expectations for an actual construction project. The project schedule was developed
using the preliminary designs given to the project team.
Additionally, the group considered typical construction activities and durations taken from
similar construction projects as well as realistic constraints on building development. For
instance, it is necessary for the structural frame to be completed before concrete can be placed
for the slab on deck. Hand drawn construction plans detailing site entrances and storage areas
were coordinated with the project schedule to give the reader visualizations of the construction
site set up through various periods of the construction process.
Based on a general program of the project owners the consultant who is going to be hired makes
site studies, develops structural designs, prepares drawings and specifications, determines
quantities involved and estimated the resultants costs. All these activities will be done in the first
phase of the project which is the design stage after the document are produced by the designers
have been received, and the works secured the project is supposed to enter the tendering stage.
At this stage contractors study the project document analyze and subsequently determine the
construction methods, built up their unit rates and submit their bids for the works. The promoter
of this project intends to compare the bids and award the contract for the lowest responsible
bidder. This, is of course, presupposes that the favorable proposal does not exceed the allocated
budget.
After the award is made and the contract signed between this project owner and the contractor,
the project constructor is expected to prepare and submits a detailed construction program which
includes material schedule, manpower requirement and cash flow forecast.
After the award is made and the contract signed between this project owner and the contractor,
the project constructor is expected to prepare and submits a detailed construction program which
includes material schedule, manpower requirement and cash flow forecast.

4.4 Utilities

A number of utilities world be put in place in order to ensure smooth functioning of the project.
These utilities include:
 Water Supply,

17 | P a g e
  Solar powered offices
 Supplementary Electricity supply.
 Telephone line Internet Broadband
 Well landscaped areas
 Responsible waste removal
 Well thought about site arrangement

4.5 Project implementation

The project’s implementation is expected to take 24 months. The major activities include Bank
loan processing, construction of the building, cleaning the area around the building, Procurement
of equipment and start rendering services. The time schedule for the above matured major
activities is presented below:

Table 4 project Implementation schedule

SN Activities Date
1 Land request processing sept – dec, 2021
2 Land approval feb, 2022
3 Bank loan processing June-July 2022
4 Site Development July 2022
5 Building and construction work August, 2022-December 2024
6 Preparation for service January, 2025
7 Service execution February, 2025

4.6 Organizational Structure

4.6.1 Organization and management

The organizational structure should be in a way that the company able to achieve its objectives as
well as the satisfaction of standard requirement. In addition to this, the structure should fit the
dynamics of all customers in the building ranging from small business to large tenants.

4.6.2 Man Power

The total manpower required for the building will be 216 persons. The manpower list and the
corresponding labor cost are shown in part five of this document.

18 | P a g e
4.6.3 Organizational Structure

The organizational structure of the project is designed by including all the necessary personnel
under the right division. At the top of the organizational structure, there will be manager with the
responsibility of supervising the overall activity of the building. Depending up on the nature of
the center and the amount of work to be performs; there exist auxiliary units under the general
manager.
Employees under each unit will be supervised by the department head that is accountable for the
general manager. General Manager is appointed by owner.

Owner

General
Manager

Building Admin Marketing Technical and maintenance

manager

HRM and IT, Electricity

finance and plumper

Purchaser

Cashier

As clearly shown in the organizational structure, the center organization has one general manager
and three main sections. Under the general manager there are the, marketing Department,
maintenance and building administration department. Under building admin dept there exist two
sections i.e., HRM & finance and general service. Further sub sections are also organized under

19 | P a g e
technical and maintenance manager. The following section deals with the duties and
responsibilities of each department.
A. The General Manager’s Duties and Responsibilities
 He/she will plan, organize, direct and control the overall activities of the building.
 He/she will devise policies and strategies that will enable the center to be profitable.
 He/she will incorporate modern technological innovation that will facilitate the service
delivery of the building to increase customer’s satisfaction.
 He/she will plan, organize, direct and control the human and non-human resources of the
building so as to achieve the short and long run objectives of the organization.

B. Building Administration Department

The building Administration Department of the multipurpose building has two main sections
(HRM and Finance and General Service section). It has responsible for undertaking the
following activities;
 Manage the human resources and control employee’s activity
 Well non-human resources of the project, which include; effective handling of the
different resources of the building, and devise strategies of controlling against fraud and
damage.
 Will provide the right material or inventory to the center with right price at the right time.
 Will plan, organize direct and control the financial transaction of the building by using all
the necessary documents.
 Accountant and casher that will collect money from the customers.
 Will develop sound financial control system by developing modern financial control
systems.
 Will prepare the annual financial statements and prepare condensed reports for both the
General Manager and other concerned government body.
 Follow the overall status of the business and provide maintenance and repair services
C. The marketing Department
 Will handle the overall marketing activities of the organization which include planning,
organizing, directing, and controlling.
 Will develop the marketing strategies for future multipurpose building development
 Will develop effective customer handling strategies.

20 | P a g e
  Execute the promotion methods.
D. Technical and maintenance manager
 Will handle the overall physical maintenance and related issues
 Will make sure electricity and back up is organized.
 Follow up security issues and educate tenants
 Works in collaboration with general service to make sure tenants are well served

5 Financial Requirement and Analysis

The financial resource is a prime resource for undertaking any activities. Hence for
implementing this mixed use building a total of 149,258,416 ETB is required, from this amount
30% or 44,777,524.84 ETB from owner equity and the rest 70% 104,480,891.29 ETB from bank
loan from bank at the prevailing interest rate.
Therefore the said amount of finance is needed for undertaking the following.

5.1 Fixed Investment

A. Land, Building & Construction

Table 5 Land, Building & Construction

S.N Description of works Total Cost in birr

1 Building construction 93,060,990.00
2 Site Development 25,200.00
3 Design and supervision 120,000.00
4 1st Year land lease & (10%) down payment 26,239.5
Total 93,232,429.50

B. Building Machineries and Equipment

Table 6 Building Machineries and Equipment

SN Description Measure Qty Unit cost in Total cost in

ment Birr Birr.
1 Generator Unit 1 120,000.00 120,000.00
2 Carpentry tool box Set 1 17,000.00 17,000.00
3 Electrician tools box Set 1 18,500.00 18,500.00
4 Plumber tools kit Set 1 12,300.00 12,300.00

21 | P a g e
 5 Fire extinguisher Unit 10 6,000.00 60,000.00
(Security Equipment)
6 Total 227,800.00

C. Vehicle

Table 7 Vehicle cost

S Description UOM Qty Unit Cost Total cost Remark

N in Fr. in Birr

1 Mini-Bus Unit 1 700,000.00 700,000.00 Duty Free

2 Sedan Unit 2 1,250000.00 1,250000.00 Duty Free

Total 3,200,000.00

D. Office Equipment
Table 8 Office Equipment

SN Description Measurement Qty Unit cost in Total cost in

birr Birr
1 Managerial tables Unit 5.00 2,600.00 13,000.00
2 Managerial chairs Unit 5.00 1,950.00 9,750.00
3 Office table with chair Unit 7.00 1,350.00 9,450.00
4 Secretarial table with chairs Unit 1.00 1,450.00 1,450.00
5 Computer with chairs Unit 3.00 15,000.00 45,000.00
6 Shelf Unit 1.00 3,500.00 3,500.00
7 Filing cabinets Unit 1.00 1,500.00 1,500.00
8 Guest chairs Unit 1.00 900.00 4,500.00
9 Fax & Telephone machine Unit 5.00 1,300.00 1,300.00
10 Carpet and Curtain LS 1.00 23,000.00
Total 112,450.00

5.2 Working Capital

5.2.1 Operating Expense at full Capacity

a. salary Expense

22 | P a g e
 Table 9 salary Expense

SN Position No Qualification Monthly Annual

salary in salary in
Birr Birr
1 General manager 1 BA in management 300 36,000
2 Building admin 1 BA in Acct/Mgt 2500 30,000
3 Secretary 1 10+2 in secretariat science 900 10,800
4 HRM Officer 1 10+2 in HRM/Management 950 11,400
5 Technical and 1 Diploma in building maintenance 1500 18,000
maintenance manager
6 Finance head 1 BA in Accounting 2500 30,000
7 IT Technician 1 Diploma in computer science/IT 1150 13,800
8 Marketer 1 Diploma in marketing 1150 13,800
9 Accountant 1 Diploma in accounting 1150 13,800
10 Guards/Security 4 Basic 500 24,000
11 General Service head 1 Diploma in Management 1500 18,000
12 Purchaser 1 Diploma in purchasing &Sup Mgt 1150 13,800
13 Electrician 1 10+2 in general electricity 1000 12,000
14 Plumber 1 10+2 in general mechanic 1000 12,000
15 Casher 2 10+1 in bookkeeping 850 20,400
16 Cleaner 5 Unskilled 450 27,000
17 Maintenance officer 1 10+2 in General mechanic 1000 12,000
18 Driver 1 10 completed 850 10,200
Total 26 327,000
Benefit (20%) 65,400
Grand Total 392,400

5.2.2 Operating Expenses

The annual operating cost at full operation capacity is estimated at Birr 12.9 million (see Table
10). The cost of raw material account for 3% of the operating cost. The other major components
of the production cost are utility (11%) , maintenance and repair (10 %) and financial cost (66
%). For detail production cost see Appendix A.2.

Table 10 Annual Operating Cost At Full Capacity (Year Two)

Items Cost %
Raw Material and Inputs 325,000 3%
Utilities 1,478,000 11%

23 | P a g e
 Maintenance and repair 1,245,000 10%
Labor direct 392,400 3%
Administration Costs 60,000 0%
Land and Lease Cost 885937.5 7%
Cost of marketing and distribution 50,000 0%
Total Operating Costs 4,436,338 34%
Depreciation 0%
Cost of Finance 8,545,670 66%
Total Production Cost 12,982,007 100%

5.3 Total initial investment cost

The total investment cost of the project including working capital is estimated at Birr 149.25
million (See Table 10). From the total investment cost the highest share (Birr 112.63 million or
42.16 %) is accounted by Building and civil work cost followed by initial working capital (Birr
580,163 ).

Table 11 initial investment cost

Foreig
Local Total %
Sr. No Cost Items n
Cost Cost Cost Share
1 Fixed investment        
1.1 Land Lease 809,000   809,000 2.25%
1.2 Building and civil work 126,360,000   126,360,000 42.16%
1.3 Machinery and equipment 183,450   183,450 12.89%
3,200,000.0
1.4 Vehicle cost   3,200,000 0.00%
0
112,450.0
1.5 Office furniture and equipment   112,450 11.42%
0
  Sub total 130,664,900 0 130,664,900 68.71%
2 Pre operating cost *        
2.1 Pre operating cost 13,343,225   13,343,225 3.93%

24 | P a g e
 2.2 Interest during construction 4,670,129   4,670,129 6.54%
  Sub total 18,013,354 0 18,013,354 10.48%
3 Working capital ** 580,163   580,163 20.81%
  Grand Total 149,258,416 0 149,258,416 100.00%

* N.B Pre operating cost include project implementation cost such as installation, startup,
commissioning, project engineering, project management etc and capitalized interest during
construction.

** The total working capital required at full capacity operation is Birr 1.16 million. However,
only the initial working capital of Birr 580,163 during the first year of operation is assumed
to be funded through external sources. During the remaining years the working capital
requirement will be financed by funds to be generated internally (for detail working capital
requirement see Appendix .A.1).

5.4 Financial analysis and Statements

5.4.1 Underlying Assumption

The financial analysis of the mixed use building is based on the data provided in the preceding
sections and the following assumptions.
A. construction and finance
Construction period 2 Years
Source of finance 30% equity and 70 loan
Bank interest rate 10%
B. depreciation
Building 3% after 5 year
Building machinery and equipment 10%
Office Equipment 10%

5.5 Sources of Fund

The source of fund to finance the project is planned to be from two sources. These are
promoter’s equity and bank loan. The loan is expected to be obtained from one of the local

25 | P a g e
lending institutions. Since the project is expected to take some times to repay all its debts, the
bank loan is assumed to obtain on long term credit basis. Taking the financial position of the
promoters into account, equity contribution and bank loan to finance the total investment outlays
of the project are assumed to be 30% and 70% respectively. Accordingly, the total financial
requirement from the two sources will be;

Table 12 Source of fund

SN Description Percentage share Amount

Owners Share 30% 44,777,524.84
Bank Loan 70% 104,480,891.29
Total 100% 149,258,416

5.5.1 Bank loan Repayment Schedule

Year Principal Payment Interest (10%) Total annual Remaining

Payment in Balance
ETB
0 104,480,891
1 10,448,089.13 10,448,089.13 20,896,178.26 94,032,802.16
2 10,448,089.13 9,403,280.22 19,851,369.34 83,584,713.03
3 10,448,089.13 8,358,471.30 18,806,560.43 73,136,623.90
4 10,448,089.13 7,313,662.39 17,761,751.52 62,688,534.77
5 10,448,089.13 6,268,853.48 16,716,942.61 52,240,445.64
6 10,448,089.13 5,224,044.56 15,672,133.69 41,792,356.51
7 10,448,089.13 4,179,235.65 14,627,324.78 31,344,267.39
8 10,448,089.13 3,134,426.74 13,582,515.87 20,896,178.26
9 10,448,089.13 2,089,617.83 12,537,706.95 10,448,089.13
10 10,448,089.13 1,044,808.91 11,492,898.04

5.5.2 Depreciation Schedule

SN Description Original Value Depreciation Depreciation per

in Birr rate in % year in Birr
1 Construction and Building 126,360,000 New up to 5 2,649,242

26 | P a g e
 year the 3%
2 Bldg. machines & Equipment 183,450 10 18,345.00
3 Vehicle 3,200,000.00 5 160,000.00
4 Office Equipment 112,450.00 10 11,245.00
Total 129,855,900 2,838,832

5.6 Financial evaluation

5.6.1 Profitability

Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax will grow from Birr 15.05 million 43.8 million during
the life of the project. Moreover, at the end of the project life the accumulated net cash flow
amounts to Birr 162.6 million. For profit and loss statement and cash flow projection see
Appendix A.3 and A.4, respectively.

5.6.2 Ratios

In financial analysis financial ratios and efficiency ratios are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator for the strength and weakness of
the firm or a project. Using the year-end balance sheet figures and other relevant data, the most
important ratios such as return on sales which is computed by dividing net income by revenue,
return on assets (operating income divided by assets), return on equity (net profit divided by
equity) and return on total investment (net profit plus interest divided by total investment) has
been carried out over the period of the project life and all the results are found to be satisfactory.

5.6.3 Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. To this end, the break-even
point for capacity utilization and sales value estimated by using income statement projection are
computed as followed.

Break- Even Sales Value = Fixed Cost + Financial Cost = Birr 12,132,201.5

Variable Margin ratio (%)

27 | P a g e
Break- Even Capacity utilization = Break -even Sales Value X 100 = 33 %

Sales revenue

5.6.4 Pay-back Period

The pay-back period, also called pay – off period is defined as the period required for recovering
the original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial investment
will be fully recovered within 6 years.

5.6.5 Internal Rate of Return

The internal rate of return (IRR) is the annualized effective compounded return rate that can be
earned on the invested capital, i.e., the yield on the investment. Put another way, the internal rate
of return for an investment is the discount rate that makes the net present value of the
investment's income stream total to zero. It is an indicator of the efficiency or quality of an
investment. A project is a good investment proposition if its IRR is greater than the rate of return
that could be earned by alternate investments or putting the money in a bank account.
Accordingly, the IRR of this project is computed to be 17 % indicating the viability of the
project.

6 Environmental impact of the project

The EIA of the project activities was determined by identifying the environmental aspects and
then undertaking an environmental risk assessment to determine the significant environmental
aspects. The environmental impact assessment has included all phases of the project namely
construction phase and operational phase. The building has both positive and negative impact
The positive impact of the project is:-
 Generation of employment opportunity
 Source income for the government through business income tax
 Income generation for the promoter
 Being exemplary for other investors who want to engage in the same business line.
Negative impact of the project
The project has the following negative impacts:

28 | P a g e
 1. noise and Dust emission during Construction
There are some noises during the construction due to the construction operation and the
company will use construct the construction during the day time. Again there is the
emission of dust which will be mitigated by sprinkling water on the service.
2. problem on workers on construction
During construction there are some problems that will materialize on workers. These are:
damage on operation by using machines, construction materials and others. To mitigate such
impact the company will provide safety insurance and safety equipment.
3. sewages during operation
During operation there are some wastes emitting from the mixed use building. These are wastes
from the latrine and will be mitigated by using modern waste treatment technology.

7 Appendix .A

FINANCIAL ANALYSES SUPPORTING TABLE

Appendix 7.A.1
NET WORKING CAPITAL ( in 000 Birr)

Items Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Ye

Total inventory 120,838 217,508 241,675 241,675 241,675 241,675 241,675 24
Accounts receivable 201,250 362,250 402,500 402,500 402,500 402,500 402,500 40
Cash-in-hand 24,150 43,470 48,300 48,300 48,300 48,300 48,300 4
CURRENT ASSETS 346,238 623,228 692,475 692,475 692,475 692,475 692,475 69
Accounts payable 50,000 85,000 100,000 100,000 100,000 100,000 100,000 10
CURRENT
50,000 85,000 100,000 100,000 100,000 100,000 100,000 10
LIABILITIES
TOTAL WORKING
296,238 538,228 592,475 592,475 592,475 592,475 592,475 59
CAPITAL

29 | P a g e
 Appendix 7.A.3

INCOME STATEMENT ( in 000 Birr)

Item Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

36,312,50
58,100,000 72,625,000 72,625,000 72,625,000 72,625,000 72,625,000 72,625,0
Sales revenue 0
Less variable costs 1,524,000 2,438,400 3,048,000 3,048,000 3,048,000 3,048,000 3,048,000 3,048,0
VARIABLE 34,788,50
55,661,600 69,577,000 69,577,000 69,577,000 69,577,000 69,577,000 69,577,0
MARGIN 0

in % of sales revenue 96% 96% 96% 96% 96% 96% 96% 96%

940,938 979,938 995,938 995,938 995,938 995,938 995,938 995,93

Less fixed costs
OPERATIONAL 33,847,56
54,681,663 68,581,063 68,581,063 68,581,063 68,581,063 68,581,063 68,581,0
MARGIN 3
93% 94% 94% 94% 94% 94% 94% 94%
in % of sales revenue
10,682,08
9,613,879 8,545,670 7,477,461 6,409,252 5,341,044 4,272,835 3,204,6
Financial costs 7
23,165,47
45,067,784 60,035,393 61,103,601 62,171,810 63,240,019 64,308,228 65,376,4
GROSS PROFIT 5
in % of sales revenue 55% 54% 53% 58% 59% 59% 60% 60%

8,107,916 15,773,724 21,012,387 21,386,260 21,760,134 22,134,007 22,507,880 22,881,7

Income (corporate) tax
15,057,55
29,294,059 39,023,005 39,717,341 40,411,677 41,106,012 41,800,348 42,494,6
NET PROFIT 9
41% 50% 54% 55% 56% 57% 58% 59%
in % of sales revenue

Appendix 7.A.4

CASH FLOW FOR FINANCIAL MANAGEMENT ( in Birr)

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
SH 144,008,125 37,240,760 58,293,725 72,754,150 72,625,000 72,625,000 72,625,000 72,625,000 72,625,000 72,625,000

144,008,125 928,260 193,725 129,150 - - - - - -

0 36,312,500 58,100,000 72,625,000 72,625,000 72,625,000 72,625,000 72,625,000 72,625,000 72,625,000
ion

30 | P a g e
 0 0 0 0 0 0 0 0 0 0

SH 144,008,125 30,299,047 37,593,981 42,268,003 41,341,602 40,647,266 39,952,931 39,258,595 38,564,259 37,869,924

xed 144,008,125 0 0 0 0 0 0 0 0 0

0 580,162.50 348,097.50 232,065.00 - - - - - -

0 1,524,000 2,438,400 3,048,000 3,048,000 3,048,000 3,048,000 3,048,000 3,048,000 3,048,000

sts
0 25,000 40,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
d
0 8,107,916 15,773,724 21,012,387 21,386,260 21,760,134 22,134,007 22,507,880 22,881,753 23,255,626

0 9,613,879 8,545,670 7,477,461 6,409,252 5,341,044 4,272,835 3,204,626 2,136,417 1,068,209

ts
ent 0 10,448,089 10,448,089 10,448,089 10,448,089 10,448,089 10,448,089 10,448,089 10,448,089 10,448,089
0 6,941,713 20,699,744 30,486,147 31,283,398 31,977,734 32,672,069 33,366,405 34,060,741 34,755,076

IVE 0 6,941,713 27,641,458 58,127,605 89,411,003 121,388,736 154,060,806 187,427,211 221,487,951 256,243,028

Appendix 7.A.5
DISCOUNTED CASH FLOW ( in Birr)
    1 2 3 4 5 6 7
Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Ye
TOTAL CASH 36,31 58,10 72,625 72 72,62 72,625 72,62
0
INFLOW 2,500 0,000 ,000 ,625,000 5,000 ,000 5,000
Inflow operation 0 36,312,500 58,100,000 72,625,000 72,625,000 72,625,000 72,625,000 72,625,000 72
Other income 0 0 0 0 0 0 0 0
TOTAL CASH
144,008,125 9,656,916 18,252,124 24,110,387 24,484,260 24,858,134 25,232,007 25,605,880 25
OUTFLOW
Increase in fixed assets 144,008,125 0 0 0 0 0 0 0
Increase in net working
0 0 0 0 0 0 0 0
capital
Operating costs 0 1,524,000 2,438,400 3,048,000 3,048,000 3,048,000 3,048,000 3,048,000 3,
Marketing and
0 25,000 40,000 50,000 50,000 50,000 50,000 50,000 5
Distribution cost
Income (corporate) tax   8,107,916 15,773,724 21,012,387 21,386,260 21,760,134 22,134,007 22,507,880 22
10,448,08 10,448,08 10,448,08 10,448,08 10,448,08 10
Loan repayment 0 10,448,089 10,448,089
9 9 9 9 9
NET CASH FLOW -144,008,125 26,655,584 39,847,876 48,514,613 48,140,740 47,766,866 47,392,993 47,019,120 46
-
CUMULATIVE NET 161,329,66 20
-144,008,125 117,352,54 -77,504,666 -28,990,053 19,150,687 66,917,553 114,310,547
CASH FLOW 7
1

31 | P a g e
Net present value -144,008,125 24,911,760 34,804,678 39,602,375 36,726,340 34,057,116 31,579,953 29,281,145 27
-
Cumulative net present 11
-144,008,125 119,096,36 -84,291,687 -44,689,311 -7,962,972 26,094,144 57,674,097 86,955,242
value 4
NET PRESENT
162,603,724
VALUE
IRR 18%
NORMAL PAYBACK 6 years

32 | P a g e