PROJECT PROPOSAL FOR:

MIXED USE BUILDING

PROJECT LOCATION:
ADDIS ABABA

PROMOTER:
ATO MESFEN KEBEDE

Jan 2021
Addis Ababa
 Contents

LIST OF TABLE........................................................................................................................................................III

LIST OF FIGURE......................................................................................................................................................III

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

2 INTRODUCTION...............................................................................................................................................2

2.1 GENERAL BACKGROUND..................................................................................................................................2

2.2 OBJECTIVE OF THE PROJECT..............................................................................................................................3
2.3 PROJECT DESCRIPTION......................................................................................................................................3
2.4 PROJECT RATIONALE........................................................................................................................................4
2.5 THE SIGNIFICANCE OF THE PROJECT.................................................................................................................4
2.6 PROJECT LOCATION..........................................................................................................................................5

3 THE MARKET STUDY.....................................................................................................................................5

3.1 MARKET ANALYSIS..........................................................................................................................................5

3.2 THE DEMAND-SUPPLY GAP..............................................................................................................................6
3.2.1 Current supply of mixed use building.....................................................................................................7
3.3 FUTURE MARKET OR DEMAND OF COMMERCIAL BUILDING RENTAL...............................................................7
3.3.1 Target customers.....................................................................................................................................8
3.3.2 Marketing promotion and strategy..........................................................................................................8
3.4 COMPETITION....................................................................................................................................................9
3.5 THE PROJECT FACILITIES AND SERVICES PLAN.................................................................................................9

4 TECHNICAL STUDY......................................................................................................................................10

4.1 DESCRIPTION OF THE PROJECT SERVICE/ PRODUCT MIX................................................................................10

4.2 CONSTRUCTION WORK AND TECHNOLOGY.....................................................................................................10
4.2.1 Construction schedule...........................................................................................................................10
4.2.2 Architectural Design & Layout.............................................................................................................11
4.2.3 Structural design...................................................................................................................................12
4.2.4 Reinforced concrete..............................................................................................................................12
4.2.5 Foundation Design................................................................................................................................12
4.2.6 Construction Plan and process..............................................................................................................13
4.3 UTILITIES........................................................................................................................................................13
4.4 PROJECT IMPLEMENTATION.............................................................................................................................14
4.5 ORGANIZATIONAL STRUCTURE.......................................................................................................................14

I|Page
 4.5.1 Organization and management.............................................................................................................14
4.5.2 Man Power............................................................................................................................................15
4.5.3 Organizational Structure.......................................................................................................................15

5 FINANCIAL REQUIREMENT AND ANALYSIS........................................................................................18

5.1 FIXED INVESTMENT.........................................................................................................................................18

5.2 WORKING CAPITAL.........................................................................................................................................19
5.2.1 Operating Expense at full Capacity......................................................................................................19
5.2.2 Operating Expenses..............................................................................................................................20
5.3 TOTAL INITIAL INVESTMENT COST..................................................................................................................20
5.4 FINANCIAL ANALYSIS AND STATEMENTS.......................................................................................................22
5.4.1 Underlying Assumption........................................................................................................................22
5.5 SOURCES OF FUND..........................................................................................................................................22
5.5.1 Bank loan Repayment Schedule...........................................................................................................23
5.6 FINANCIAL EVALUATION.................................................................................................................................23
5.6.1 Profitability...........................................................................................................................................23
5.6.2 Ratios....................................................................................................................................................23
5.6.3 Break-even Analysis.............................................................................................................................24
5.6.4 Pay-back Period....................................................................................................................................24
5.6.5 Internal Rate of Return..........................................................................................................................24

6 ENVIRONMENTAL IMPACT OF THE PROJECT....................................................................................24

7 APPENDIX .A...................................................................................................................................................26

II | P a g e
 List of table

TABLE 1 OFFICE SPACE DEMAND FORECAST.................................................................................................................8

TABLE 2 BUILDING FUNCTIONS.......................................................................................................................................9
TABLE 4 PROJECT IMPLEMENTATION SCHEDULE...........................................................................................................14
TABLE 5 LAND, BUILDING & CONSTRUCTION............................................................................................................18
TABLE 6 BUILDING MACHINERIES AND EQUIPMENT....................................................................................................18
TABLE 8 OFFICE EQUIPMENT........................................................................................................................................19
TABLE 9 SALARY EXPENSE...........................................................................................................................................19
TABLE 10 ANNUAL OPERATING COST AT FULL CAPACITY (YEAR TWO)....................................................................20
TABLE 11 INITIAL INVESTMENT COST...........................................................................................................................21
TABLE 12 SOURCE OF FUND..........................................................................................................................................22

List of Figure

FIGURE 13D VIEW OF THE BUILDING............................................................................................................................11

III | P a g e
 1 Executive Summary

1. Project name: Mixed use Building

2. Project Type : Multipurpose business building
3. Nationality: Ethiopian owned
4. Project Owner: Mesfen Kebede mixed use building
5. Project location: Addis Ababa, Ethiopia
6. Project composition: Mixed use Buildings (G+4) used for diverse business activities like
shopping, banking & insurance, super market, shops, restaurants, cafés, beauty salon,
Pharmacy or offices.
7. Total investment Cost: 9.4 million ETB is required from this amount 30% or 2.8 million
ETB from owner equity and the rest 70% 6.6 million ETB from bank loan.
8. Employment opportunity: 9 individuals on permanent 50 on casual basis
9. Social and Economic Benefit: provide better Building service, employment opportunities,
generation of income and benefits for the local area and people.

1|Page
 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,
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 Mesfen Kebede

2|Page
who has founders been living for long time in this city, planned to construct in Addis Ababa 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
Addis Ababa 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 Addis
Ababa. Its specific objectives include the following.
 To construct and develop modern Cloth outlets, 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 Addis Ababa and its surrounding
areas by creating a differentiated experience capitalizing on personal service. The proposed
project will have a total area of 205m2, designed to render a multipurpose giving business, which
will in turn plays significant role towards solving shortage of business center in Addis Ababa.
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

3|Page
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 is experiencing, the good governance created
and even if the city is in its nascent 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.
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:

4|Page
 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 9 individuals on permanent 50 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

Addis Ababa city, capital city of Ethiopia.

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-

5|Page
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. Addis Ababa is dynamically
growing city. Though the market demand gap for mixed use building in Addis Ababa 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 Addis Ababa is very high and hence the demand and the supply gap is very wide.

3.2 The Demand-Supply Gap

Addis Ababa city is situated in the very center of Ethiopian service industry. Addis Ababa city 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
activist and partly due to an increase in the flow of international and local traders in to the city.
Since Addis Ababa 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 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 mixed use buildings, so, this project
would not face any problem of demand scarcity for it business center and it would provide good
service to customers.

6|Page
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 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 Addis Ababa in booming highly due to the recent
rapid growth experienced in Ethiopia. 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 Addis Ababa are mainly firms providing banking,
cafeteria and restaurants, bed room, supermarkets service, computer Center Crevice. The
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

7|Page
 case economic in m2 economic in m2
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. Mixed business Community
2. Nearby business organization
3. the government bureau
4. small accounts(SOHO) SME
5. Nongovernmental 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
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.

8|Page
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:

Table 2 Building functions

Building Description UOM Availed area

Ground Supermarket, Pharmacy, Banking & M2 150
Insurance
st
1 FLOOR Bank, Office, Cafeteria & Restaurant M2 158
2nd FLOOR – 4th FLOOR Apartments M2 474
Total 782
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

9|Page
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 3.2
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 four floors.
The purpose of the building explained as follows;
 the ground floor and first 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 second to fourth will be designed as apartments.
Besides, the buildings will have enough parking facility for its customers and green area in its
compound.

4.2 Construction work and Technology

4.2.1 Construction schedule

The construction project is started on May 2021, and is expected to be finished on May 2022. 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.

10 | P a g e
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.

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

4.2.2 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.
The walls and partitions throughout the floor were congruent with the structural frame and
column locations.

11 | P a g e
4.2.3 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.

4.2.4 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 500 kilos per square meter was assumed. Loads were calculated based on the
requirements of the minimum Design loads for Buildings and other Structures.

4.2.5 Foundation Design

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

4.2.6 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.

12 | P a g e
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.

4.3 Utilities

A number of utilities world be put in place in order to ensure smooth functioning of the project.
These utilities include:
 Water Supply,
 Solar powered offices
 Supplementary Electricity supply.
 Telephone line Internet Broadband
 Well landscaped areas
 Responsible waste removal

13 | P a g e
  Well thought about site arrangement

4.4 Project implementation

The project’s implementation is expected to take 12 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 3 project Implementation schedule

SN ACTIVITIES DATE
1 Construction work permit processing JANUARY, 2021
2 Construction Bid Processing FEBRUARY, 2021
3 Site Development APRIL 2021
4 Building and construction work Phase I MAY, 2021- JULY,2021
5 Bank loan processing JULY,2021-AUGUST,2021
6 Building and construction work Phase II AUGUST, 2021- MAY,2022
7 PREPARATION FOR SERVICE JUNE, 2022

4.5 Organizational Structure

4.5.1 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.

4.5.2 Man Power

The total manpower required for the building will be 59 persons. The manpower list and the
corresponding labor cost are shown in part five of this document.

4.5.3 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

14 | P a g e
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
finance

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
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

15 | P a g e
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.
 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

16 | P a g e
17 | P a g e
 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 9.47 million ETB is required. From this 30% 2.8
million birr will be covered by the promoter of the project while the rest 70% 6.6 million will be
covered through 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 4 Land, Building & Construction

S.N Description of works Total Cost in birr

1 Building construction 8,581,500
2 Site Development 12,500
3 Design and supervision 54,000
Total 8,648,000

B. Building Machineries and Equipment

Table 5 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
5 Fire extinguisher Unit 10 6,000.00 60,000.00
(Security Equipment)
6 Total 227,800.00

C. Office Equipment
Table 6 Office Equipment

SN Description Measurement Qty Unit cost in Total cost in

18 | P a g e
 birr Birr
1 Executive table Unit 1.00 25,000.00 25000
2 Managerial Table Unit 2.00 17,500.00 35000
3 Working Table Unit 2.00 12,000.00 24000
4 Document shelf Unit 4.00 7,100.00 28400
5 File cabinet Unit 3.00 2,430.00 7290
6 Desktop computer Unit 4.00 6,100.00 24400
7 Laptop Unit 1.00 24,000.00 24000
8 Printer Unit 1.00 15,000.00 15000
9 Fax & Telephone machine Unit 2.00 1,300.00 2600
10 Carpet and Curtain LS 1.00 21,000.00 21,000.00
Total 206,690.00

5.2 Working Capital

5.2.1 Operating Expense at full Capacity

a. salary Expense
Table 7 salary Expense

SN Position No Qualification Monthly Annual

salary in salary in
Birr Birr
1 General manager 1 BA in management 3000 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 Custodians 1 Basic 950 11,400
5 Technical and 1 Diploma in building maintenance 1500 18,000
maintenance manager
6 Guards/Security 4 Basic 500 24,000
Total 9 130,200
Benefit (20%) 26,040
Grand Total 156,240

5.2.2 Operating Expenses

The annual operating cost at full operation capacity is estimated at Birr 1.9 million (see Table
10). The cost of Office stationary account for 0.5% of the operating cost. The other major
components of the operating cost are financial cost (82 %). For detail production cost see
Appendix A.2.

19 | P a g e
 Table 8 Annual Operating Cost At Full Capacity (Year Two)

Items Cost %
Office stationary 10,000 0.5%
Utilities 54,000 2.7%
Maintenance and repair 78,000 4.0%
Labor direct 156,240 7.9%
Administration Costs 25,000 1.3%
Land lease cost 20000 1.0%
Cost of marketing 0.0%
Total Operating Costs 343,240 17.4%
Depreciation 0.0%
Cost of Finance 1,625,277.0 82.6%
Total Production Cost 1,968,517 100.0%

5.3 Total initial investment cost

The total investment cost of the project including working capital is estimated at Birr 9.4 million
(See Table 11). From the total investment cost the highest share (Birr 8.6 million or 91 %) is
accounted by Building and civil work cost

Table 9 initial investment cost

Foreig
Local Total %
Sr. No Cost Items n
Cost Cost Cost Share
1 Fixed investment
1.1 Land Lease 20,000 20,000 0.21%
1.2 Building and civil work 8,648,000 8,648,000 91.24%
1.3 Machinery and equipment 228,000 228,000 2.41%
1.4 Vehicle cost 0 0 0.00%
Office, office furniture and
1.5 equipment 206,690 206,690 2.18%
Sub total 9,102,690 0 9,102,690 96.04%
2 Pre operating cost * 0.00%
2.1 Pre operating cost 202,620 202,620 2.14%

20 | P a g e
 2.2 Interest during construction 70,917 70,917 0.75%
Sub total 273,537 0 273,537 2.89%
3 Working capital ** 101,804 101,804 1.07%
Grand Total 9,478,031 0 9,478,031 100.00%

* 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 203,608. However, only
the initial working capital of Birr 101,804 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 16%
B. depreciation
Building No depreciation

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
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

21 | P a g e
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 10 Source of fund

SN Description Percentage share Amount

Owners Share 30% 2,843,409.23
Bank Loan 70% 6,634,621.53
Total 100% 9,478,031

5.5.1 Bank loan Repayment Schedule

Year Principal Payment Interest (16%) Total annual Remaining

Payment in Balance
ETB
0 6,634,621.53
1 581,276.95 1,061,539.44 1,642,816.4 6,053,344.57
2 674,281.27 968,535.13 1,642,816.4 5,379,063.31
3 782,166.27 860,650.13 1,642,816.4 4,596,897.04
4 907,312.87 735,503.53 1,642,816.4 3,689,584.16
5 1,052,482.93 590,333.47 1,642,816.4 2,637,101.23
6 1,220,880.2 421,936.2 1,642,816.4 1,416,221.03
7 1,189,625.67 226,595.37 1,642,816.4 0

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 448,533 to 1.9 million during the
life of the project. Moreover, at the end of the project life the accumulated net cash flow amounts
to Birr 12.8 million. For profit and loss statement and cash flow projection see Appendix A.3 and
A.4, respectively.

22 | P a g e
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 1,835,469.18

Variable Margin ratio (%)

Break- Even Capacity utilization = Break -even Sales Value X 100 = 56 %

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 5 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

23 | P a g e
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 12 % 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:
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. swages 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.

24 | P a g e
 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 Yea
Total inventory 112,000 179,200 224,000 224,000 224,000 224,000 224,000 224

Accounts receivable 64,575 103,320 129,150 129,150 129,150 129,150 129,150 129

Cash-in-hand 3,229 5,166 6,458 6,458 6,458 6,458 6,458 6,4

CURRENT ASSETS 179,804 287,686 359,608 359,608 359,608 359,608 359,608 359

Accounts payable 78,000 124,800 156,000 156,000 156,000 156,000 156,000 156

CURRENT LIABILITIES 78,000 124,800 156,000 156,000 156,000 156,000 156,000 156

25 | P a g e
 TOTAL WORKING CAPITAL 101,804 162,886 203,608 203,608 203,608 203,608 203,608 203

Appendix 7.A.2
PRODUCTION COST ( in Birr)
             
Item Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Y
Office stationary 5,000 8,000 10,000 10,000 10,000 10,000 10,000 1
Utilities 27,000 43,200 54,000 54,000 54,000 54,000 54,000 5
M
aintenance and repair 39,000 62,400 78,000 78,000 78,000 78,000 78,000 7
Labor direct 78,120 124,992 156,240 156,240 156,240 156,240 156,240 1
Administration Costs 12,500 20,000 25,000 25,000 25,000 25,000 25,000 2
Land lease cost 20000 20000 20000 20000 20000 20000 20000 2
Cost of marketing 21,000 33,600   0 0 0 0
Total Operating
202,620 312,192 343,240 343,240 343,240 343,240 343,240 3
Costs
Depreciation              
Cost of Finance 1,625,277.0 1,625,277.0 1,625,277.0 1,625,277.0 1,625,277.0 1,625,277.0 1,625,277.0
Total Production
1,827,897 1,937,469 1,968,517 1,968,517 1,968,517 1,968,517 1,968,517 3
Cost

26 | 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

Sales revenue 1,642,200 2,627,520 3,284,400 3,284,400 3,284,400 3,284,400 3,284,
Less variable costs 149,120 238,592 298,240 298,240 298,240 298,240 298,2
VARIABLE MARGIN 1,493,080 2,388,928 2,986,160 2,986,160 2,986,160 2,986,160 2,986,
in % of sales revenue 91% 91% 91% 91% 91% 91% 91%
Less fixed costs 1,678,777 1,698,877 1,670,277 1,670,277 1,670,277 1,670,277 1,670,
OPERATIONAL MARGIN -185,697 690,051 1,315,883 1,315,883 1,315,883 1,315,883 1,315,
in % of sales revenue -11% 26% 40% 40% 40% 40% 40%
Financial costs 1,625,277 1,625,277 1,625,277 1,625,277 1,625,277 1,625,277 1,625,
GROSS PROFIT -1,810,974 -935,226 -309,394 -309,394 -309,394 -309,394 -309,3
in % of sales revenue 55% 54% 53% 58% 59% 59% 60%
Income (corporate) tax -633,841 -327,329 -108,288 -108,288 -108,288 -108,288 -108,2
NET PROFIT -1,177,133 -607,897 -201,106 -201,106 -201,106 -201,106 -201,1
in % of sales revenue -72% -23% -6% -6% -6% -6% -6%

Appendix 7.A.4
CASH FLOW FOR FINANCIAL MANAGEMENT ( in Birr)

Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Y

TOTAL CASH INFLOW 9,305,310 1,805,086 2,674,320 3,315,600 3,284,400 3,284,400 3,284,400 3,2
Inflow funds 9,305,310 162,886 46,800 31,200 - - -
Inflow operation 0 1,642,200 2,627,520 3,284,400 3,284,400 3,284,400 3,284,400 3,2
Other income 0 0 0 0 0 0 0
TOTAL CASH OUTFLOW 9,305,310 1,689,871 2,057,734 2,282,462 2,241,740 2,241,740 2,241,740 61
Increase in fixed assets 9,305,310 0 0 0 0 0 0
Increase in current assets 0 101,803.75 61,082.25 40,721.50 - - -
Operating costs 0 149,120 238,592 298,240 298,240 298,240 298,240 29
Marketing and 0 21,000 33,600 0 0 0 0
Income tax 0 -633,841 -327,329 -108,288 -108,288 -108,288 -108,288 -10
Financial costs 0 1,625,277 1,625,277 1,625,277 1,625,277 1,625,277 1,625,277

27 | P a g e
 Loan repayment 0 426,511 426,511 426,511 426,511 426,511 426,511 42
SURPLUS (DEFICIT) 0 115,215 616,586 1,033,138 1,042,660 1,042,660 1,042,660 2,6
CUMULATIVE CASH 0 115,215 731,801 1,764,939 2,807,599 3,850,258 4,892,918 7,5

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 Y
TOTAL CASH 1,642,200 2,627,520. 3,284,400 3,284,400. 3,284,400. 3,284,400 3,284,400
0
INFLOW .00 00 .00 00 00 .00 .00
Inflow operation 0 1,642,200 2,627,520 3,284,400 3,284,400 3,284,400 3,284,400 3,284,400
Other income 0 0 0 0 0 0 0 0
TOTAL CASH
9,305,310 -463,721 -55,137 189,952 189,952 189,952 189,952 189,952
OUTFLOW
Increase in fixed
9,305,310 0 0 0 0 0 0 0
assets
Increase in net
0 0 0 0 0 0 0 0
working capital
Operating costs 0 149,120 238,592 298,240 298,240 298,240 298,240 298,240
Marketing and
0 21,000 33,600 0 0 0 0 0
Distribution cost
Income (corporate) tax   -633,841 -327,329 -108,288 -108,288 -108,288 -108,288 -108,288
Loan repayment 0 426,511 426,511 426,511 426,511 426,511 426,511 426,511
NET CASH FLOW -9,305,310 2,105,921 2,682,657 3,094,448 3,094,448 3,094,448 3,094,448 3,094,448
CUMULATIVE
-9,305,310 -7,199,389 -4,516,732 -1,422,284 1,672,164 4,766,612 7,861,059 10,955,507
NET CASH FLOW
Net present value -9,305,310 1,968,150 2,343,137 2,525,991 2,360,739 2,206,299 2,061,961 1,927,067
Cumulative net
-9,305,310 -7,337,160 -4,994,023 -2,468,032 -107,292 2,099,006 4,160,967 6,088,034
present value

NET PRESENT 9,285,94

VALUE 2
IRR 18%
NORMAL
5 years
PAYBACK

28 | P a g e