Mixed Use Building Development Project

Executive Summary

The project is to be promoted in Holeta town of Oromia region at about 30

Km from Finfinne city/center National market. The general description of the
project:
 Name of the project: SENA Building
 Project type:- Mixed Use Building Development
 Owner: SENA Business Plc
 Total area of land it require: 2000 M2
 Financial description of the project:
 Fixed capital -------------------------------------- 12,329,900.00
 Working capital ---------------------------------------- 957,800.00
 Total capital ----------------------------------- 13,287,700.00
 Contingency (5%) ------------------------------------- 664,385.00
 Total investment cost ----------------------------13,952,085.00
 Financial source to promote the project
 Promoter contribution (40%) ------------------------ 4,185,625.50
 Bank (60%) ---------------------------------------------- 9,766,459.50
 Total (100%) ------------------------------------------ 13,952,085.00

The community will benefited from this project by supplying labor both during
project implementation and operation phase that it creates job opportunity for
more than 50 job seekers in both permanent and contractual bases. Its
payback period is estimated to be 6 years after its establishments expecting
more than 2.5 million Birr profit each year from rent and running their own
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business that increases.

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1. General Background
Ethiopia is a country with ample of potential resources for every investment activities
especially on un-utilized potential of the development of construction sector with its
facilities. Facilities need to go a long way to satisfy the ever-increasing demands of
service seekers that has direct linkage with the provision of the proposed facility which
have great implication of having access for what the community needs to improve the
live being of the town community.

Private investment sector should be encouraged to increase from year to year and
investment constraints have to be alleviated in order to pave development ways so that
investment of private sector happens to be determinant about factor of economic
development of the country like Ethiopia. It is usually considered as the engine of an
economy. Both private sector and government bodies in many ways have commonly
agreed this idea. Economic development in any case needs both efforts of the private
as well as the public sector. There are investments that could not be undertaken by
private sector due to its difficult nature.

However, the passed command economy system and the lack of experience between
both sides have made it so hard for a privet sector to flourish. The discrepancy between
limited number of domestic investor engaged in a sector and growing demand of the
services has further complicated the problem. Due to this the project under
consideration envisages to exploit this business potential for the benefit of the promoter,
the community, the town administration as well as the country as a whole.

The town is considered the center of many rural settlers of productive areas and serving
them as the administrative centre as well as centre for developed and technology. It is
also the centre for market access for all business activities. The project is aimed to
provide different services for the town community and to maximize return on invested
capital as most business venture to the promoter. In a process of attaining this basic
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idea it also plan to benefit the community through creation of job opportunity, service
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rendering, taxpaying and so on.

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2. Background of the town

2.1 Physical set up of the town

The project is planned to be developed in Holeta town of Oromia region which is

located at about 30km distance Finfinne city on Finfinne- Nekemt highway.
Holeta is one of the reformed towns of the special zone of Oromia surrounding
Finfinne. Although, it is one of those towns of Oromia region in which major
economic activities carried out. Due to its current fast growing situation of the
town, many potential investors are interested to invest which encourage the
promoter to be engaged in the proposed project.

The town is located within an approximate geographical coordinates of

9º03'03.02"N - 9º04'45.58"N latitude & 38º 28'28.30" E - 38º30'37.00"E longitude.
With regard to relative location, it shares common boundaries with Menagesha
Kolobo in the Southeast and Ejere in the Northwest, as well as rural villages of
the district in the rest directions.

Holeta town is faced and influenced by the Suba Mountain and Kolobo forest for
the regulation of its climate condition. The geographical location of the town
which is in between high productive areas is the potential for the developments of
the town as well as its economic development. The proposed project is planned
to be established along the main asphalt road crossing the town on the
commercial land use of proposed on the town plan which is an ideal location for
the proposed activities.
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2.2 Climatic Condition of the town

Climatically, the town is classified under wiena-Dega zone that has the same
general climatological characteristics as that of Addis Ababa. Globally it is a
part of tropical humid climatic region, which is characterized by warm
temperature and high rainfall. The broad climatic characteristics of the study
area, with its alternating wet and dry seasons, are determined largely by the
annual movements across the country of equatorial low pressure zones
caused by the convergence of dry north-easterly winds with moist winds of the
south-easterly or south-westerly origin.

3. Economic Activities and Infrastructure availability

3.1 Economic Activities
It is a bare fact that elsewhere in the country rural dwellers depended largely
on agricultural activities whereas urban dwellers are engaged in commercial
activities as their primary economic base and agro-based activities as a
supplementary and secondary economic base.

Hence, the economic activities carried out in the project area coincide exactly
with other towns of Oromia special zone surrounding Finfinne and found at
immediate boundary of Finfinne city that is close to the national market. Since
Holeta is one these towns with highly access to the national and international
market, it has all those advantages than other towns of the region in the same
standard has. The major economic activities that are widely carried out are
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commercial, service, industrial, and agro-based activities that has a great

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contribution on the market of construction as well as constriction related

activities.

Therefore, the overall development of commercial and industrial activities that

has a great role to contribute to construction and related activities in the
region, the existing need on the town for residential, commercial, industrial
and the like with inadequate supply to support these all activities that support
these development activities, the town has attracted the promoters and laid
down bases for this project to be promoted.

3.2 Infrastructure Availabilities

The social and economic infrastructure availabilities in the town include

schools up to tertiary level, health institutions up to Hospital level. With
respect to physical infrastructures; there is a 24 hours hydroelectric power,
well developed transport services in similar standard with the Federal capital
Finfinne city wand pure potable water supply services with different modern
communication facilities in the town.

Despite the fact that there such market access with investment activities in the
project area in the town, there is no any well developed service rendering
activities that accommodate the ever increasing demand of service seekers in
the town where the project is to be developed. 5
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4. The Project

The project is to be engaged on constructing mixed use building to provide the

current backlog in the town like Banks, Supper market, cafeteria and
restaurant as well as to let-out other classes from these all. It is entitled as
“SENA Mixed Use Building” and owned by SENA Business Plc. It is to be
promoted in the near future in order to solve the current gap in the town as
well as the local site. The project site will be situated along Finfinne-Nekemt
Highway crossing the town on the proposed commercial land use of the
structure plan of the town. It is integrated with the asphalted road which is
easy access to transportation, parking and other duty important facilities.

4.1 Objectives

4.1.1 General Objective

The general objective of this project is primarily to construct modern mixed

building with as commercial center as well as rental classes for service
rendering activities.

4.1.2 Specific Objectives

The project has the following specific objectives:

• To solve the current facility gap in the town, the specific area
• To generate reasonable return on investment to be made
• To increase government revenue through taxations and
• To create job opportunities at construction & implementation stages both
plants to be sited on the same site.
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4.2 Project Rationale

The project is a privately owned profitable business center that needs

resources to run in profit. On the other hand there is unutilized potential
market opportunity in the locality/town especially for those which are engaged
in such business activities like Banking, shop, cafeteria, office, hotels,
restaurants & the like. This can be justified by looking on the current demands
when most service rendering activities in the locality using small kiosks and
shanty houses without comfort for both service provider and their customers.

The development of the project in this town will have a huge benefit in using
the unutilized resource construction which is on its infant stage to use as an
income generating tools. The existing buildings in the town are observed not
satisfying the current demand as indicated above. Despite these constraints,
they observed extremely misused potential lands in the town for incompatible
land use that enforces the service renders to use uncomfortable houses for
service seekers.

Therefore, service seekers need to get the service with every facilities and
comforts. With these rationales, to exploit such intact market, the project
owner has highly desired to invest in this activity to be benefited from it and to
benefit the community that in turn benefit the town administration to make the
town competent town.
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4.3 Project Description

The project includes modern commercial center for service seekers and other
organization to rent weather governmental, non-governmental ad well as profit
making organizations that directly and/or indirectly in turn results community
satisfaction. Not only had this, but also the project promoter had objective of
participating on different development work on sub-contractual base like
working cooperation with other small scale industries. In order to achieve
these, there will be land development and civil work activities for the project
development.

4.4 The Benefits of Mixed Use Development for the Town

Many business men prefer mixed use building than those specified one due
different reasons. Majority of these are to the benefit of both the promoter and
the service seekers. Some see it as an excellent way to incorporate a mix of
activity types on a small scale while enhancing access for the service. Still
others use it to create or enhance market and village centers. Listed below
are some of the many benefits of mixed use development:
 Encourages high quality design by providing both greater flexibility and more
control
 Preserves and enhances traditional common service and common life
centers
 Promotes a village-style mix of retail, restaurants, offices, civic uses, and
multi-family housing
 Provides more housing opportunities and choices
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 Enhances an area’s unique identity and development potential (e.g.,

Market centers, locations near bike paths, or “gateway” areas that
announce a community’s strengths)
 Encourages economic investment and market strength
 Promotes efficient use of land and infrastructure
 Guides development toward established areas, protecting outlying rural
areas and environmentally sensitive resources
 Improves a municipality’s Commonwealth Capital score
 Embodies “Smart Growth” and increases revenues
Although mixed use is especially applicable near public transportation, it has
advantages for other areas as well. Benefits include the preservation of
undeveloped or environmentally sensitive land elsewhere in the community,
opportunities for more or different housing, bicycle and pedestrian-friendly
destinations, and an enhanced sense of place or sense of community. In
developing a bylaw, communities should select the advantages that best apply
and structure the provisions to accomplish these goals.

4.5 Land Requirement and Utilization

Land is primarily used to realize the proposed project. The total land required for
the proposed project is 2000 M2 of land which is owned by the developer as well
as with the adjacent expansion opportunity of 1000 M2 nearby land which is a
total of 3000 M2 for service expansion and provision of different facilities and
services. Out of this area, 75% of land will be built up that is to be allocated for
the construction of the building and other built up areas, the remaining 25% of
land will be used for other different purposes like green area and an experience
of sitting outside.
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Table:-1. Land Budget of the Project

S.N Function type Area in M2 Remark
1 Main Building 400
2 Store and Extra room 400
3 Green areas 350
4 Fencing 72
5 Frontage & Extra space 250
6 Car Parking 450
7 Dry toilet 36
8 Guard House 42
Total 2000

4.6 Market Assessment and Analysis

Construction, especially such a mixed building development as a commercial

center seems modern advantage and technology is at its infant stage in our
country, Ethiopia in such medium and small towns despite our economic
standard is categorized under developing countries. Therefore, it presents us
with growing demand for such facility with the increasing development of
needs that increases at alarming rate in the region as well as the country as a
whole.

Ethiopia, Oromia Region, in particular towns of the region which are located at
near to the National market like the town where the project is to be developed,
Holeta town has enormous land for investment use that also may come with
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both negative and positive impact for the general need.

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The General assessment of the project market shows that the need for such
service like this project in our country is increasing from time to time while the
supply side has problem with the growing demand both in quality and quantity
terms. This may be due to an increasing demand of business development
and recreation facility in our country as well as the proposed town of the
project that shows our right decision for the development of the project.

To ensure the center’s service quality that in turn ensures customer centered
service delivery, the project promoter has conducted market assessment and
believed in hiring out qualified managers and professionals. Thus, this project
is initiated on the bases of pre-feasibility studies that are conducted in the
form of reconnaissance and partly due to the interest of the project owner to
invest in steel processing and manufacturing activity. This project will be
economical, social, technological and politically feasible if a project like this
one is implemented in nearby area. Therefore, implementation of the project
under study can serve only some existing excessive demand for the standard
services ever needed.

Taking the advantage of the importance of the new economic policy, many
investors are on a way of involving into such type of investment with different
objectives of providing the proposed facilities. So, that the economy is
growing fast, the quality of live going to be improved, and markets are
expanding. As it has been observed and surveyed by the project owners the
project area is highly demanded for such facility both in government
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organizations, non-governmental organizations as well as private companies.

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4.6.1 Segmentation

The project shall initially use local market from the town community through
penetration strategy in general and from the nearby towns and surrounding rural
area to introduce its functional rooms and services to be provided to establish
itself in a local market with an intention to expand to the external visitors on the
weekend and any other days as well as unplanned passengers. Accordingly, the
market for the service products the industry shall be:
• Local market from the town dwellers and the surrounding rural community
both rent and service consumption
• Market from the nearby towns as well as Finfinne city for rent as well as
other unplanned market from passengers for the proposed service to be
provided

4.6.2 Promotion

The building shall be advertized to attract the attention of customers from its
expected different sources. Hence, promotion through town administration, town
association as well as with other media shall be used for its considerable
markets. Posters, pamphlets and any more means of advertisements could be
used for passengers and other expected markets.

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4.7 Project Benefits and Beneficiaries

The promoter will benefit from this project as it gains income from the service
and housing rent. Secondly, the community around the project area will
benefited from this project by supplying labor both during project
implementation and operation phase. Third, for the potential users, the
residents of the town earn other additional alternative for their quest for such
services going to be provided without allocation of extra expense.

Fourth, the community and the town administration will be benefited by having
quality services within the town that made the competent in every direction as
well as using its potential resource. The developer also aims to provide this
service to the local community with reasonable cost by providing services in
their home town without encuring unreasonable cost which also have socio-
economic impact to the society.

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5. Environmental Aspects

The project will seriously involve itself in protecting, conserving and

developing the natural and flora of the project area inline with the Millinium
development goal. To this end it will play a vital role in participating in various
organizations and the community around the project area to form an
environmental committee in charge of all environmental issues to be handled
in accordance to various environmental and water policies of 1997/1999.

The owner of the project believes to undertake several environmental issues

for the conservation, development and creation of sustainable environment
around the project area. This will include soil and water conservation
activities, protecting and developing the natural flora, fauna and ecosystem as
a whole.

The promoters of the project will participate in any forum that might be
organized by concerned authorities and the community to promote
environmental issue and concept for sustainable development in the area. In
addition to this, it will introduce and use environmental friendly technologies
such as tree planting and conserving the existing tree species in the
compound.
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6. Financial Analysis of the Project

6.1 Raw Materials/Inputs

The project as every other business organization shall need raw materials as
input to produce its products in the production process. Hence, land means of
production, raw materials and human power shall be the major inputs,
accordingly: Physical assets including construction cost, Capital goods
(machineries and other) with estimated cost and Initial cost of the year to start
the project will be presented as follows:

6.1.1 Organizational structure and Man Power of the project

Number of employees required for the project is determined by types of tasks
to be undertaken during construction phase and ongoing activities. Based on
its activities, this project will employ a total of 50 persons both on permanent
20 and the remaining in contractual bases when it starts to fully operate with
considerable number at construction stage.

Manager

Finance & Administration Head Secretary Auditor

Accountant
Purchaser
Laborers
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Janitors Guards
Cashier
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Fig: 1 Organizational structure

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As easily seen above, the chart clearly shows that hierarchy of and accountability
of each stuff members in order to aware them and avoid accountability gap and
redundancy. If there is no accountability gap and overlap, it may have negative
impact on the productivity of the business by affecting affectivity and efficiency.
The administration section of the organization will support the component
structure. The component as a unit will also have its own plan and responsibility.
The labor requirement operational unit and salary bill is provided under a unit, but
the salary of construction calculated in the construction cost.

Table:-2. Salary Allocation for Permanent Employees

Position No Monthly Salary Annual Salary
S.N
1 General Manager 1 4000.00 48,000.00
2 Secretary & IT tech. 1 1800.00 21,600.00
3 Admin. & Finance head 1 3000.00 36,000.00
4 Auditors 1 2500.00 30,000.00
5 Accountant 1 2500.00 30,000.00
6 Purchaser 1 2000.00 24,000.00
7 Sales man 1 2000.00 24,000.00
8 Casher 1 2000.00 24,000.00
9 Driver 2 1500.00 30,000.00
10 Store keeper 2 1200.00 28,800.00
11 Guards & Greeneries 4 650.00 31,200.00
12 Janitors 4 650.00 31,200.00
13 Laborers 30 400.00 144,000.00
Total 49 _ 502,800.00
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6.2 Fixed Investment Costs

Fixed investment items are including construction cost, service facilities, vehicles,
machineries and furniture with additional office equipments. The major
investment cost of the project is costs of construction materials and vehicles. The
total investment capital of the project will end up by producing fixed capital which
is required in local currency. The following cost estimation shows the fixed
investment of the project according to its functionality.

6.2.1 Construction Cost of the Project

This cost is rough estimate of the total construction cost of the project. It includes
every cost encored on project construction such as material cost, labor cost,
instrument and any other cost of the project during its construction up to finishing
including extra work in connection of the building project. The rough estimate
cost of the project is presented in the table below.

Table:- 3. Estimated Construction Cost plan of the Project (Birr)

S/N Description Unit Qty Price Remark
Unit Total
1 Block I
(400*4*5400)
• Main Building (G+3) M2 400 5,400.00 8,640,000.00

2 Block II
(400*4000)
• Store and extra rooms M2 400 4,000.00 1,600,000.00

3 Block III
• Fencing M2 72 1,200.00 86,400.00
“
• Dry Toilet 36 1,500.00 54,000.00
“
• Guard House 42 1,500.00 63,000.00
4 Block IV
• Car parking M2 450 750.00 337,500.00
“
• Frontage & Extra space 250 750.00 187,500.00
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“
• Green area 350 250.00 87,500.00
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Total Sum 2000 11,055,900.00

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Table:- 4. Some Standing Cost of the Project plan (Birr)

Price
S/N Description Unit Qty. Unit price Total price Remark

I Standing capital
1 Office furniture Lump Est. - 60,000.00
2 PC with accessories Pc 2 20,000.00 40,000.00
3 Pick up vehicle No 1 750,000.00 750,000.00
5 Midi Bus (Service) ” 1 250,000.00 250,000.00
6 Generator ” 1 150,000.00 150,000.00
8 Land lease rent M2 2,000 12.00 24,000.00
Total 1,274,000.00

Table:- 5. Summary of Fixed Investment Cost

No Description Unit Quantity Total Cost
1 Building and Civil Works M2 11,055,900.00

2 Vehicle
• Medium Bus No 1 250,000.00
• Pick up ” 1 750,000.00
3 Computers with printers ” 2 40,000.00
4 Generator ’’ 1 150,000.00
5 Office furniture Set - 60,000.00
6 Land Lease M2 2000 24,000.00
Total 12,329,900.00
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6.3 Working Capital

Working capital is part of annual operating costs and is required to make the
project operational. Except for some operational costs whose yearly expenses
were taken as they are some limited monthly expenses were taken to forecast
the working capital requirement of the project. The main components of working
capital are salary and wage, purchase of raw materials with other operating
costs.
Table:- 6. Some other supportive/Administration expenditure plan (Birr)
Quantity Price (Birr) Remark
S.N Items Unit Unit price Total Price
2 Fuel & Lubricant ” ” 120,000.00
3 Stationary ” ” 25,000.00
4 Utilities ” ” 50,000.00
5 Consultant service ” ” 30,000.00
6 Advertisement ” ” 50,000.00
7 Commission ” ” 30,000.00
8 Insurance ” ” 50,000.00
9 Perdium ” ” 50,000.00
10 Incentives ” ” 50,000.00
Sub-Total 455,000.00

Table:- 7. Summary of Working capital

Item Description Cost per year
1 Salary and wage 502,800.00
2 Other non-standing cost 455,000.00

Total 957,800.00
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6.4 Total Investment Cost of the Project

Total investment cost of the project includes both the fixed investment cost
and the working capital of the project. Fixed investment cost of the project by
itself incorporates the construction cost of the project, capital costs, the
standing costs as well as other tangible assets of the project.

The working capital of the project on the other hands incorporates the
employee’s salary and wages, non-standing costs as well as other intangible
assets of the project. Working capital of the project is the budget that is
expense on the project activity to perform the project which is budgeted only
once a year to perform the project work for that budgeting year.

Table:- 8. Total Investment Cost

No. Items Total Cost
1 Fixed Capital 12,329,900.00
2 Working Capital 957,800.00
Total 13,287,700.00
Contingency (5%) 664,385.00
Grand total 13,952,085.00
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6.5 Finance Source of the Project

Since Finance is the basic for any project development, analysis of source of
finance is also the main part and parcel of project planning for the feasibility of
the project. All the project investment is covered by means of financing plan.
Hence, about 30% source of finance for the investment of the project would
be covered by the promoter. The remaining 70% of the total investment cost
will be granted from Bank loan.

Table:- 9. Source of Finance

S.N Source Percentage Amount in birr
1 Promoter contribution 30% 4,185,625.50
2 Bank loan 70% 9,766,459.50
Total 100% 13,952,085.00

The bank load for the project development is also expected to be payed back
for the borrower bank starting from the end of the construction of the project.
This could be done when the project is finalized and fully operational and their
starting business that help the promoter to earn revenue either from the
renting rooms or from the business of the promoters. 21
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7. Implementation Strategies of the Project

When thinking to establish this project, the promoter has a plan to implement
it in three phases.

• 1st Phase:- requires its own machineries and working capital including
construction of the building for the project. It covers about 50% of the
total investment cost of the project.

• 2nd Phase: - will start at a year of completing the 1st Phase of the
project. It is worth at around 30% of the total investment cost of the
project. The working hour will be doubled and number of employees
increase by 50% in this phase.

• 3rd Phase: - will start immediately after completing the 2nd Phase of the
project. It covers the remaining 20% of the total the project cost.

The projects estimated cost of working capital is covered by the promoters.

The fund that is to be generated from various sources is ready to cover the
cost of construction of the buildings, the purchase of machineries, furniture,
equipments, vehicles and other requirements.

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8. Revenue Projection

The total revenue expected from this project is assumed to derive from room
rent of the buildings and my also the profit business of the owner in the
buildings. These activities which are going to be performed from rooms of the
mixed use building by the promoter on the commercial land use of the town
plan. The project will be fully operational after three years time starting from
the first phase. Therefore, the project income is assumed to increase from the
third years to the planning period by increasing and improving their services
after the whole rooms of the building are ready for rent and services to attract
the existing and new expected customers.

9. Payback Period of the Project

However, any project worthiness can tested using the simple payback period
calculation method, thus the payback period of the project calculated as the
ratio of the total investment cost to the net profit as shown below:

Total investment cost 13,952,085.00

Payback period = ------------------------------ = ------------------- = 5.47 years
Net profit 2,546,475.00

This means it takes a maximum of 6 years pay the cost of the project back to
the promoter. Therefore, the payback period of the project promoted will be 6
years which from the estimation of high speed revenue from the current
..shortage of the service in the town that leads to high market access and
profit expected from this revenue which increases with time.
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10. Risk Assessment

10.2 Threats

The local customers shall be considered as it as inferior the service to be

provided and the rooms for rent. But through intensive promotion and quality
service and other options shall be applied to penetrate the local market with less
profit margin.
10.3 Competition

Development competition shall bring change. Thus the change in design,

technology, and others shall be addressed through local and any other
communication from the nearby towns.
.
10.4 Contingency Plan

With all these efforts, if the building demand may reduce, rebased or failed, the
project shall go in to Restaurant and café business, Hotel and guest houses,
colleges which may not require much additional skill and reformation.

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Table: - 10. Project Time Schedule

2015 2016 2017
S.N Activities 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th Remark
1 Pre-feasibility
2 Feasibility study
3 Project design

4 Approval
5 Site clearance
6 Collecting Material
7 Starting Construction
8 Partial finish & renting
9 Finishing work
10 Starting Business

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