1. Course: Urban Planning and Real Estate Markets
Lecturer: Prof. Karl Kluegel
Student Name: Nguyen Ngoc Anh
Student Number: 2010-UDP-M-02
CLASS ASSIGNMENT
Individual Essay: Real Estate Market and Developments
Due date: August 30, 2011
2. LIM TOWER
9-11 Ton Duc Thang
District 1
Ho Chi Minh City
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3. Table of Contents
I. INTRODUCTION ................................................................................................................... 3
II. BUILDING OVERVIEW/DESCRIPTION ................................................................................ 3
III. METHOD OF EVALUATION .............................................................................................. 4
IV. EVALUATION .................................................................................................................... 5
1. Design ................................................................................................................................ 5
2. Parking Capacity ................................................................................................................ 6
3. Traffic ................................................................................................................................. 7
4. Market Analysis .................................................................................................................. 8
5. Economic Analysis ............................................................................................................. 9
6. Social Impact.................................................................................................................... 14
7. Environmental friendly ...................................................................................................... 14
V. CONCLUSION ..................................................................................................................... 15
REFERENCES ........................................................................................................................... 16
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4. I. INTRODUCTION
This paper is an individual part of the UDP2010-2012 class assignment. The objectives of the
class assignment are to analyze the impacts of a number of real estate projects on District 1
and on HCMC as a whole. To begin with, fifteen (15) projects are selected from the pending
project building presented in Vietnam Real Estate Update and Market Overview; Indigestion in
the Property Market by Townsend, M (2011). To the extent of this paper, the evaluation of the
LIM TOWER will be presented.
II. BUILDING OVERVIEW
The LIM TOWER is located at 9-11 Ton Duc Thang Street, at the conjunction of Ton Duc Thang
St, Nguyenn Huu Canh St, and Le Thanh Ton St, District 1, Ho Chi Minh City. The investment
capital is 37 million USD, and the developer is Mai Thanh Limited Company. The Tower will has
02 basements, 34 storey, with total building floor area is 33.300 m2, functioning as serviced
office building. It is estimated that The LIM TOWER project will completed in 24 months by
Quarter IV 2012.
Figure 1: Location map of the LIM TOWER
Summary information about the project is provided below:
- Investment Capital: 37 million US$
- Design: CASA Vietnam LTD.
- Management: APAVE Vietnam & ASIAN
- Constructor: COTECCONS Group
- Monitor: COTEBA (France)
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5. III. METHOD OF EVALUATION
A set of criteria was discussed and finalized in class, when all 15 members agreed on the
relevance and effectiveness of these criteria. Moreover, the availability of information also affect
the selection of criteria for analysis. Seven (7) criteria were selected, showed in Table 1.
Methodologies to assess the LIM TOWER with the selected criteria are flexible for each
criterion. Literature reviews, current market reviews for critical comments is mostly used for all
criteria. Field observation is also applied for criteria: Design, Traffic, and Social Impact. For
criteria Parking capacity and economic analysis, the paper uses some technical calculation for
assessment.
Table 1: List of criteria
No. Criteria Notes on method Applied Ranking
Good Bad
1 Design & image Social harmony 1 2 3 4 5
Social status
2 Parking capacity Calculation: 1 2 3 4 5
Motorbikes
Cars
3 Traffic Accessibility 1 2 3 4 5
Mobility
4 Market analysis Rental rate, occupancy 1 2 3 4 5
rate forecast
5 Economic analysis Calculation 1 2 3 4 5
ROR, ROI, IRR
6 Social impact At 500m radius 1 2 3 4 5
7 Environmental friendly Presence or not any 1 2 3 4 5
environmental standards
Each criterion, after being analyzed, is then given a ranking score, based on ranking of 5. This
will be one section of the general assessment of combined 15 projects.
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6. IV. EVALUATION
Table 2: General information 1
Items Value
Land area 1,917 m2
Plot ratio 16
GFA 33,300 m2
Parking - base 3,044 m2
Parking- upper 3,300 m2
Leasable GFA 30,000 m2
Office-1 17,000 m2â secured leased by Techcombank
Office -2 13,000 m2â open to market
Total development cost 37,000,000 m2
(including land cost)
Owner Equity 11,100,000 Million US$
Bank loan 25,900,000 Million US$
Interest rate per annum (2011) 20%
1. Design & Image
The fist assessment is social harmony, including
harmony with close environment, culture
representation, and general likeliness. The LIM
TOWER is located in the boundary of the CBD of Ho
Chi Minh Center. With the height of 126m and glassy
design, it is a very typical office building. Together
with a number of other high buildings in the area, the
LIM TOWER contributes to the business and finance
cultural representation.
However, there have been many critiques about the
emergence of many office buildings in Ho Chi Minh
City to the landscape and urban planning of the city.
Some architectural analysts expressed that these
buildings now constitute to the âcloning urbanâ (Binh,
1
Official letter No. 1893/SQHKT-QHKTT. Department of Planning and Architecture. July 15, 2010.
Nguyen Ngoc Anh â LIM TOWER â 5 | 16
7. 2011). The Vietnamese characters are losing, when replacing by new skyscrapers. Architect
Chung (2011) criticized that rapid urbanization and no-clear-plan for high building, skyscrapers
has destroyed the architectural landscape of Ho Chi Minh City, which are critically valuable.
Finally, I believe that the LIM TOWER itself is not the only one building to blame, but together
nearby skyscrapers are responsible to break down the landscape harmony and historical value
of the area including the Ba Son Port, Bach Dang Quay, and the riversides.
Score: 4
2. Parking Capacity
According to the building design, LIM TOWER will have two basements for car parking and four
storey for motorbike parking. Moreover, the construction of car parking will have technology for
two layers for each basement. The total area available for parking is summarized in table 3.
Table 3: Parking capacity at LIM TOWER
Type Number of Area Capacity
storey (Car equivalent)
Car parking 2 6,088 m2 195
Motorbike parking 4 3,300 m2 128
Total 365
According to the TCVN 276:2003, Office Building-Design Standard 2 requires 300 car parking
plots for 30,000m2 office floor area. For that calculation, the LIM TOWER will provide efficient
parking area, for both the use of the building and surrounding area.
In 2011, it is reported that in HCMC there are approximately 500,000 cars (30% of total in
Vietnam) and 4.5 million motorbikes (15% of total in Vietnam). Furthermore, there are about
60,000 cars and 1 million motorbikes form other provinces travelling in HCMC. The need for
parking is essential important, and the construction of new buildings can contribute to the
parking area, while the existing area for parking can supply only 0.6% of the demand (Dung,
2011). Therefore, the LIM TOWER is one of a few office buildings in HCMC provide good
parking service.
Score: 2
2
TCVN 276:2003 requires 1 car parking plot per 100m2 floor area
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8. 3. Traffic
The LIM TOWER is located at the conjunction of Ton Duc Thang St, Nguyenn Huu Canh St,
and Le Thanh Ton St. The building has great advantages for its locations. Because the tower is
located at the boundary of CBD, it is at the hub of transportation to travel to other
districts/provinces (Figure 2).
The most significant point is that the LIM TOWER is only 200m away from the Station 3 of Metro
Line 2: Ben Thanh-Suoi Tien. Metro Line 1 has total 14 stations, and Station 3 is one in 3
underground stations on this line.
Secondly, from this location, it is only short distances to the Thu Thiem tunnel (completed by
end of 2011), and to Khanh Hoi bridge in order to travel to District 2 and District 4. Therefore,
the accessibility to LIM TOWER is relatively good.
The âbottle neckâ conjunction at Le Thanh Ton and Ton Duc Thang is slightly a negative point
for LIM TOWER. There are usually congestion at this conjunction during rush hours. People
believe that with better traffic design and better driving behavior is the most effective solution.
Finally, Ton Duc Thang, Nguyen Huu Canh are big road used for trucks and containers to travel
out of town, however, this may not affect to the accessibility and mobility of the LIM TOWER as
these large vehicles are not allowed in city during office hours.
Score: 2
Figure 2: Traffic map from LIM TOWER
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9. 4. Market Analysis
The LIM TOWER is classified as office building Grade B. Currently, from CBRE July 2011
report 3 , the average rent for Office building B is $18.72 per spm per month. This section will
analyze both pros and cons measures to evaluate the rent and the trend for leasing this project.
Pros:
As presented in the development plan 4 , the building will
provide 30 floors with 30,000 m2 for office leasing.
Among these, 17 floors (equivalent to 17,000m2) are
secured by contract with Techcombank, and the
remaining 13 floors are open to market. Therefore, the
LIM TOWERâs occupancy rate is always secured at
minimum 57%.
Another advantage of the LIM TOWER is its location
and parking capacity. These are presented in Section 2
& 3 (Parking capacity and Traffic). These criteria are
CBRE, Market View HCMC July 201
the plus for the rental rate for the LIM TOWER,
compared to some other buildings at the same grade (Green Builidng, A&B Building).
While vacancy rate of Grade A is 34.2%, vacancy rate of Grade B is lower at 15.8%. Moreover,
it is forecasted that there will be new promising tenants for Grade B from State own enterprises
and local enterprises upgrading from Grade C or below. Therefore, given the lower vacancy rate
and larger tenant opportunities, the LIM TOWER can be assumed to have rental rate at 20 US$.
Cons:
It is forecasted that by the 2013, new office
supply in HCMC will be 540,752m2, in which
202,655m2 will be Grade B. There will be
more competition among these new building
for their tenants.
Although leasing rental at the LIM TOWER
is forecasted to moderately higher than the
average rent rate of Grade B office, the
rental will still follow to the trend of the
CBRE, Mid Year Market Review, July 2011
3
CBRE Market View Ho Chi Minh City July 2011
4 Official letter No. 1893/SQHKT-QHKTT. Department of Planning and Architecture. July 15, 2010.
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10. market. The rental rate for Grade B are now at level not seen since 2003 5 , and there is no
promising view for the substantial increase in price in the coming years, given the large market
supply and economic situation. As the changes in rental rate has been reducing since 2008, the
escalation rate would be slowly increased only if the recovery of the economy.
Study from CBRE also shows that the ânew trendâ for a tenant requirement is now moving from
âlocationâ to âsustainableâ, âdesignâ, and âmanagementâ 6 . Therefore, having the advantages in
location and traffic do not necessarily provide the LIM TOWER from having a better rental rate
and an escalation rate in the long run.
Score: 2
5. Economic Analysis
The LIM TOWER construction started in 2011 and it is expected to complete by Quarter IV
2013. With that plan, leasing will start in 2013. The calculations for evaluation are presented
from Table 4 to Table 9 as the following:
Table 4: Construction schedule and Capital structure
Year        2011 2012Â
 Construction schedule   50% 50%Â
Capital structure (US$)      Â
Total development cost (including land cost)   18,500,000 18,500,000 Â
      Owner Equity  30% 11,100,000  Â
      Bank loan 70% 7,400,000 18,500,000 Â
Table 5: Rough Estimate of Economic Feasibility
Items Amount
 Project Cost (US$) 37,000,000
Gross Rental Revenue at 100% Occupancy 8,316,000
- 5% Vacancy Rate (415,800)
- 20% Operate Cost (1,663,200)
Net Operate Income 6,237,000
Break Even ROR 17%
From the rough estimate of economic feasibility, the project is only economically feasible if the
investors require ROR †17%. However, the fact that the interest rate for loan is extremely high
at the last 4 months, from 20-26% per annum; thus with the break even ROR at 17%, the
project is not economically feasible. However, this calculation is taken for rough estimation at
one year, the more in-depth calculation throughout project years are as below.
5 CBRE Market View Ho Chi Minh City, July 2011
6
Smith, N (2011) What if you build it and they donât come?, March 17, 2011
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11. Table 6: Bank loan during the construction period and repayment
Total 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Loan at the beginning 7,400,000 27,380,000 32,856,000 34,915,200 29,169,600 23,424,000 17,391,120 11,358,240 5,023,716 -
Interest rate 7 20% 20% 20% 20% 20% 20% 20% 20% 20%
Interest 1,480,000 5,476,000 6,571,200 6,983,040 5,833,920 4,684,800 3,478,224 2,271,648 1,004,743 -
Total payable 32,856,000 - - 4,512,000 5,745,600 5,745,600 6,032,880 6,032,880 6,334,524 5,023,716 -
Interest payable 21,615,792 4,512,000 5,745,600 5,745,600 4,684,800 3,478,224 2271648 1004743.2 0
Principal repayment 11,240,208 - - - 1,348,080 2,554,656 4062876 4018972.8 0
Loan at the end 8,880,000 32,856,000 34,915,200 29,169,600 23,424,000 17,391,120 11,358,240 5023716 0 0
7
Assume that with the secure contract with Techcombank, the LIM TOWER project can achieve compatible interest rate at 20% per annum
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12. Table 7: Revenue and expenses
2013 2014 2015 2016 2017 2018 2019 2020
Leasable area (m2) 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Escalation rate 0.00% 1% 1% 2% 2% 3% 3% 3%
Rent (US$ psm per month) 8 20.0 20.0 20.2 20.4 20.8 21.2 21.9 22.5
Occupancy rate 9 78% 90% 90% 95% 95% 95% 95% 95%
Total revenue 5,640,000 6,908,400 6,977,484 7,117,034 7,259,374 7,477,156 7,701,470 7,932,514
Operating expenses 10 (20% of Total Revenue) 1,128,000 1,381,680 1,395,497 1,423,407 1,451,875 1,495,431 1,540,294 1,586,503
BTCFs from property operation 4,512,000 5,745,600 5,745,600 6,032,880 6,032,880 6,334,524 6,334,524 6,334,524
BTCFs from selling property 11 63,345,240
8
From Section 4. Market analysis
9
Assume that occupancy rate will achieve 90% in year 2, and increasing to 95% in year 4, due to its advantages in office market
10
According to CBRE assumption and calculation
11
Calculation for selling property at year 8 of operation at 10%
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15. The more in depth analysis show the Internal Rate of Return of the LIM TOWER project is at
22.32%, which is a relatively risk for the efficiency of the project, given the assumed interest rate
is at 20%.
Reports show that real estate market has been cold since last year, and has been going down
since May this year. When the Decision No.11 of Vietnam Government is strictly implemented,
inflation will come down in early 2012, following the decrease in interest rate. However, âthe
fund from the bank may not be the miracle for the real estate marketâ (Lan, 2011). Loan for real
estate is reported at 9.94% of the bank outstanding loan, and this figure can get to 30-40% at
some small banks, which is very dangerous for the economy and the real estate market.
Moreover, the gold fever these months may also affect to the economy when the input money
are less in the market, slowing the decrease of the interest rate (VNExpress reporters, 2011).
Therefore, the strict monetary policy in bank credit is needed, ensure that the bank will only
untie credit to projects that are secure and liquidity.
Score: 4
6. Social Impact
This section will assess the social impact by the LIM TOWER to the radius of 500m. The LIM
TOWER is located in the conjunction between three main streets: Ton Duc Thang, Nguyen Huu
Canh, and Le Thanh Ton.
Food/restaurants and other services are the main possibility for the impact to the surrounding
residence. The fact that Ton Duc Thang and Nguyen Huu Canh are the main big streets, closing
to Ba Son Port, with very few residential ling. Therefore the social impact is expected to very
low. Lastly, at the other direction, Le Thanh Ton and other small streets nearby are already the
center for food and restaurants for the existing surrounding office building. In conclusion, there
may be no negative social impact from the LIM TOWER.
Score: 3
7. Environmental friendly
Whether the building is built with an âenvironmental friendlyâ rating system is a key assessment
for this criterion. At first review, the LIM TOWER does not apply any âgreen constructionâ or
âsustainable buildingâ standards such as LEED or Lotus.
Energy is now a critical issue for Ho Chi Minh City. Generally, the emergence of this 34 storey
building will require a large energy consumption, which would increase the short of energy for
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16. the City. There is no information available showing clearly the construction of the LIM TOWER
achieves any significant figures in sustainable materials, energy and water conservation, etc.
This would be the limitation in information access in order to make a stronger assessment for
this criterion.
Score: 3
V. CONCLUSION
The paper has analyze the LIM TOWER, to the extent of seven criteria selected by the group
exercise. Table 10 presents the summary results of the analysis.
Table 10: Summary results of the evaluation
No. Criteria Ranking 1 2 3 4 5 Applied
Good Bad
1 Design 1 2 3 4 5
2 Parking Capacity 1 2 3 4 5
3 Traffic 1 2 3 4 5
4 Market analysis 1 2 3 4 5
5 Economic analysis 1 2 3 4 5
6 Social impact 1 2 3 4 5
7 Environmental friendly 1 2 3 4 5
8 Total Score 20
In conclusion, the LIM TOWER accounts for some advantages in their project, i.e. location,
traffic, car-parking capacity, secured occupancy rate. However, with the condition of current
economy, such as high interest rate, this project still faces many challenges. Understanding the
market, the economy, improving the quality of the building (sustainable design and/or
management) can help the LIM TOWER become more competitive in the office building market.
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