PROJECT PROPOSAL FOR:

MIXED USE MALL

PROJECT LOCATION:
ADDIS ABABA

PROMOTER:
WEHENET MIXED MALL AND APARTMENT

May 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 LAND USE PLAN ............................................................................................................................. 11
4.3 CONSTRUCTION WORK AND TECHNOLOGY.................................................................................... 11
4.3.1 Construction schedule ........................................................................................................... 11
4.3.2 Architectural Design & Layout ............................................................................................. 12
4.3.3 Structural design.................................................................................................................... 12
4.3.4 Reinforced concrete .............................................................................................................. 13
4.3.5 Foundation Design ................................................................................................................ 13
4.3.6 Construction Plan and process .............................................................................................. 13

I|Page
 4.4 UTILITIES ....................................................................................................................................... 14
4.5 PROJECT IMPLEMENTATION ........................................................................................................... 14
4.6 ORGANIZATIONAL STRUCTURE ..................................................................................................... 15
4.6.1 Organization and management .............................................................................................. 15
4.6.2 Man Power ............................................................................................................................ 15
4.6.3 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 ................................................................................................. 21
5.4 FINANCIAL ANALYSIS AND STATEMENTS ...................................................................................... 22
5.4.1 Underlying Assumption ........................................................................................................ 22
5.5 SOURCES OF FUND ......................................................................................................................... 23
5.5.1 Bank loan Repayment Schedule............................................................................................ 23
5.6 FINANCIAL EVALUATION ............................................................................................................... 24
5.6.1 Profitability ........................................................................................................................... 24
5.6.2 Ratios..................................................................................................................................... 24
5.6.3 Break-even Analysis ............................................................................................................. 24
5.6.4 Pay-back Period .................................................................................................................... 25
5.6.5 Internal Rate of Return .......................................................................................................... 25

6 ENVIRONMENTAL IMPACT OF THE PROJECT ................................................................... 25

7 APPENDIX .A .................................................................................................................................. 27

II | P a g e
 List of table

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

TABLE 2 BUILDING FUNCTIONS..................................................................................................................... 9
TABLE 3 LAND UTILIZATION PLAN .............................................................................................................. 11
TABLE 4 PROJECT IMPLEMENTATION SCHEDULE ........................................................................................ 15
TABLE 5 LAND, BUILDING & CONSTRUCTION .......................................................................................... 18
TABLE 6 BUILDING MACHINERIES AND EQUIPMENT .................................................................................. 18
TABLE 7 VEHICLE COST .............................................................................................................................. 19
TABLE 8 OFFICE EQUIPMENT ...................................................................................................................... 19
TABLE 9 SALARY EXPENSE ......................................................................................................................... 20
TABLE 10 ANNUAL OPERATING COST AT FULL CAPACITY (YEAR TWO) .................................................. 21
TABLE 11 INITIAL INVESTMENT COST ......................................................................................................... 21
TABLE 12 SOURCE OF FUND ........................................................................................................................ 23

List of Figure

FIGURE 13D VIEW OF THE BUILDIN ............................................................................................................. 12

III | P a g e
 1 Executive Summary

1. Project name: Mixed use Building

2. Project Type : Multipurpose business building
3. Nationality: Ethiopian company owned
4. Project Owner: Wehenet mixed mall and apartment private limited company
5. Project location: Addis Ababa
6. Project composition: Mixed use Buildings (B+G+4) and (2B+G+15) used for diverse
business activities like shopping, banking & insurance, super market, shops, restaurants,
cafés, beauty salon, Pharmacy, offices and B.
7. Premises Required: 30,000 m2
8. Total investment Cost: 500.4 million ETB is required from this amount 30% or 150.12
million ETB from owner equity and the rest 70% 350.82 million ETB from bank loan.
9. Employment opportunity: 462 individuals on permanent 305 on casual basis
10. 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 Wehenet mixed mall and apartment
private limited company

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 30,000m2, 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 insurance,

3|Page
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 462 individuals on permanent 305 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;

7|Page
Table 1 Office Space Demand Forecast

Office space demand under base Office space demand under high case
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.

8|Page
  Keeping the quality of its service/ facilities and consistently improving with changing
situations.
 Seasonal discount pricing different others customer centric marketing strategies will be
used by the company.

3.4 Competition

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

3.5 The project facilities and Services plan

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

Table 2 Building functions

Building Description UOM Availed area

round Supermarket, Pharmacy, Banking & Insurance M2 14,400
1st floor – Retail stores Beauty salon, shop, Computer Center, M2 57,600
4th floor Cafeteria & Restaurant

9|Page
4th floor - Different governmental, NGO & other offices M2 57,600
8th floor
8th floor- Apartment service M2 115,200
15th floor
Basements Parking Service Car 572
Total

Since the project will be engaged in mixed building the main sources of its annual revenue would
be from the rental of building spaces such as shops, offices, and banking, café & restaurant
bedrooms. Therefore, the sources of revenue have been classified in to one category namely the
rental of banking & supermarket, offices, shops, bedrooms restaurant and café based on these
classifications. Based on the market price of similar mixed use building in the area, the envisioned
buildings set the following fair price (Before VAT) for its service, hence when the building
construction fully get operational it is assumed to generate a yearly income of ETB 217.8 Million.

4 Technical Study
4.1 Description of the project Service/ Product mix

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

10 | P a g e
4.2 Land Use Plan

The total land required for the envisioned project is estimated to be 30,000m 2. The total area for
the construction of the building will be 21,600m2, as revealed below.
Table 3 land utilization Plan

No Description Land M2
Basement Ground 1st -4th 4th-8th 8th-15th
s floor floor Floor
1 Building(2B+G+15) & (B+G+4) 16,350 21,600 57,600 57,600 115,200
2 Onsite Parking & Green area 3,300
Total built up area 246,750

4.3 Construction work and Technology

4.3.1 Construction schedule

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

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

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

11 | P a g e
conditions can and will almost undoubtedly impact the project schedule by causing unforeseen
delays and project inefficiency.

Figure 13D view of the building

4.3.2 Architectural Design & Layout

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

4.3.3 Structural design

One of principle deliverables of our project is the structural design of the building. The structural
elements were coordinated with the layout of the building adjustments were made to the columns
if specific layouts are necessary. The frame was made up of a grid with repeating standard
structural bays. Included in the structural system are bay sizes, shape and size of structural

12 | P a g e
members, floor compositions and curtain walls. These elements were established to resist gravity
ad lateral loads as appropriate.
The gravity load design was completed for two frames; one of structural steel and one of reinforced
concrete. Reinforced concrete frame was chosen for further design based on cost per square foot,
local availability of material and constructability considerations, such as erection and casting. The
concrete system was then designed for lateral loading with necessary adjustment being made to
framing.

4.3.4 Reinforced concrete

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

4.3.5 Foundation Design

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

4.3.6 Construction Plan and process

The project team developed a coordinated project schedule and construction plans that would
reflect the expectations for an actual construction project. The project schedule was developed
using the preliminary designs given to the project team.
Additionally, the group considered typical construction activities and durations taken from similar
construction projects as well as realistic constraints on building development. For instance, it is
necessary for the structural frame to be completed before concrete can be placed for the slab on
deck. Hand drawn construction plans detailing site entrances and storage areas were coordinated
with the project schedule to give the reader visualizations of the construction site set up through
various periods of the construction process.

13 | P a g e
Based on a general program of the project owners the consultant who is going to be hired makes
site studies, develops structural designs, prepares drawings and specifications, determines
quantities involved and estimated the resultants costs. All these activities will be done in the first
phase of the project which is the design stage after the document are produced by the designers
have been received, and the works secured the project is supposed to enter the tendering stage. At
this stage contractors study the project document analyze and subsequently determine the
construction methods, built up their unit rates and submit their bids for the works. The promoter
of this project intends to compare the bids and award the contract for the lowest responsible bidder.
This, is of course, presupposes that the favorable proposal does not exceed the allocated budget.
After the award is made and the contract signed between this project owner and the contractor, the
project constructor is expected to prepare and submits a detailed construction program which
includes material schedule, manpower requirement and cash flow forecast.
After the award is made and the contract signed between this project owner and the contractor, the
project constructor is expected to prepare and submits a detailed construction program which
includes material schedule, manpower requirement and cash flow forecast.

4.4 Utilities

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

4.5 Project implementation

The project’s implementation is expected to take 24 months. The major activities include Bank
loan processing, construction of the building, cleaning the area around the building, Procurement

14 | P a g e
of equipment and start rendering services. The time schedule for the above matured major activities
is presented below:

Table 4 project Implementation schedule

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

4.6 Organizational Structure

4.6.1 Organization and management

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

4.6.2 Man Power

The total manpower required for the building will be 26 persons. The manpower list and the
corresponding labor cost are shown in part five of this document.

4.6.3 Organizational Structure

The organizational structure of the project is designed by including all the necessary personnel
under the right division. At the top of the organizational structure, there will be manager with the
responsibility of supervising the overall activity of the building. Depending up on the nature of the
center and the amount of work to be performs; there exist auxiliary units under the general
manager.

15 | P a g e
Employees under each unit will be supervised by the department head that is accountable for the
general manager. General Manager is appointed by owner.

Owner

General
Manager

Building Admin Marketing Technical and maintenance

manager

HRM and IT, Electricity

finance and plumper

Purchaser

Cashier

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

16 | P a g e
 He/she will plan, organize, direct and control the human and non-human resources of the
building so as to achieve the short and long run objectives of the organization.

B. Building Administration Department

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

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 500.4 million ETB is required. From this 30% 150.1 million birr
will be covered by the promoter of the project while the rest 70% 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 5 Land, Building & Construction

S.N Description of works Total Cost in birr(000)

1 Building construction 428,947
2 Site Development 12,500
3 Design and supervision 4,310
4 1st Year land lease & (10%) down payment 2,427
Total 448,176

B. Building Machineries and Equipment

Table 6 Building Machineries and Equipment

SN Description Measure Qty Unit cost in Total cost in

ment Birr Birr.
1 Generator Unit 1 120,000.00 120,000.00
2 Carpentry tool box Set 1 17,000.00 17,000.00
3 Electrician tools box Set 1 18,500.00 18,500.00
4 Plumber tools kit Set 1 12,300.00 12,300.00
5 Fire extinguisher Unit 10 6,000.00 60,000.00
(Security Equipment)
6 Total 227,800.00

18 | P a g e
 C. Vehicle

Table 7 Vehicle cost birr (000)

SN Description UOM Qty Unit Cost Total cost Remark

in Fr. in Birr

1 Mini-Bus Unit 3 700 2,100 Duty Free

2 Sedan Unit 6 1,250 7,500 Duty Free

Total 9600

D. Office Equipment
Table 8 Office Equipment

SN Description Measurement Qty Unit cost in Total cost in

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

5.2 Working Capital

5.2.1 Operating Expense at full Capacity

a. salary Expense

19 | P a g e
 Table 9 salary Expense

SN Position No Qualification Monthly Annual

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

5.2.2 Operating Expenses

The annual operating cost at full operation capacity is estimated at Birr 43.9 million (see Table
10). The cost of raw material account for 12% of the operating cost. The other major components
of the production cost are financial cost (62 %). For detail production cost see Appendix A.2.

20 | P a g e
 Table 10 Annual Operating Cost At Full Capacity (Year Two)

Items Cost %
Raw Material and Inputs 5,259 12%
Utilities 4,434 10%
Maintenance and repair 3,735 8%
Labor direct 392 1%
Administration Costs 180 0%
Land and Lease Cost 2658 6%
Cost of marketing and distribution 150 0%
Total Operating Costs 16,808 38%
Depreciation 0%
Cost of Finance 27,159 62%
Total Production Cost 43,967 100%

5.3 Total initial investment cost

The total investment cost of the project including working capital is estimated at Birr 500.4 million
(See Table 10). From the total investment cost the highest share (Birr 474.9 million or 94.91 %)
is accounted by Building and civil work cost followed by initial working capital (Birr 1.74 million
or 0.35 %).

Table 11 initial investment cost

Local Foreign Total %

Sr. No Cost Items
Cost(000) Cost Cost (000) Share
1 Fixed investment
1.1 Land Lease 2,427 2,427 0.49%
1.2 Building and civil work 474,947 474,947 94.91%
1.3 Machinery and equipment 227 227 0.05%
1.4 Vehicle cost 9,600 9,600 1.92%
1.5 Office furniture and equipment 112 112 0.02%

21 | P a g e
 Sub total 487,314 487,314 97.38%
2 Pre operating cost *
2.1 Pre operating cost 8,404 8,404 1.68%
2.2 Interest during construction 2,941 2,941 0.59%
Sub total 11,346 11,346 2.27%
3 Working capital ** 1,740 1,740 0.35%
Grand Total 500,400 500,400 100.00%

* 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 3.4 million. However, only
the initial working capital of Birr1.74 million during the first year of operation is assumed to
be funded through external sources. During the remaining years the working capital
requirement will be financed by funds to be generated internally (for detail working capital
requirement see Appendix .A.1).

5.4 Financial analysis and Statements

5.4.1 Underlying Assumption

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

22 | P a g e
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 promoters into account, equity
contribution and bank loan to finance the total investment outlays of the project are assumed to be
30% and 70% respectively. Accordingly, the total financial requirement from the two sources will
be;

Table 12 Source of fund

SN Description Percentage share Amount

Owners Share 30% 150,120.05
Bank Loan 70% 350,280.12
Total 100% 500,400

5.5.1 Bank loan Repayment Schedule

Year Principal Payment Interest (10%) Total annual Remaining

(000) (000) Payment in Balance
ETB (000) (000)
0 350,280
1 35,028.01 35,028.01 70,056.02 315,252.11
2 35,028.01 31,525.21 66,553.22 280,224.10
3 35,028.01 28,022.41 63,050.42 245,196.08
4 35,028.01 24,519.61 59,547.62 210,168.07
5 35,028.01 21,016.81 56,044.82 175,140.06
6 35,028.01 17,514.01 52,542.02 140,112.05
7 35,028.01 14,011.20 49,039.22 105,084.04
8 35,028.01 10,508.40 45,536.42 70,056.02
9 35,028.01 7,005.60 42,033.61 35,028.01

23 | P a g e
 10 35,028.01 3,502.80 38,530.81 0.00

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 65.4 million 126.3 million during
the life of the project. Moreover, at the end of the project life the accumulated net cash flow
amounts to Birr 406.1 million. For profit and loss statement and cash flow projection see Appendix
A.3 and A.4, respectively.

5.6.2 Ratios

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

5.6.3 Break-even Analysis

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

Break- Even Sales Value = Fixed Cost + Financial Cost = Birr 36,780,000.5

Variable Margin ratio (%)

Break- Even Capacity utilization = Break -even Sales Value X 100 = 16.8 %

24 | P a g e
 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 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 13 % 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

25 | P a g e
 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.

26 | P a g e
 7 Appendix .A

FINANCIAL ANALYSES SUPPORTING TABLE

27 | P a g e
 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 Year 9 Year 10 Year 11
Total inventory 675 1,080 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350
Accounts receivable 1,937 3,100 3,875 3,875 3,875 3,875 3,875 3,875 3,875 3,875

Cash-in-hand 97 155 194 194 194 194 194 194 194 194

CURRENT ASSETS 2,709 4,335 5,418 5,418 5,418 5,418 5,418 5,418 5,418 5,418
Accounts payable 969 1,550 1,937 1,937 1,937 1,937 1,937 1,937 1,937 1,937

CURRENT 969 1,550 1,937 1,937 1,937 1,937 1,937 1,937 1,937 1,937
LIABILITIES
TOTAL WORKING 1,740 2,785 3,481 3,481 3,481 3,481 3,481 3,481 3,481 3,481
CAPITAL

Page 28
 Appendix 7.A.2
PRODUCTION COST ( 000in Birr)

Item Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11

Raw Material and Inputs 2,630 4,207 5,259 5,259 5,259 5,259 5,259 5,259 5,259 5,259

Utilities 2,217 3,547 4,434 4,434 4,434 4,434 4,434 4,434 4,434 4,434

Maintenance and repair 1,868 2,988 3,735 3,735 3,735 3,735 3,735 3,735 3,735 3,735

Labour direct 196 314 392 392 392 392 392 392 392 392

Administration Costs 90 144 180 180 180 180 180 180 180 180

Land lease cost 1,329 2,126 2658 2,658 2,658 2,658 2,658 2,658 2,658 2,658

Cost of marketing 75 120 150 150 150 150 150 150 150 150

Total Operating Costs 8,404 13,447 16,808 16,808 16,808 16,808 16,808 16,808 16,808 16,808

Depreciation 9,700 9,700 9,700 9,700 9,700 9,700

Cost of Finance 0 35,028 31,525 28,022 24,520 21,017 17,514 14,011 10,508 7,006

Total Production Cost 8,404 48,475 48,333 44,831 41,328 37,825 34,322 30,819 27,317 23,814

Page 29
 Appendix 7.A.3

INCOME STATEMENT ( in 000 Birr)

Item Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
Sales revenue 108,938 174,300 217,875 217,875 217,875 217,875 217,875 217,875 217,875 217,875
Less variable costs 6,714 10,742 13,428 13,428 13,428 13,428 13,428 13,428 13,428 13,428
VARIABLE 102,224 163,558 204,447 204,447 204,447 204,447 204,447 204,447 204,447 204,447
MARGIN
in % of sales revenue 94% 94% 94% 94% 94% 94% 94% 94% 94% 94%

Less fixed costs 1,494 2,390 2,988 2,988 2,988 2,988 2,988 2,988 2,988 2,988

OPERATIONAL 100,730 161,167 201,459 201,459 201,459 201,459 201,459 201,459 201,459 201,459
MARGIN
in % of sales revenue 92% 92% 92% 92% 92% 92% 92% 92% 92% 92%
Financial costs 0 35,028 31,525 28,022 24,520 21,017 17,514 14,011 10,508 7,006
GROSS PROFIT 100,730 126,139 169,934 173,437 176,940 180,442 183,945 187,448 190,951 194,454
in % of sales revenue 55% 54% 53% 58% 59% 59% 60% 60% 61% 61%
Income (corporate) 35,255 44,149 59,477 60,703 61,929 63,155 64,381 65,607 66,833 68,059
tax
NET PROFIT 65,474 81,991 110,457 112,734 115,011 117,288 119,564 121,841 124,118 126,395
in % of sales revenue 60% 47% 51% 52% 53% 54% 55% 56% 57% 58%

Page 30
 Appendix 7.A.4
CASH FLOW FOR FINANCIAL MANAGEMENT ( in 000 Birr)

Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
TOTAL CASH
495,718 111,722 174,881 218,262 217,875 217,875 217,875 217,875 217,875 217,875 217,875
INFLOW
Inflow funds 495,718 2,785 581 387 - - - - - - -
Inflow operation 0 108,938 174,300 217,875 217,875 217,875 217,875 217,875 217,875 217,875 217,875
Other income 0 0 0 0 0 0 0 0 0 0 0
TOTAL CASH
495,718 113,841 122,609 136,802 133,828 131,552 129,275 126,998 124,721 122,444 81,637
OUTFLOW
Increase in fixed
495,718 0 0 0 0 0 0 0 0 0 0
assets
Increase in
0 1,740.49 1,044.29 696.20 - - - - - - -
current assets
Operating costs 0 6,714 10,742 13,428 13,428 13,428 13,428 13,428 13,428 13,428 13,428
Marketing and 0 75 120 150 150 150 150 150 150 150 150
Income tax 0 35,255 44,149 59,477 60,703 61,929 63,155 64,381 65,607 66,833 68,059
Financial costs 0 35,028 31,525 28,022 24,520 21,017 17,514 14,011 10,508 7,006 1
Loan repayment 0 35,028 35,028 35,028 35,028 35,028 35,028 35,028 35,028 35,028
SURPLUS
0 -2,119 52,272 81,461 84,047 86,323 88,600 90,877 93,154 95,431 136,238
(DEFICIT)
CUMULATIVE
0 -2,119 50,154 131,615 215,661 301,985 390,585 481,462 574,616 670,046 806,284
CASH

Page 31
 Appendix 7.A.5
DISCOUNTED CASH FLOW ( in Birr)

Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
TOTAL CASH INFLOW 0
108,937.50 174,300.00 217,875.00 217,875.00 217,875.00 217,875.00 217,875.00 217,875.00 217,875.00 217,875.00
Inflow operation 0 108,938 174,300 217,875 217,875 217,875 217,875 217,875 217,875 217,875 217,875
Other income 0 0 0 0 0 0 0 0 0 0 0
TOTAL CASH OUTFLOW 495,718 42,044 55,011 73,055 74,281 75,507 76,733 77,959 79,185 80,411 81,637
Increase in fixed assets 495,718 0 0 0 0 0 0 0 0 0 0
Increase in net working capital 0 0 0 0 0 0 0 0 0 0 0
Operating costs 0 6,714 10,742 13,428 13,428 13,428 13,428 13,428 13,428 13,428 13,428
Marketing and Distribution cost 0 75 120 150 150 150 150 150 150 150 150
Income (corporate) tax 35,255 44,149 59,477 60,703 61,929 63,155 64,381 65,607 66,833 68,059
Loan repayment 0 35,028 35,028 35,028 35,028 35,028 35,028 35,028 35,028 35,028 0
-
NET CASH FLOW 66,893 119,289 144,820 143,594 142,368 141,142 139,916 138,690 137,464 136,238
495,718
CUMULATIVE NET CASH -
-428,825 -309,536 -164,716 -21,122 121,246 262,388 402,304 540,995 678,459 814,697
FLOW 495,718
-
Net present value 62,517 104,191 118,216 109,547 101,507 94,049 87,133 80,719 74,771 69,257
495,718
-
Cumulative net present value -433,201 -329,010 -210,793 -101,246 260 94,309 181,442 262,161 336,932 406,189
495,718

NET PRESENT VALUE 406,189

IRR 13%
NORMAL PAYBACK 5 years

Page 32