Project Proposal for the Development of a

G+7 Mixed Use Apartment Building

The nature of our Mixed Use Building colony includes facilities for Business
Units, Residential Apartments, Recreational area and other Public Service
facilities.

Owner: Ahmed Muhumed Awale

Presented to: Dire Dawa Administration

Investment Bureau

September 2021
 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

Contents
1. Introduction .......................................................................... 4
1.1. Background ...................................................................... 4
1.2. The Proposed Project ......................................................... 5
1.3. Project Location ................................................................ 6
1.4. Owner’s Profile ................................................................. 6
1.5. Organizational Structure ........................................................ 6
Figure: Organizational Structure ................................................... 7
2. MARKET ANALYSIS .................................................................. 7
2.1. MARKETING STRATEGY....................................................... 8

2.2. MORTGAGE FINANCE.......................................................... 9

Table: Payment Method ............................................................. 10

2.3. CUSTOMER PROFILE......................................................... 10

3. PRODUCTS AND DEVELOPMENT SPECIFICATIONS ...................... 12

3.1. SITE AREA DISTRIBUTION ................................................ 12

Table: Summary of the plan ....................................................... 12

Table: Building Specifications...................................................... 13
Table: Site Area Distribution ....................................................... 13
Table: Number of Units .............................................................. 14
3.2. COST SPECIFICATIONS .................................................... 14

Table: costs for construction ....................................................... 14

4. CAPITAL EXPENSES ............................................................... 15
Table: Capital Expenses ............................................................. 15
5. FINANCIAL CONIDERATIONSS ................................................ 15
Table: Pre-operating Costs ......................................................... 15
Table: Personnel Plan ............................................................... 16
Table: Selling, General & Administrative (SG&A) Expenses ............. 17
Table: Construction Timeline and Sales Forecast ........................... 17

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

Table: Start-Up Requirements .................................................... 17

Table: Sources of finance ........................................................... 18
Table: Loan repayment schedule ................................................. 18
Table: Profit and Loss Statement ................................................. 18
Table: Cash Flow Statement ....................................................... 19
Table: Balance Sheet Statement ................................................. 20
6. Profitability ........................................................................... 21
7. Economic Benefits ................................................................. 21

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

0. Executive Summary

This project proposal is prepared with the objective of developing a

Multipurpose building in Dire Dawa City. The project will be established
on a 20,000 msq land secured by the promoter at Boren Kebele of Dire
Dawa Town.

Our market Study shows that there seems to be a huge market for
high standard Business Complex and Luxurious Apartments in Dire
Dawa City Administration.

Generally, the plan is to construct a G+7 Mixed Use Building. As such,

the Building will have a total of 8 Floors including one underground
floor. Likewise the first three floors are dedicated for Business
operations while the floors from 4th to 7th shall be used as luxurious
apartments.

Accordingly, a total of 13 Business units (each units holding 400 msq

area on average) and 118 Housing Units (each units holding 200 msq
area on average) shall be contained in the building.

The required initial investment of the project is estimated at ETB

40,268,627.67, from which ETB 12,080,588.30 is contributed by the
owner while the remaining ETB 28,188,039.37 is expected to be
financed by Bank loan.

The project is financially viable with an internal rate of return (IRR) of

72% and a net present value (NPV) of ETB 71,902,984, discounted at
10%. The investment cost and income statement projection are used
to project the pay-back period, the project will fully recover the initial
investment and working capital within one year.

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

1. Introduction

Dire Dawa City is one of the fastest growing cities in Ethiopia. Trade
and industry is the predominant sector of the region’s economy. The
city is acknowledged to being the center of trade and industry in east
Ethiopia. The majority of people directly or indirectly derive its
livelihood from trade, industry and related activities.

The city has locational potential being at the cross road and transport
corridor of the country, situated at 515kms road distance to Dire Dawa
and 311kms to the west of Djibouti port.

In recent year, market center development projects in Dire Dawa are

only few in number. As a framework for its development, the city has
master plan prepared with vision to see Dire Dawa (attractive cozy &
globally competitive which is endowed with good governance and
strong and sustainable economy specializing on trade, industry &
service sectors).

As part of implementation of the structure plan, the city has identified

strategic investment areas, from which Multipurpose building
development is one of the yet untapped area of investment. Therefore,
the promoter proposes the construction of Multipurpose building with
standard design on a compound area of 1000 meter square.

1.1. Background

Despite the fact that significant role can be played by the private
sector in promoting national and regional development, the prevailed

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

policy in the past few decades in Ethiopia, had highly discouraged the
participation of private investor, both foreign and domestic.

This has resulted in hindering national and regional socioeconomic

progress in almost all sectors of the economy revealing the existing
low productivity capacity of the economy and significant socio-
economic losses in various dimensions.

Recognizing the extent to which the past policy environment has

highly impeded the development of the national economy and the
necessity to promote private sector participation in various investment
ventures, that are believed to be more rewarding and compatible with
the current national regional development objectives, the new
investment policy in country has opened wider opportunity for private
sector participation.

Based on this, at present the private sector has started to mobilize and
invest their knowledge and financial resources in various investment
activities, which is assumed to be beneficial for them and to the
country.

1.2. The Proposed Project

The proposed project intends to construct all-purpose ground plus

three (G+7) building with compartments of rooms on a 20,000 meter
squared land secured by the promoter at boren kebele of Dire Dawa
Town.

The proposed multipurpose building will have its own standard design.
It can serve for different business activities to satisfy the prevailing

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

shortage of business provision in the town, which is currently, felt the

needs of various government, non-government and private
institutions.

The main advantage anticipated from these all-purpose rooms for rent
is to ensure the financial viability of the project as the future demands
of rented shops, may have open by taking some important factors like
people housing desire weather condition and other considerations.

1.3. Project Location

The proposed Business Complex Building project is planned to be built

on a 20,000 meter squared land secured by the promoter at boren
kebele of Dire Dawa Town.

1.4. Owner’s Profile

Name: Ahmed Muhumed Awale

Address: Dire Dawa City

Ahmed Muhumed Awale is the owner of the project. Mr. Ahmed is a

successful Entrepreneur with more than 15 years of experience
managing various private Businesses in Ethiopia.

1.5. Organizational Structure

The Project has its own Organizational Structure with the owner at the
apex, having different functionally related departments. Detailed
descriptions are found in the following section.

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

Figure: Organizational Structure

2. MARKET ANALYSIS

Currently, market is one of the major economic sectors internationally.

Businesses move from one place to another for several purposes: need
accommodation facilities, food and drink service, entertainment, etc.

Market center is therefore a critical component in the economic fabric

of the society. However, Dire Dawa City being a center for trade and
commerce of the country, shortage of market center that will be used
for various business activities and related purpose is major problem.

Likewise, efforts targeted at solving the housing problem in Dire Dawa

have fallen short of the accumulated demand. Shortage is especially

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

acute for the low income and lower middle income households that
account for the bulk of the city’s population.

Overcrowding and deterioration widely prevail. A substantial

percentage of the city’s core is dilapidated. The city is also not able to
provide adequate services to the extension areas thus discouraging
house construction and contributing to the expansion of slums. The
shortage as well as the condition of residential units in Dire Dawa city
has been deteriorating from period to period. The other problem in
the city is the expansion of informally built houses.

Currently a substantial amount of houses are built on informally

occupied plots which are generally poor in their conditions. The main
reason for the proliferation of informal housing in Dire Dawa are socio-
economic, political, institutional constraints, high population growth
coupled with lack of formal land supply for housing development and
low level of economy or high unemployment in particular.

One of the solutions for the existing sever housing shortage is to

improve the existing housing stock by encouraging private investors to
participate in real estate/housing development for rental or direct
sale.

2.1. MARKETING STRATEGY

We intend to maintain an extensive marketing campaign that will
ensure maximum visibility for the completed units in its targeted
market.

At the initial stage, we shall dedicate our time in setting up a quality

management and marketing team that has a strong ability to succeed.

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

We strive to build sound professional partnerships and look for

commitment, synergy, innovation and growth potential in all partners
that will lead to referrals and business success in the long term.

Liaising with marketing agent branches in the France, Canada,

the USA, the UK, and the UAE where most expatriate Ethiopian
live
Hiring a wide local network marketing agents and brokers to
prospect potential customers
Setting up a showroom and Customer Center established at our
office which will be located at a convenient location around Bole
area
Creating a website for internet savvy that will allow future clients
to browse and compare different designs on interactive feature
to match the combinations of designs, and to sign in and to
make orders of available properties.
Launching a national advertising campaign via the use of
commercial signboards, local media, and word of mouth.

2.2. MORTGAGE FINANCE

The target clients should be capable of buying properties for
100% cash. However, financial institutions and banks are
providing long-term mortgages financing.
We have approached several financial institutions and banks to
provide long-term financing to clients for the acquisition of their
residential unit provided that the clients hold substantial
collaterals.
A 10-20 year mortgage financing will be made available to
buyers who can afford to disburse at least a 20% deposit to the

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

bank. This makes owning our homes more affordable to those

who are not able to make full payment upfront.

Table: Payment Method

Payment Method Payment Month

(%) Completed
Advance 20.00% 0.00
Foundation completed 15.00% 3.00
Second Floor concrete work completed 10.00% 7.00

Fourth Floor concrete work completed 10.00% 11.00

Year 1 55.00%
Fifth Floor concrete work completed 10.00% 15.00

Sixth Floor concrete work completed 10.00% 20.00

Seventh Floor concrete work 10.00% 25.00

completed
Year 2 30.00%
Doors and Windows installed 5.00% 27.00
Buyer receives 5.00% 32.00
Title deeds ready 5.00%
Year 3 15.00%
Total 100.00%

2.3. CUSTOMER PROFILE

Based on the construction plan, the first three floors of the envisaged
mixed use building will have;
 Banks,
 Supermarkets
 Office rooms

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

 Café
 Restaurant and
 Other service rooms

It is expected that within a year time the construction works and

procurement of the necessary materials and equipment will be
finalized. Therefore, after one year of construction, the Rooms will
commence operation. Upon finalization, the project will start operation
at its full capacity. As the promoter has already been in the market
and has built a good will, no time will be required for market
penetration and customer attraction.

As the Company intends to operate among several different

investment and operating units, it is hard to characterize any specific
tenant that will occupy the Company’s properties. However,
Management will enact strict tenant quality and credit review
procedures to ensure the Company’s revenues will not be interrupted
by tenant default.

The nature of our mixed use colony is more conducive to

 Stat up Businesses and first-time homeowners expected to come
mainly from middle to high-income brackets living in Dire Dawa
and those living abroad (the diaspora)
 Foreign Businesses opening branches in Ethiopia and visitors
(such as neighboring business people) who may opt to own
second or holiday homes in the resort city.

Therefore, the homebuyers that the Company will be serving can be

declined into these 3 groups in line with the below assumed
proportions:
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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

 Local Businesses and residents: 85%

 Diaspora: 10%
 Foreign Businesses and Visitors: 5%

3. PRODUCTS AND DEVELOPMENT SPECIFICATIONS

The Building will have a total of 8 floors including one underground

floor. Likewise the first three floors are dedicated for Business
operations while the floors from 4th to 7th shall be used as luxurious
apartments.

Accordingly, a total of 13 Business units (each units holding 400 msq

area) and 118 Housing Units (each units holding 200 msq area) shall
be contained in the building.

3.1. SITE AREA DISTRIBUTION

Table: Summary of the plan

Description Area (m2)
Total area 5,000.0
Built up area 2000

Project: G+7 Mixed Use Building

Location: Dire Dawa City
Area: Boren Kebele
Total land area:20,000 msq
Building Size: 8 Floors (one floors
underground)

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Table: Building Specifications

UNITS SPECIFICATIONS PER UNIT
Built up area Built-up Area
Designation
Plot area (m2) (m2) No. of floors Total m2
8 (7 floors + 1
G+7 5,000 2,000 underground) 28,000

UNITS TOTAL BUILT-UP AREA SPECIFICATIONS

Quantity Total Built-up Area Built-up Area
Designation
Units Per Unit m2 Total m2
G+7 1 2,000 2,000
TOTAL 1 2,000

UNITS TOTAL PLOT AREA SPECIFICATIONS

Quantity Total Plot Area Per Plot Area Total
Designation
Units Unit m2 m2
G+7 1 5,000 5,000
TOTAL 1 5,000

Table: Site Area Distribution

Distributed
Designation
Area m2

Building Space (Plot Area Total) 20,000

Built up space 2,000

Allowance for corridors, stairs &

400
elevators @ 20% of built up area

Rooms spaces/Floor 1,600

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No. of Business Units/floor @ 400

4
sqm each on average
No. of apartments/floor @ 200 sqm
8
each on average

Table: Number of Units

Designation No. of units Area of housing
unit (m2)
400.00
13
Business Units
Housing Units 118 200.00

131
TOTAL

3.2. COST SPECIFICATIONS

Cost estimates are based on cost structures in comparable projects in
the country. Likewise, in determining the cost of construction,
comparable projects were assessed.

Table: costs for construction

Quantity Built-up Area Cost Basis Per Total Cost
Designation
Total Units Total m2 m2 ETB ETB
Total
G+7 Distributed 28,000.00 1,300.00 36,400,000
Area m2
TOTAL 28,000.00 36,400,000

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

Table: Sales -Unit Prices Determination

Designation No. of units Area of Sale Price Total Sales
(pieces) housing unit Per m2 ETB
(m2)

13 400.00 5,000 26,000,000

Business Units
Housing Units 118 160.00 7,000 132,160,000

TOTAL 131 158,160,000

4. CAPITAL EXPENSES
The Company will invest in
- The purchase of 3 Vehicles (a minivan for site visitations and 2
vehicles for the staff)
- Office Improvements by the renovation of its Customer Center,
and

Table: Capital Expenses

Designation Total ETB

Vehicles 2,062,209

Office Furniture &

500,000
equipment
TOTAL 2,562,209

5. FINANCIAL CONIDERATIONSS

Table: Pre-operating Costs

Description Total Cost ETB
Legal 30,000.00
Transport 43,000.00

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Office 18,000.00
Advert 90,000.00
Professional Fees 36,000.00
Allowances 51,000.00
Case killer 30,000.00
Website development & 120,000.00
internet marketing
Fuel 40,000.00
Recruiting & Consulting 60,000.00
Overhead @ 5% 20,900.00
Total Pre-Operating Costs 538,900.00

Table: Personnel Plan

Description Qty Salary monthly Annual
General Manager 1 15,000.00 180,000.00
Finance, Secretary & Cashier 1 8,000.00 96,000.00
Marketing and Design 1 7,000.00 84,000.00
Engineer 1 12,000.00 144,000.00
ICT Guy 1 8,000.00 96,000.00
Sales 5 5,000.00 300,000.00
Legal 1 6,000.00 72,000.00
General services 1 7,000.00 84,000.00
Business Development 1 12,000.00 144,000.00
Total People 13
Subtotal 1,200,000.00
20% employee benefits 240,000.00
Grand Total 1,440,000.00

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

Table: Selling, General & Administrative (SG&A)

Expenses
Designation Annual

Selling Expenses @ 1% of Sales 869,880.00

Salary 1,440,000.00
Travel & Invitations 72,000.00
Rent, Office 252,000.00
Marketing/Promotion 200,000.00
Fuel 90,000.00
Miscellaneous 5% 146,194.00
TOTAL 3,070,074.00

Table: Construction Timeline and Sales Forecast

Designation Quarter 1 Quarter 2 Quarter 3 Total
%age completed 55% 30.00% 15.00%
cost of sales 20,020,000.00 10,920,000.00 5,460,000.00 36,400,000.00
Payment received 86,988,000.00 47,448,000.00 23,724,000.00 158,160,000.00
Gross Profit 66,968,000 36,528,000 18,264,000 121,760,000

Table: Start-Up Requirements

Designation Value (Birr)

Construction costs 36,400,000.00

Subtotal Development Expenses 36,400,000.00

Capital Expenses 2,562,209

Pre-operating Costs 538,900
SG&A Expenses for 3 months 767,519
FUNDING REQUIREMENTS 40,268,628

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Table: Sources of finance

No. Description Total Costs Amount % Amount %

Development
1.0 36,400,000.00 30% 25,480,000.00 70%
Expenses 10,920,000.00
2.0 Capital Expenses 2,562,209.17 768,662.75 30% 1,793,546.42 70%
Pre-operating
3.0 538,900.00 30% 377,230.00 70%
Costs 161,670.00
SG&A Expenses
4.0 767,518.50 30% 537,262.95 70%
for 3 months 230,255.55
Grand Total
40,268,627.67 12,080,588.30 30% 28,188,039.37 70%
(1+2+3+4)

Table: Loan repayment schedule

Loan Interest Outstanding
Quarter Repayment (11.5%) Balance
0 28,188,039
1 9,396,013 3,241,625 18,792,026
2 9,396,013 2,161,083 9,396,013
3 9,396,013 1,080,542 0

Table: Profit and Loss Statement

Description Project Years
Quarter 1 Quarter 2 Quarter 3 Total
Sales 86,988,000 47,448,000 23,724,000 158,160,000
costs of sales 20,020,000 10,920,000 5,460,000 36,400,000
Gross Profit 66,968,000 36,528,000 18,264,000 121,760,000
Gross margin(%) 76.99% 76.99% 76.99% 76.99%
Operational
3,070,074 3,377,081 3,714,790 10,161,945
expense
Profit before tax 63,897,926 33,150,919 14,549,210 111,598,055

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 Project Proposal for Business Complex Building, by Ahmed Muhumed Awalel Dire Dawa 2021

and interest
Depreciation 853,984 853,984 853,984 2,561,953
EBITDA (Earning
befor tax, interest 64,751,910 34,004,903 15,403,195 114,160,008
and depreciation)
Interest expense 3,241,625 2,161,083 1,080,542 0
Profit tax (35%) 0 0
Net profit 60,656,301 30,989,836 13,468,669 105,114,806
NPM 70% 65% 57% 63.94%

Table: Cash Flow Statement

Production Year
Production
Year
Cash in flow 0 Quarter 1 Quarter 2 Quarter 3
Owners' equity 12,080,588
Bank Loan 28,188,039

Net Profit 0 60,656,301 30,989,836 13,468,669

Depreciation 853,984 853,984 853,984
Total Cash in flow 40,268,628 61,510,286 31,843,820 14,322,653
Cash out flow
Replacement 0 0 0
loan repayment 9,396,013 9,396,013 9,396,013 9,396,013
Capital Expenditure 2,562,209 - - -
Working Capital 767,519
Existing SG&A Expenses 0
Pre-operating expenses 538,900
Total Cash out flow 13,264,641 9,396,013 9,396,013 9,396,013
Net Cash Flow 27,003,987 52,114,273 22,447,807 4,926,640
Cash balance 52,881,791 75,329,598 80,256,238

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Table: Balance Sheet Statement

Description Investment Production Year
ASSETS 0 Quarter 1 Quarter 2 Quarter 3
Current Assets
Cash 767,519 52,881,791 75,329,598 80,256,238
Inventory 36,400,000 36,400,000 36,400,000 36,400,000
Total Current
37,167,519 89,281,791 111,729,598 116,656,238
Assets
Fixed Asset
Vehicles 2,062,209.17 1,374,875 687,541 206
Office Furniture &
500,000.00 333,350 166,700 50
equipment

Total Fixed Asset 2,562,209 1,708,225 854,241 256

Total Asset 39,729,728 90,990,016 112,583,838 116,656,494
LIABILITIES

Long term liability

28,188,039 18,792,026 9,396,013 0
(Bank Loan)
Sub Total 28,188,039 18,792,026 9,396,013 0
CAPITAL
Owner's Equity 12,080,588 12,080,588 12,080,588 12,080,588
Retained Earnings -538,900 60,117,401 91,107,237 104,575,906
Investor 0 0 0 0
Earnings 60,656,301 30,989,836 13,468,669
Sub Total 11,541,688 72,197,990 103,187,825 116,656,494
Total Liability &
39,729,728 90,990,016 112,583,838 116,656,494
Capital
Net Worth 11,541,688 72,197,990 103,187,825 116,656,494

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6. Profitability

According to the projected income statement, the project by itself will

start generating profit in the first year of operation.

Important ratios such as profit to total sales, net profit to equity (Return
on equity) and net profit plus interest on total investment (return on
total investment) show an increasing trend during the life-time of the
project.

The income statement and the other indicators of profitability show that
the project is viable.

7. Economic Benefits

This project will create a job opportunity for about 20 permanent workers
and during the construction time on average and 15 permanent workers
and up to 50 temporary workers shall be employed right before the
project starts its operation.

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