Construction of business centers: business plan, project, estimate, paperwork. Building permit

The project is the construction of an object (presumably a shopping and entertainment center). The facility is located in the city of Mytishchi, Moscow region, at the address: st. Letnaya, 26. The approximate date for commissioning the facility is 2019.

Object coverage areas

When developing the concept of building a business center, it is necessary to determine the boundaries of the service area surrounding the site.

Conventionally, the area around the object can be divided into three zones (depending on the proximity of location):

• 1st encirclement ring: limited by Yubileynaya, Mira streets, Yauza river.
• 2nd encirclement ring: covers most of the city, with the exception of remote areas - Stroitel, Chelyuskinskaya, Stroiplastmass, East Perlovka and Druzhba.
• 3rd ring of environment: covers the whole city of Mytishchi, including the areas of Stroitel, Chelyuskinskaya, Stroyplastmass, East Perlovka and Druzhba.

Internal and external factors of project success

External factors are beyond the control of the investor, but their influence on the subsequent development of the project is of fundamental importance in the implementation of the construction project of the business center.

A comparison of external and internal development factors is presented in the table below.

Based on the analysis, we can conclude that, when deciding on the construction of a business center, several parameters must be taken into account:

• Prospects for the economic, social and demographic development of the region.
• The level of competition in the area of ​​the facility.
• Socio-demographic characteristics of the population living in the area.
• Features of the object itself.
• Investment performance of the project.

It should be noted that the average cost of building business centers in St. Petersburg is 450 million rubles with an area of ​​40,000 square meters. m. However, this indicator differs slightly from the same in Moscow.

It should be noted that the cost of building business centers in Moscow is about 600 million rubles, with a quadrature of over 40,000 square meters. m

SWOT analysis of the object

Below is the final table of the SWOT analysis of the facility proposed for construction.

After analyzing the strengths and weaknesses of the object, its development and threats, we can consider the possibility of implementing two different options for the use of space:

• Shopping center.
• Shopping and entertainment center.

Shopping center

In this case, you can focus on the shopping gallery. The large size of the shopping area will increase the variety of goods offered. Rental rates for retail premises are much higher than for entertainment areas. In this case, the coverage area of ​​the shopping center will be only the first ring of the environment.

This business plan for the construction of a business center is the most optimal subject to the construction of a two-story facility.

Shopping and entertainment center

In the second case, you can focus on the entertainment component. The main advantage of this proposal is the fact that in the city market there is an acute shortage of places for leisure activities for children. The presence of an entertainment zone increases the time spent by customers on the property. In new shopping centers, the ratio of shopping and entertainment areas is 50% to 50%.

On the ground floor it is proposed to place a grocery supermarket.

If there are a large number of entertainment operators, the shopping and entertainment center will be able to attract visitors to the first and partially second rings of the city’s environment, as there are not enough entertainment venues in the city. It should be borne in mind that rental rates for this type of service are lower than for retail space, which will ultimately lead to an increase in the payback period of the project.

Foreign experience suggests that the most optimal implementation of the project will be the creation of a shopping and entertainment complex, as this option reduces commercial risks.

The planned business center belongs to class A. It is the highest among those that can be assigned. Class A assessment indicates the prestige of all the premises of the building, the availability of modern life support systems and the work of the center itself.

The cost of building a Class A business center using a specific example is presented below. We must not forget that the construction of a shopping center in another city may have completely different financial investments in volume.

Compilation of project cash flows

Presumably, the mall will have the following parameters when obtaining a building permit:

• The total area of ​​the shopping center is 9672 square meters. m
• Including the 1st floor - 4847 sq. M. m
• Including the 2nd floor - 4825 square meters. m
• The occupancy rate in the 1st year is 70%.
• The occupancy rate in subsequent years is 95%.
• The risk of non-payments is 0%.
• Revenue growth per year - 5%.

Since the lease agreement sets the amount of the penalty for late payments of more than 30 days, the risks of non-payments during the construction of the business center are equal to zero. The annual increase in rental prices will be 5%.

This is illustrated more clearly by the table below.

Investments in the construction of the construction of a business center (RUB)

The most important point is the study of capital investment financing issues. For this purpose, both own and borrowed funds of the company can be used. Below are the data on the financing of the construction project in more detail.

Project Financing:

• Total investments - 13439642 dollars.
• Including the 1st year - 10939642 dollars.
• Including the 2nd year - $ 2,500,000
• Total borrowed capital - $ 13,439,642, including 1st year: $ 10,939,642, 2nd year: $ 2,500,000
• Loan repayment term - 10 years.
• The interest rate on the loan is 18%.

In the process of studying the financial results of the project, an important point is the study of the amount and amount of the tax burden in the company according to the business plan.

The results of the planned tax deductions for the project are presented below.

Taxes paid during the operation of the project:

• For property - 2.2%.
• Profit - 20%.
• VAT - 18%.

To build the cash flow, we need to determine the approximate amount of revenue from renting out the premises, for which we need to carry out zoning of the shopping center area. Zoning elements are presented in the table below.

Zoning

Calculation of income from the rental of premises for the planned business center is a central point, as it is associated with its effectiveness. There are various forecast options for obtaining such income: optimistic, average and pessimistic. The table below shows the characteristics of each option more clearly.

The first table presents the pessimistic forecast for the option of generating income.

Calculations of rental income. Rental Rates - Pessimistic Forecast

The data in the table allow us to conclude that as a result of the implementation of the project, the pessimistic size of the income from the rental of space in the mall will be $ 3909468.

The table below shows the data on the calculation of rental income from shopping center space with the averaged option.

Calculations of rental income. Rental Rates - Average

The data in the table allow us to conclude that as a result of the implementation of the project, the average size of the received income from the rental of space in the mall will be $ 4,429,399.

It is also necessary to predict an optimistic forecast for the possible receipt of the object’s income from the lease of space, which is presented in the table below.

Calculations of rental income. Rental Rates - Optimistic Forecast

These tables allow us to conclude that as a result of the implementation of the project, the optimistic size of the income from the rental of space in the mall will be $ 4776385.

We calculate the cost of borrowed funds and the repayment schedule in the table below.

Note: in the 3rd month, the monthly payment will include a two-year deferment of payment and capitalization of interest equal to $ 5143445.

The data in the table indicate that the monthly payment for the project will be 3214579 dollars per month.

other expenses

Consider and calculate all kinds of operating expenses during the construction of a business center:

• The first two years, the work of the guard will cover half of the constant volume.
• The calculation of cleaning services includes the cleaning of all areas and territories.
• The payment of wages in full is taken into account, taking into account all taxes and VAT.
• An annual salary increase of 5% per year.
• All operating expenses are transferred to tenants (except for the 1st year and half of the 2nd year expenses).

To compile the cash flow, we calculated the following data:

• Estimated average rental income for 10 years of project implementation, provided that in the first year, the leased area is 70%, and in the next 95%.
• Depreciation of property will be 3.33% per year.

Settlements in the framework of financial activities include excess interest according to tax laws, since the format before and after financing will not be drawn up.

Since the construction is accepted “according to the stages of work”, and the cash flow is formed starting from the first year, which starts from the moment the project generates the first ruble of income, the company loses the right to VAT refund in the first year upon completion of construction.

Since the project balance is a positive amount when the facility reaches 100% capacity, other and extraordinary expenses were not taken into account in the calculations.

Based on the available data, it seems possible to display the planned cash flows created by the project.

The table below shows the operational costs of the project.

Operating expenses

The table below shows that the amount of operating expenses in the first year will be $ 271,707, then it will increase by year and will reach $ 740157 in the 10th year.

In a subsequent analysis of project effectiveness, the dynamics of project income over the first 10 years will be considered in the table below.

Project Revenues

The data in the table allows us to conclude that the amount of project income in the first year will amount to $ 2,717,987, then revenues will increase, by the 10th year they will amount to $ 3,970,2947.

When researching a project, the calculation of depreciation deductions, which is presented in the table below, is important.

Project depreciation

As can be seen from the table, the amount of depreciation in the third year will be $ 262,153, and in the last, 10th year - $ 227,582. The total amount of depreciation for all years of the project will be $ 1,956,147.

The table below shows the cash flow for the project.

Cash flow

The table shows that the total cash flow for the project will be $ 1,300,415.

Discount Rate Estimation

It is used to recalculate future income streams into a single value at the moment. The discount rate (r) will be calculated cumulatively by the formula:

r = α + MRR * RI,

Where

α is the average inflation rate over the period.

MRR (Minimum Risk of Return) - the minimum real rate of risk associated with the functioning of the project.

RI (Investment Risk) - the level of average required profitability (risk) by project participants.

The minimum real MRR risk rate for this case will be equal to the cost of borrowed funds, namely 18%, that is, the rate on a bank loan.

In accordance with the investment agreement, the average required RI yield by the project participants is set at 2%.

Thus, the discount rate will be equal to:

r = (0.13 + 0.18 * 1.02) * 100% = 30%

findings

When drawing up a business plan for the construction of a business center, the project was considered, optimistic conclusions were drawn.

Over the next three years, a moderate economic growth will be observed in Mytishchi district, however, the lag of the average indicators for the district from the average indicators for the Moscow region is expressed. The leading industries will remain engineering, instrument making, and construction industry.

By the end of 2018, it is planned to increase the growth rate of retail trade by 40% and increase the annual volume of household services by 35%. The growth of trade will be ensured by the growth of the middle class and its income.

Areas that meet international standards are in acute shortage, the demand for quality retail space exceeds supply. This will lead to an increase in the quality of the creation and management of the mall.

The main sources of demand today are clothing stores. They account for about 50% of the area in shopping centers. The level of free space in 2018 will be 10-15%. The expected increase in retail real estate will be about 75,000 sq. M. m. Currently, the average rental rate for commercial premises in the city is about $ 405 / sq. m. per year (including VAT and operating expenses).

In the zone of the first ring of the environment there are a large number of objects that compete both in the food sector and in the industrial goods sector.

When calculating cash flows, the average rental rate, the availability of premises at the level of 5%, as well as all operating costs and loan payments were taken into account. The cash flow for the project turned out to be positive, but still not large enough.

The discount rate, which includes the average inflation rate, the risk generated by the project, and the average required return, was 30%.

Thus, the submitted project can be accepted for consideration, since the calculations show its profitability and effectiveness.