Report 18 ENG by eba.metropolitan

Copyright ÂŠ 2016 PARDIS GOLESTAN TEJARAT Co. All rights reserved. Unit 18, Floor 5, No.47, East Maryam st. , Elahieh Ave., Tehran, Iran , 1915953791 Fax: (+9821)26208031 Tel: (+9821)26208011 | 26208017

Pardis Golestan Tejarat

Experimental Branch of Architecture [Metropolitan]

Strategic Documents of Pardis Golestan Tejarat

IFA

VER 2.02

The Investment Perspective PARDIS TEJARAT

Contents Directorâ&#x20AC;&#x2122;s Foreward

Introduction

Mission and Purpose

Pardis Golestan Tejarat Co

Rationale

Project Context

Significance of Tehran

Tehran City

Metropolitan Region

Main Business District

Transportation in Tehran

Economy of Tehran

Project Program

Current Status

Project Timeline

Market Demands

Hotel

Market Price

Building Costs

Financial Assessment

Project Advantages

The Investment Perspective

Director’s Foreword: The City of Tehran is looking to the future and aspires to undertake bold, proactive projects to improve the economy of its citizens. Tehran is a remarkable city, with a high growth rate, an exceptional educated workforce, and a good infrastructure among the country. We appreciate this project as an exceptional project. So, rather than starting with an architectural identity, we began by planning a comprehensive strategic study for the project: mission, vision, requirements, functional program and feasibility study. This study takes great care to consider these elements within Iran’s unique cultural context and to focus always on the future, seeking new possibilities and approaches rather than settling for standard building development practices. Inspired by the admirable support of the Tejarat Bank, and the municipality of Tehran, we sought answers not just through internal discussions but also by engaging a wide range of experts. Through interviews, surveys, think tanks, seminars, congresses, panel discussions, site visits, and financial models, we worked diligently to understand and take into consideration how a highrise and mix-use building development project could benefit the country economically, culturally, and socially. The company managing board announced this development study in January 2014, and we decided that the process should be completed within one year. This ambitious deadline was met thanks to the dedicated efforts of the responsible consultant company, EBA-[M]. Also, we could not have accomplished this task without the assistance of Mayor of the District 6 and their staff, the advice of the CRE department of Tejarat Bank, as the owner of the project, and input from expert contributions of our consultants and many others. The Board of Directors approved the results of the study at its meeting on March 2016. The board’s enthusiastic support reflects its conviction that moving forward to the next stage of the project would strengthen the project, attract potential investors to the project, foster a long-term alliance with the Government of Iran, the ministry of industry, mine and trade, the chamber of commerce and make an outstanding contribution to the economic life of Tehran and the region a whole. Tehran’s embrace of change and its willingness to explore the symbolic idea of a 21st-century building, a World Trade Center for Tehran, emboldened us to seek unconventional solutions and explore bold new ideas. This process has opened up new vistas for us, and I am confident it would yield tangible benefits for the investors of the project, also the country and then the city of Tehran. Hossein Nasseri Managing Director of Pardis Golestan Tejarat

The Investment Perspective

In January of 2014, “Pardis Golestan Tejarat Company” announced a Concept and Development study to explore the potential viability of a high-rise and mix-use building development project, in a valuable property in the CBD of Tehran, possibly operate as the World Trade Center for Tehran. The Concept was named “Pardis Tejarat” for this 73 story building. “Pardis” means Paradise and “Tejarat” means trade. Therefor the name means “Trade Paradise” and nominated to be the first World Trade Center for Tehran. The study was the product of an exceptional collaboration with colleagues at the Tejarat Bank corporate real state department; wide-ranging discussions among experts; detailed research and analysis by consultants that mainly included a famous local architectural consultant, called EBA[M] and other experts in the field of construction economy; conversations with outside colleagues and experts from a wide array of fields, including chamber of commerce; and input from ministry of industry, mine and trade. An estimate in final stages of the study placed the total cost of the project about 1,700 million USD, or 3,450 USD per square meter, including land purchase and construction permit fees. However, the tower›s total estimated construction budget would not be more than 1,150 million USD (or 2,280 USD per square meter), but making it the most expensive office building in Iran. The result of the study was so embracing for the stakeholders, to convince them to decide to proceed to the next stage: development of an architectural concept and schematic design for the project, in order to clarify different aspects of the project in more details. This summary is based on the results of the study so far, to present to potential investors, and to invite them to invest on this exceptional project in Tehran. It includes a brief economical history of Iran, a comprehensive analysis of Tehran economic figures, a mission and building program proposed for the building, a brief market study, preliminary financial appraisal, followed by a series of conclusions.

3 The Investment Perspective

Introduction

The Investment Perspective

Pardis Tejarat project, is to construct the World Trade Center â&#x20AC;&#x201C; Tehran. At 280 meter tall, Tehran world trade center, will be the tallest office building in the city and will set new standards of design, construction and operation. Pardis Tejarat will become the first choice of international companies, for their workplaces in Tehran. It will also become the first choice for big domestic companies. A selection of business oriented amenities and business service area, would offer a convenient, high-quality and smart workplace to the client. It would be the most recognized and desirable office address in Iran. Pardis Tejarat will have a strong focus on architecture and design, and become admirable for its design, construction, and its operation, and would become a famous landmark in the region. It would also be able to play a unique role in testing new approaches and technologies of green buildings, in the country.

5 The Investment Perspective

Mission and Purpose

The Investment Perspective

“Pardis Golestan Tejarat” was established in 2012 and is a “project company” dedicated to management and development of “Pardis Tejarat” project. The company is a joint stock private company, registered in Tehran, and affiliated to Tejarat Bank. Tejarat Bank, is one of the greatest banks in Iran, has an effective presence in the domestic, regional and global markets. Tejarat bank is the owner of the property. Activities which are completed by the company till now, includes all land development tasks, site analysis, feasibility studies, traffic studies, geo-technical surveys, preliminary design studies, purchasing and integration of necessary neighboring properties into the site and permit/zoning applications and payment of all legal fees for the project. Total investment by the company, so far is about 578 million UDS for this project. The company is proud to announce that a pre-construction permit for the project has been issued by local authorities and the municipality of Tehran. The company has already paid 237 million USD to the municipality of Tehran to cover all legal fees and duties and no further payment is necessary for the final permit. Now the company is planning to prepare the project for design and further construction period, and making the project ready for investors to enter. Total investment required for the project is estimated at 390 million USD.

7 The Investment Perspective

Pardis Golestan Tejarat Co.

PARDIS TEJARATThe DEVELOPMENT SYMMERY Investment Perspective

Rationale Experts agree that the signing of a comprehensive nuclear agreement and the consequent lifting of external sanctions will have a positive impact on the Iranian economy. Although Iranian and Western stakeholders had different expectations on how quickly the sanctions would be lifted, the psychological boost already generated by a comprehensive deal is enough to create a significant economic momentum. Fact is that Iran will be in a very better position to materialize its economic potential. Now, Iran is the world’s 18th-largest economy, and the 3rd in the region. Iran, unlike its richer Arabian neighbors, is not only an oil-soaked rentier state, but a regional power with an industrial economy and lots of educated people who actually work. The supreme leader, Ayatollah Khamenei, has set a target of %8 average annual growth for the next five years, up from its current %2.5. Most experts reckon that, within a decade, Iran’s GDP might surpass that of Saudi Arabia and Turkey, the regional economic powerhouses, and rank the number one in the region. The population of 80 million is well-educated; and the country’s oil and gas reserves are huge. The Tehran stock exchange is the second-biggest in the Middle East, with a capitalization of about 150$ billion, according to Turquoise Partners, the first foreign investment fund dedicated to Iran. But at the end of 2014 foreigners owned only %0.1 of listed companies’ shares, compared with %50 on Turkey’s main exchange in Istanbul, which will make Tehran as a hotspot for international investors. Iran ought to be able to attract much more foreign direct investment, given its size. One estimate puts Iran’s pent-up need at over 1$ trillion. In the next five years the country needs an estimated 230$ billion260$- billion of investment in oil and gas, and other interesting sectors according to experts. Iran is preparing for take-off. In this framework, a landmark high-rise building in the heart of Tehran, as a symbol of new era of international collaboration in Iran, developed by the company, with support of Tejarat Bank and the municipality of Tehran, could be an exciting prospect. Persia is a thriving nation of increasing importance in Middle East and throughout the world. With its cohesive society and dynamic culture, Iran has the capacity to actively participate in the world’s trade and economic growth, and to promote the international business collaborations, and other manifestations of the business culture of the nations. The project as the World Trade Center of Tehran, will serve as a bridge between East and West and is located at the heart of Tehran, the heart of Iran and the heart of the Middle East region.

Tehran is a dynamic city that will continue to grow in the coming years. The project will act primarily as a trade center, and with near 140,000 square meter of prime office spaces, would host most of international companies willing to be active in this huge market. The project also consists of a high quality hotel, and further commercial, recreational, and cultural spaces. The city’s 2012 master plan lays out Tehran’s vision for a smart, rich, and vibrant urban structure. A world trade center – Tehran, could advance the master plan’s goals by acting as a hub and a gathering place for international business people, helping to make Tehran legible for international companies to invest, while improving quality of life for locals.

PARDIS TEJARATThe DEVELOPMENT SYMMERY Investment Perspective

The Investment Perspective

Project Context In the early 20th century, high-rise development was a symbol of progress and modernity. Tall office buildings, hotels and residential buildings were an expression of a new style of living and technological potential, and they were becoming incorporated into the panorama of big cities, although Iran cultural backgrounds, especially the after Islamic revelation, stayed conservative to this idea for the past three decades. However, recent experiences in high-rise development in Tehran shows that, as far as the creation of property value and spatial order are concerned, high-rise development is a helpful solution, if it is applied with proper study and enough care. Despite this fact, getting a high-rise development permit in Tehran is very complicate and rare. “Pardis Tejarat” in its class, has a quite exclusive construction permit, thanks to a detailed study of a group of consultants and expert engineers, and visionary authorities of Tehran City. Building height of this project was reviewed from many perspectives in its development studies, mostly analyzed for the following items: • •

technological, which focuses on the technical and technological possibilities of constructing a tall office (mix-used) building in Tehran, spatial, where the purposefulness of this building into urban fabric is analyzed in terms of spatial order,

Tehran overview

Economic, where the rationality of constructing this tall structure is fully assessed against the profitability of such an investment, especially for the investors

Some of the main factors behind this project include: • population increase in Tehran, connected with a growth in demand for new office, hotel and commercial spaces in the CBD of Tehran, • rising prices of land for development, in the CBD Tehran • restrictions on the territorial expansion of Tehran city, • Unique high-rise development viewed as a symbol of prestige and international trade collaboration. Analysis of the project’s economic landscape entailed visiting local and regional similar buildings, meeting with experts and business professionals, and conducting benchmarking and numerous site visits for in-depth interviews with key stakeholders. Tehran lacks from a well-organized infrastructure for office spaces, although some quality office building and hotels are constructed in past years. Even a visual scan of Tehran office space offerings suggested that a huge gap does exist that even a project like this could not fill. Tehran has few significant hotels and class A office buildings to offer, and lack other major public spaces required for international visitors. Since this is the project focus, the project program would be unlikely to overlap with those of existing office buildings.

11 The Investment Perspective

•

The Investment Perspective

World Trade Center Seoul (South Korea)

World Trade Center Bahrain

World Trade Center One (New York)

World Trade Center Abu Dhabi (UAE)

Pardis Tejarat project could convene and collaborate with other activists, present world-class exhibition center of Tehran, act as a welcome center to major international companies, and serve as a community hub that provides ample common areas for business people to gather, reflect, and socialize. These amenities would not only appeal to those who fit the typical profile of an international enterprise but are likely to attract local and international SME’s.

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Tehran’s office building landscape is rich, but it is also fragmented. Few of Tehran’s office buildings are in purpose-built facilities, numerous office buildings face space constraints, and most of big companies occupy multiple sites throughout the city. Several companies are contemplating or beginning construction projects for themselves; but even so, Tehran’s business district lacks a center of gravity.

The Investment Perspective

Significance of Tehran Tehran is the political and economic center of Iran. Within Iran, Tehran serves as a key center for science and research, with over 300 universities and higher education institutes found in the city. Educational levels in Tehran are above the national average, which is particularly important in driving the city’s business services. Tehran also has a well-developed infrastructure, which is beneficial for the city’s commerce activities. In particular, Tehran’s extensive system of motorways is considered unrivalled in western Asia. Tehran labor productivity (or GVA per employee) exceeding the country’s average by 48% in 2014. The city derives its economic strength mostly from developing as a key center for science and research and from its relatively well developed infrastructure. Between 2007 and 2012, labor productivity increased by an impressive 22% in Tehran (in constant 2012 prices). Tehran’s advantage in labor productivity over the rest of Iran is a principal factor behind the 49% higher average annual disposable income per household in the city, as of 2014. However, reflecting the economic sanctions imposed on Iran by the international community, the household income level decreased over 2007-2012 and is forecast to increase again based on the nuclear agreement. Thanks to greater income per household in the capital, consumer expenditure per household (excluding housing and transport) was 30% above the country’s average in 2014. However, lack of affordability in residential real estate decreases the budget for discretionary spending in Tehran. Tehran’s residential property is the most expensive in Iran and the city is twice as reliant on personal cars as the remaining country. This makes living in Tehran relatively less affordable compared to the rest of the country: Consumer expenditure on housing and transport (measured per household) was 58% higher in the city in comparison to the rest of Iran in 2014.

The Investment Perspective

The Old Grand Bazaar of Tehran

The Investment Perspective

Tehran City Tehran is the largest metropolis in Iran and is also among the 25 largest metropolitan regions worldwide in terms of population (ranking between Rio de Janeiro and Guangzhou). The cityâ&#x20AC;&#x2122;s population of 12.3 million (as of 2012) accounts for 16% of the total number of residents in Iran. Over 2007-2014, the capitalâ&#x20AC;&#x2122;s population growth (1.4% per year) was somewhat faster than in the rest of the country (1.1%). Between 2014 and 2020, Tehran is expected to sustain a similar growth pace and reach 13.2 million inhabitants in 2020. Historically, Tehran became an important regional center when it was made the capital city of Persia in 1785. The first modernization of Tehran came in the second half of the 19th century, when new city walls were built, and horse-drawn trams were introduced. Yet, population-wise the most notable boost came following World War II. In 1941, Tehran was home to no more than 800,000 people, while less than three decades later, in 1966, it had three million residents. The most recent strategic plan of the city was developed at the beginning of the 21st century. The expansion of public transport was prioritized and metro construction received substantial efforts from the government. The city also increasingly saw the construction of high-rise buildings in its northern districts. Today, Tehran is one of the 25 largest cities worldwide, coping with urban sprawl and gradually introducing modern infrastructure.

The Investment Perspective

Metropolitan Region The Tehran metropolitan region corresponds to Tehran province, covering 13,700 sq. km. The Tehran province consists of 13 counties, with the City of Tehran being the principal one. The province is bounded by mountain ranges to the north and northeast, which protect the urbanized areas from the dryness of the deserts. In 2014, the population of the metropolitan area reached 12.3 million (accounting for 16% of the countryâ&#x20AC;&#x2122;s total), with about 8.4 million living in the core urban area - Tehran City. Tehran City covers 614 sq. km and is divided into 22 districts. Historically, Tehran evolved radially, adding new districts at the outer areas from the city center. Tehranâ&#x20AC;&#x2122;s inner areas remain mainly orientated towards commerce and administrative functions. Dense residential areas, with commerce and cultural functions, surround the inner circle and comprise the middle circle of the city. Finally, the outer areas of the city contain newly developed, less dense areas. Historically, Tehran evolved radially, adding new districts at the outer areas from the city center. Tehranâ&#x20AC;&#x2122;s inner areas remain mainly orientated towards commerce and administrative functions. Dense residential areas, with commerce and cultural functions, surround the inner circle and comprise the middle circle of the city. Finally, the outer areas of the city contain newly developed, less dense areas.

The Investment Perspective

Tehran Core City Metropolitan Area

The Investment Perspective

Main Business Districts of Tehran The Central Business District (CBD) of Tehran is primarily clustered in two of the 22 districts of the Tehran core urban area, namely districts 12 and 6. The intense economic activities of the CBD are reflected in the significant commuter population that enters the area. District 6 in more developed and benefits from better infrastructures, while the 12th district has old Grand Bazar of Tehran in its heart. On the other hand, the CBD of Tehran does not have enough A-class office buildings, and most of companies located in these areas are using “Class B” or “Class C” offices, re-furbished from old residential spaces. The highest density of industrial activities is found on the outskirts of the core urban area of Tehran, particularly to the west and south. This is partly a result of a decision to move polluting industrial activity outside Tehran to industrial parks around the city. Some 27 sq. km of the core urban area (4% of the total) of Tehran is dedicated to industrial parks. Tehran has two commercial airports: Mehrabad International Airport and Imam Khomeini International Airport (IKA). Mehrabad used to be the primary airport of Tehran before being replaced by IKA. However, Mehrabad is still Iran’s main domestic hub, serving 13.6 million passengers between April 2013 and March 2014 (Iranian year). During the same period, IKA served 4.9 million passengers.

The Investment Perspective

District 6

District 12

The Investment Perspective

Transportation In Tehran The public transport system of Tehran, consisting of metro, buses, minibuses and trolleybuses, has been improved recently. In fact, the city ranked second in the Sustainable Transport Awards by ITDP (The Institute for Transportation and Development Policy), after Guangzhou (China), with Tehran named as an exemplar city due to its aggressive promotion of new transportation options. Tehran has expanded its metro and BRT systems during recent years and has incorporated an integrated electronic fare system in its BRT. According to the ITDP, passengers on the new lines receive up to 42% time savings on their trips since the new lines were put in place. The cityâ&#x20AC;&#x2122;s metro and BRT systems are claimed to transport 2 million and 1.8 million passengers daily, respectively. It is now faster to travel in certain parts of Tehran by metro than by car. Although public transport system is growing fast, it is not sufficient, and using private cars for daily use is quite extensive. More than 44% of people are using private cars, and because of this fact, Tehran is highly dependent to its highways. The metropolis of Tehran has a massive network of highways (503km) and of interchanges ramp & loops (402km). District 6 of Tehran, as the central business district, has three major highways in north, west and east borders. Unfortunately, the southern areas of this district, which is near to old district 12, do not have any access through highways. There are also two main highways in the district, which crossed each other at the project location. To reduce hazardous air pollution in the city, the authorities have enforced traffic restricted zones, introduced an odd/even license plate traffic-control plan, and implemented congestion pricing.

The Investment Perspective

HAK IM ‫بزرگراهههای اطراف‬

Ko rde sta n

‫دسرتسی بزرگراهی‬

HAKIM and Kordestan Highways are two main highways in the district, which crossed each other at the project location.

The Investment Perspective

The metropolis of Tehran has a massive network of highways

The Investment Perspective

Economy of Tehran With a GDP of 135 billion USD in 2012 (accounting for 24% of Iran’s total), Tehran trails only the cities of Abu Dhabi (US$217 billion), Riyadh (US$188 billion) and Doha (US$154 billion) in the Middle East. At the same time, Tehran considerably overshadows other capital cities of the Middle East, such as Amman (US$20 billion). The industrial makeup of Tehran differs significantly from oil- and manufacturing-driven Iran. In 2014, services constituted 76% of the city’s economy, with business services and commerce playing a principal role. In comparison, the tertiary sector accounted for only 40% of GVA in the rest of Iran, in the same year. This contributes to Tehran’s labor productivity (or GVA per employee) of US$36,000 being 48% higher than in the rest of Iran. Within Iran, Tehran serves as a key center for science and research, with over 300 universities and higher education institutes found in the city. Educational levels in Tehran are above the national average, which is particularly important in driving the city’s business services. Tehran also has a well-developed infrastructure, which is beneficial for the city’s commerce activities. The city is also an important railway hub in Iran. Manufacturing: Manufacturing is the second largest employer in Tehran (after commerce), providing jobs to 969,000 people (26% of the city’s workforce), who generated 15% of Tehran’s GVA in 2014. The main industries include petrochemicals and automobiles, electronics and electrical equipment, military weaponry, textiles, sugar, cement, and chemical products. Tehran Oil Refinery posts daily production of around 6.6 million liters of gasoline (15% of the country’s total gasoline production as of 2010) and 10 million liters of fuel oil (13% of Iran’s total as of 2012), among other refined products. IKCO, Iran’s leading car manufacturer, with a 50% share of the market in the country, has its headquarters and a flagship plant in Tehran. The company is regarded as the largest automaker in the Middle East. In 2016, IKCO aims to produce more than 600,000 passenger cars, with a determination to export 30% of production up to 2017.

The Investment Perspective

GVA From Different Sectors in Tehran

Employment Rate Share From 2005 to 2014

The Investment Perspective

Commerce:With 1.2 million people in employment (or 32% of the city’s total workforce), commerce was the largest employer in Tehran in 2014. The sector contributed 29% of local GVA in the same year. Commerce has much more significance in the city’s economy than elsewhere in Iran, which originated only 18% of GVA from commerce. Tehran is the distribution hub of goods for the country. Accounting for 16% of the country’s population and 25% of Iran’s total consumer expenditure, Tehran is the most important wholesale hub and retail market in Iran. Bazaars, traditional Iranian markets, are important channels for the exchange of merchandise, foodstuffs and services. In Tehran, there are bazaars for watches, clothing, jewelry, toys and household products. The Grand Bazaar in southern Tehran is one of the most important points of retail in Iran, with an approximate length of corridors of over 10 km. In the communication industry, a notable company is Telecommunication Company of Iran (TCI), which is based in Tehran. Almost entirely owned by the state, it is the dominant player in Iran’s telecommunications industry, which provides 90% of fixed-line services in Iran and has a market share of more than 60% of the mobile phone segment. Business Services: Business services are notably more developed in Tehran than in the rest of Iran. In 2014, their respective GVA shares (Gross Value Added share) coming from business services made up 34% and 11%. In fact, more than half of national sectoral production originates from Tehran. Financial activities particularly stand out within Tehran’s business services. The state-owned Bank Melli Iran (BMI), headquartered in Tehran, is the largest commercial bank in the Middle East. Other major banks based in the city include Bank Mellat and Bank Tejarat, a modern commerce-oriented bank, which has 3,800 employees overall and manages an extensive network of branches, joint ventures and regional offices in Europe, and the Middle East. The city also serves as home to the Tehran Stock Exchange. In real terms, Tehran’s GDP grew at an annual average of 6.6% between 2007 and 2011. Tehran’s more diversified economy helped it endure the crisis-stricken years of 2008 and 2009 fairly well compared to other cities in the Middle East. In fact, while most of the world cities experienced severe consequences of the economic downturn, Tehran managed to reach GDP growth of almost 14% in 2009. Tehran’s economic growth is anticipated to be high during the coming years, also. Over 20152020, the city’s real GDP is forecast to increase more than total average of the country, by 1.6% per annum.

The Investment Perspective

Plot Location : The project is a high-rise development project on a private owned property located in north-west of the 6th district of Tehran, one of the best locations of the CBD of Tehran. The land is about 34000 sqm right now, directly accessible from Kurdistan and Hakim Highways of Tehran, two main motorways of the district 6 and Tehran. The 6th district of Tehran is ended from the northern, eastern, western, and southern sides to Hemmat Highway, Modarres Highway, Chamran Highway, and Enqelab Street respectively. This district with the total area of 45 hectare, owed %2.3 of Tehran City. In line with Tehran`s development, beside district 1 and 3, district 6 is one of the modernist regions. The Plan: The project is programmed to function as a 21st century World Trade Center in Tehran. If by any chance, the formal and official process of registration to the world trade center association is pended, the building could work as an independent International Trade Center, or International Financial Center. Fundamental principles of the programming process, was to build a mixed-use complex, with a high-rise, “class A” Office Building as its major application. The main applications of the building consists of the following: •

Office spaces: the main function of the building is its offices spaces. Proper daylight use, fast vertical access, and proper emergency exit plans are among the specification of office spaces. Office spaces will be open, flat, and flexible, so as to be allocated to the clients according to their individual needs. A separate space is considered to be the main office of the world trade center operator, which will be in charge of the management of the building also. Total net leasable area of office spaces is about 138,500 square meter in 51 story.

•

luxury hotel: A full service luxury hotel is planned to be in this building. This hotel will be cover the requirements of international trade groups, diplomatic visitors, and other VIPs visiting the country. It consists of 280 rooms and will directly benefits other spaces, like sport club and cultural spaces. Total gross usable area of the hotel is 20,000 sq. meter.

33 The Investment Perspective

Project Program

The Investment Perspective

•

Commercial spaces: Commercial space of the project is planned with regards to the main target of the building: trade, finance and monetary services. Final conceptual design of these spaces will be completed, in the next phase by the designer and collaboration with marketing consultants. For the purpose of this study, a large area is dedicated to local bank branches, exchange and monetary institutions, car show rooms, and other commercial spaces, in line with the purpose of the building: a prestigious trade center. Total net leasable area of commercial areas are 24,000 sq. meter.

•

Sport club: a high-end sport club is considered to be in this program, to cover all needs of the residents of the hotel and office areas. It may also available to the public with some conditions. Total net usable area of sport club is 9,600 square meter.

•

Cultural Center: a very modern cultural complex, consisting of a convention center, and its dependent service areas, an art center, and an independent book store and media tech is planned in this building program. Total net usable area is about 9,600 square meter, and it is in line with the exhibition center of the building.

•

Parking lots: An important factor in the programming of this building is the parking lots and other general service areas of the building, which make totally 188,000 square meter. A Parking lot with the capacity of 4,600 cars is considered in this program in seven stories.

•

Total floor area of the building is about 500,000 square meter.

The Investment Perspective

37 The Investment Perspective

Installation level Hotel’s restaurant observation deck 2 5star hotel Hotel’s lobby Special office Coarse office (macro office( Sky lobby zone 3 observation deck 1 Installation level Microlithic office (micro office( Sky lobby zone 2 Installation level Coarse office (macro office( Office's dining room Sky lobby zone 1 Installation level Sport center Commercial ( banks and exchanges( Art center auditorium Commercial ( chartered brands( Medium halls Hub Cultural lobby Comercial (Cafes & restaurants( Dock Exhibition Parking Powerhouse

)A3 ‫ چیدمان عمودی فضاها (در گزینهی‬-12-3

The Investment Perspective

Current Status Conducting development studies: A complete pre-feasibility study, full land mapping, congestion studies, geology and geo-technique studies, seism tectonics, and the other basic studies have been completed accordingly. Pre-feasibilty study of the project is completed by EBA[M]. The congestion studies are being done by the Italian company named Systematica. Geotechnique, soil mechanic, hydrology, and the primary geologic studies are being done by Sano Company. A group of international experts, is responsible to study seism tectonics and special spectrum, which their task will be completed in near future.

Traffic Infrastructure: Traffic impact assessment study of the project is done by an Italian based company, called Systematica. Based on their experiences in international high-rise projects, they suggested all site access roads and parking lot calculations. Access roads includes ramps and loops from Kurdestan and Hakim highways to the site directly. Construction Permit: All governmental and legal fees are paid, and a pre-construction permit is obtained, as bellows: • • •

Old Properties Demolish and Workshop Equipment Permit: has been issued. Signed Agreements by Municipality of District 6: By signing two agreements, municipality will cooperate in license issuance and all construction permits. Commission of Article No. 5: The issued verdict accords with requested preliminary building program and it has been confirmed by all influential people in the city.

Planning Permit: It has been issued according to commission of Article 5. Pre-construction Permit: It has been approved based on commission of Article 5 and early density request has been issued. Final Permit: It will be issued after finalization of project architectural drawings and plans.

39 The Investment Perspective

Land integration: All activities regarding land integration is finished, and a total useful amount of 28,800 square meter of land is in the project property. Purchasing and integration of other neighboring lands is also possible, if necessary.

The Investment Perspective

Project Timeline Total Project timeline is consists of 9 years. 2 years roughly is assigned for architectural design and finishing preliminary earth works. Next five years are planned for completing the construction works, and two more years for finishing the sales process of the project.

Office Spaces overview : Office buildings are typically grouped into one of three categories: Class A, B or C. For purposes of this Study, office space supply and demand analysis are organized into these building classes. Building classifications are determined using a combination of factors including rent, age, finish, location and size, and indicate each building’s relative desirability in a given market. Classifications differ between different countries. However, the class designations follow the general principle that Class A buildings are the most prestigious and attractive in a given market and that Class C buildings tend to be smaller and of lower quality. International firms, Investment companies, financial services, legal services and accounting will drive the class A office space demand. But the type of space that is suited to the needs of other firms tends to be found in existing Class B and C buildings. For purposes of this study, office space preferences were considered according to three key segments: affordability, location and physical attributes. Based on the following segmentation, only clients of class A office spaces are included in the project marketing target. Affordability : The funding level of a High Growth Industry tenant has a large bearing on the elasticity of its demand for space. Funding and the ability to borrow allows for more location options at higher price points. Market research shows that early to mid-stage tenants consider asking rents of 430 USD per square meter and below in the affordable range. Rents in this range have historically fallen within the Class B and C classifications. Location: While office location is an important factor for all kinds of firms, High Growth firms are particularly sensitive to location. Many of these firms are looking for investors. Investors prefer their portfolio companies to be in close proximity to them, so HGI firms seek to locate near these sources of capital, typically the CBD of Tehran. Locating near clients is also a high priority of HGI firms as a substantial amount of HGI firms’ work is external and entails meeting with and doing demonstrations of their product to prospective clients. Proximity to employees’ residential centers is a key factor in HGI firms’ ability to attract and retain talent. This represents a substantial shift from the behavior of TOU firms, where location is more likely to be determined by proximity to executive level housing. Traditionally, workforces have followed corporate executive preferences; however, HGI firms may be more likely to follow their workforce. HGI firms prefer to be in live/work/play neighborhoods that have -24hour access to social amenities such as restaurants, bars and coffee shops. These amenities complement flexible work hours and provide convenient and stimulating places to collaborate, which suits the social and

41 The Investment Perspective

Market Demands

The Investment Perspective

entrepreneurial culture of HGI firms.

Physical Space Characteristics : Different firms tend to prefer different physical space characteristics in their offices. HGI firms tend to prefer that their space project a less “corporate” image to prospective clients and talent. Likewise, they are more likely to seek spaces that foster collaboration and innovation. Broadly, TOU firms are associated with Class A space and HGI firms with Class B and C space.

The Investment Perspective

Office Space Market Demand Analysis of economic growth of the country is complex as its determinants are combination of many involved variables according to their contribution to the growth rate of Gross Domestic Product (GDP). Among the determinants identified to explain an economic growth, Foreign Direct Investment (FDI) has become one significant element in this rising trend of globalization. It is estimated that at least 4 billion USD will be invested directly in Iran annually. Although answers to the question of how, and to what extent, FDI affects economic growth is relatively differed from one study to another. In Iran’s economy at least, to promote one percent of growth in national economy, 3.5 billion USD of FDI is required. Considering %5 of estimated growth rate in Iran, more than %20 of the growth would originate from FDI. On the other hand, studies on employment rate in Iran shows that by one percent of growth in GDP of the country, 100,000 of net employment is created, which is very essential for the country’s young and skilled people. With the above facts in mind, with an average of %5 of annual growth, predicted for Iran economy, within the five years of the project sales process duration, some 2.5 million of new jobs will be opened in the country, of which %20 would be based on FDI. Considering Tehran as %24 of the country’s economy, 600,000 of these new employees will be employed in Tehran during those 5 years. As more than %42 of Tehran economy is in service sector, and commerce, about 250,000 of these employment will be involved in service companies which will demand office spaces for their workplaces. Detailed studies of the project shows that by considering 10 to 15 square meter of office space per employee in Tehran, during those five years of sales process, some new 2.5 million to 3.7 million sq. meter of office spaces would be demanded in Tehran. Tehran suffers from having not enough office spaces, as far as class A spaces are concerned. As Tehran is waiting for numerous amount of international companies, seeking to organize their activities in Iran, the idea of building a very prestigious and high quality office building in the CBD of Tehran is wise. Most of international companies looking for their local offices to be located in Tehran, and such a building is a must to begin.

The Investment Perspective

If just 20 percent of the total market demand, is demand for Class A office spaces, 500,000 to 740,000 square meter of class A office workplace is required in Tehran. Therefor our project with 138,000 square meter of office space is considered to fill one fifth of the market gap. Following is the latest list of building projects in Tehran which provide office spaces, that may considered as competitor in market study: •Sepehr-e-Elahiye, Tehran, 21,000 sqm. •Jam, Tehran, finished, 40,000 sqm. •Baran, Tehran, 70,000 sqm. •Atlas plaza, Tehran, 60,000 sqm. •Mega Pars, 12,000 sqm. •Madar Tower, Tehran, 16,000 sqm. •Negar, Tehran, finished, 60,000 sqm. Total estimated supply of office space in Tehran: 280,000 sqm

The Investment Perspective

Hotel Tehran has around 6,000 hotel rooms, in 77 registered hotels. Only %30 of these rooms are in 5 star Hotels, as ranked according to national standards in Iran. Construction of new Hotels in Tehran had suffered due to lack of market demand from tourist side visiting Iran, during the last four decades. But, post-deal Iran needs to boost infrastructures in the tourism and hotel industry also, due to a sudden increase in the number of international business trips to Tehran. The WTM Global Trends Report 2015 by Euromonitor International which has been unveiled at World Travel Market London, predicts that Iran has the potential to be the next must-see destination in the world, thanks to its unique culture and heritage. The diplomatic relations between the US and Iran have thawed and the recent lifting of sanctions sparked a scramble to open the country up to visitors. The country looks set to exploit its ancient Persian history, 17 World Heritage Sites, and more unlikely tourism attractions such as 19 ski resorts, and opportunities for mountain climbing and bird-watching. The WTM Global Trends Report 2015, reveals the Iranian government has already taken steps to boost tourism by enabling many nationalities, such as French, German and Russian, to obtain a visa upon arrival. However, the years of international isolation have left the tourism infrastructure in need of major investment. It is forecasted that 5.3 million foreign tourists would visit Iran by the end of the current Iranian calendar year (20 march 2016). Based on the above facts, this project as a world trade center in Tehran, consisting a convention center for a capacity of 1500 business person, beside a modern exhibition center will need to be able to receive at least 150 to 250 business persons and diplomatic VIPs during each event, from other cities in Iran or other countries. Although construction of 5 new hotels in Tehran is planned during last year, it is believed that they cannot compete with a luxury hotel at the top of the tallest building in Tehran.

The Investment Perspective

HOTEL AZADI , 1974

HOTEL ESPINAS PALACE , 2016

The Investment Perspective

Market Price Market investigations shows that strong demand originated by the country’s economic growth, beside demand pressure from international companies seeking their office in Tehran, will increase office rents, and sales prices accordingly. Current sales prices of the latest ordinary office building project, in Tehran are 7,250 USD per sq. meter, for the first floor, by an %1.5 charge for each higher floor. This equals to 435 USD per sq. meter of yearly rent for this office building. Considering “Pardis Tejarat” as a landmark and luxury office building project in Tehran, right in one of the best locations of the CBD, For the purpose of this project, two scenarios were developed. The optimistic scenario suggest a price value of 9,700 USD per sq. meter, for the base price, with an %1.5 charge for each higher stories, for all 51 stories of the tower. The pessimistic scenario suggests just around 8,370 USD, for the base piece, considering %1.4 additional charge value for each higher flat. To prepare the pre-feasibility report, pessimistic values are used. For estimation of sales value of other applications of the project, like its hotel and sport club, “Terminal Value” analysis has been used. Published international reports on trends in prime office rental performances and occupancy costs across the globe supports the optimistic scenario assumptions. Published ranking of the most expensive locations across the world and a more in-depth rental and occupier overview for each region is analyzed to discover probable Tehran situation in global rankings in the next five year, when this project begin to compete internationally. Thanks to provided information, it was possible for our research team to assess the results of Tehran market investigations on sale prices, and office rents against global office market performances, and summarized that even if the project competitiveness fall below its competitors in New Delhi, Singapore or even Dubai, its performance will be quite interesting for its investors. Project revenue for the last six year of the project timeline, in which sale process starts and finishes are indicated in the following table:

Forecasted Cash in flow of project:

The Investment Perspective

all values are in 1000 USD 3,500,000

3,015,844 3,000,000 2,398,516

2,500,000

2,000,000

1,669,699

1,500,000 924,284

1,000,000 473,720

500,000

Year 1

Year 2

Year 3

156,193

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Sales process assumptions: - %35 pre-payment - %50 before delivery by montly installment - %10 on delivery - %5 on the last year, on title deed Sales income originated from sales of of the hotel, sport club and cultral center of the project to beneficiaries, is supposed to be accured in the forth and fifth years, based on their values, pridicted by the project model for terminal value.

The Investment Perspective

Building Costs The high cost of development for new ground-up development of a commercial office buildings is often most feasible for Class A product that can be leased at higher rental rates or can be sold with higher prices. Tehran Cityâ&#x20AC;&#x2122;s development costs are driven by both high land prices and construction costs. High land prices in the CBD of Tehran and its key submarkets are driven by a continuing decline in supply. Tehran Cityâ&#x20AC;&#x2122;s construction costs are among the average in the region. The building construction costs are estimated based on several recent experiences of similar low-rise buildings, modified for a high-rise project, based on the results of international benchmarks. Total project costs are estimated in below table:

Cost Centers

Total Costs (000 USD)

1 Land Purchase Permit fees 2 Municipality Taxes and &Fees 3 Design and Management

Construction Costs

Offices Hotel Commercial Cultural Sport Parking Lots Access Roads and Landscape

5 Unforeseen Costs 6 Utility Distribution Fees 7 Sales Costs Sum total

340,495 340,495 237,301 237,301 50,849 51,911 452,374 464,737 63,028 64,750 94,879 97,472 13,412 13,779 22,356 22,967 129,075 132,602 43,510 44,699 16,151 16,509 219,847 227,993 13,420 13,940

1,696,698 2,069,650

Amounts mentioned in first and second rows, have been already paid by the project owner.

219,847

13,420

Sales Costs

(thousand dollars)

869,484

16,151 Other

Utility Distribution Fees Unforseen Costs

Parking Lots Sport Cultural Commercial Hotel

Offices

50,849 237,301

340,495

Construction Costs Design & Management

Taxes & Fees

Land Purchase

The Investment Perspective

1,696,698 TOTAL COST

The Investment Perspective

Financial Assessment Current Investment:Total current investment on this project, including purchasing of the properties and payment of all necessary municipality fees and taxes for the project building is equivalent to 578 million USD. Total Capital Required: Total construction costs for the project to complete is estimated at 1,700 million USD. Considering previous expenditure as mentioned above, the remaining financial requirement is worth 1,113 million USD, to be financed during construction years. While part of financial requirement of the project could be generated from its own revenue (selffinance), some lower amount of investment may be required to be provided by the investor or lenders. Calculations of the pre-feasibility studies shows that the minimum required amount, is 388 million USD in the first five years, if all the activities are managed according to the program. Therefore the total capital required for the project estimated at 388 million USD.

500.0 400.0

300.0 200.0

100.0 0.0 -100.0

-200.0 Net Cash Flow for investor

year 1

year 2

year 3

year 4

-3.9

-48.1

-133.8

-96.0

UDS

Total revenue, caused by marketing and sales process of the project, is estimated at 3,016 million USD. The investorâ&#x20AC;&#x2122;s net yearly income, in million USD, would be as follows:

Forecasted net cash-flow of the project in-flow

out-flow

(3,933)

(48,015)

(133,379)

(94,795)

(3,980)

2,276

179,398

303,295

136,651

year 5

year 6

year 7

year 8

year 9

-43.6

-62.1

161.1

379.3

324.7

53 The Investment Perspective

Total Revenue: Anticipated local market is large and medium-scale domestic companies, while anticipated international market is great international companies that need to have appropriate and World Class office spaces to enter the Iranian market.

The Investment Perspective

Payback Period: In the sixth year of the project timeline, the cash flow of the project become positive, and in the 8th year the break-even point will be reached, for the investor. Rate of return: Calculated rates for the project are as follow:

Internal Rate of Return:

for the total project: %17.14 for the investors:%19.65

PV of Cash Out-flow: 1229 Million USD @ %14.46 PV of Cash In-flow: 1343 Million USD @ %14.46 Net Present Value: 114 Million USD @ %14.46

Return on Investment: %168

Yearly ROI: %19

Assumptions: For the purpose of this calculations, the following assumptions are made: Inflation rate of Project Costs: Total rate:%12

for USD:%1.8

For Rial:%10.2

Sales Price inflation:%1.6

Exchange rate: 1 USD=34,500 IRR

NPV or net present value of the project is calculated based on EBIDTA. EBIDTA is essentially net income with interest, taxes, depreciation and amortization added back to it.

The Investment Perspective

Project Advantages: Location: We’ve all heard the cliched line «Location, location and location!» when it comes to property, but how important is this age-old rule to the inherent success of an investment property purchasing? When it comes to investigating property for sale in Tehran, the location of the project is one of the main factors that will contribute to the overall value of the property. Real estate, much like stocks, changes over time – either increasing or decreasing in value. Properties in a great location are more likely to experience an increase in value, while poor locations are less likely to see major changes between each cycle. Furthermore, well-located projects are likely to have their high value periods last longer than their unfortunately located counterparts. And since most investors who purchase property are aiming to hold the property for a relatively long period of time, in order to make the greatest returns possible, the location of the property plays a major role in their investment decisions – it isn’t easy to simply up and move a company to another, more suitable location. But location also plays into how successful an investment property will be in the interim. Considering turning the investment into a rental property, it is better to imagine the project from the perspective of a potential tenant. Ensuring that the project is located close to local amenities is crucial. Public transport hubs, motorway ramps, and parks are all factors that business people are looking into when they’re considering becoming a tenant in a property. Making sure that your property falls within the CBD of the city is a fantastic way to widen the potential tenant pool. After all, a young company, or with plans to have high growth, will be more likely to seriously consider a workplace that offers them options for their vicinity to their customers and investors. Furthermore, the distance to the city center and accessibility to high quality residential areas should factor into the decision. This is for managers who work in the CBD needing to know exactly where they stand in terms of distance from their residential place and the types of transport available to them. Considering all these factors, the location of the project seems to be the best, as the project is located at the heart of the CBD of Tehran, but directly accessible through important high-ways of Tehran, and in close proximity to BRT and metro station. The project location is also close to the northern residential zones of Tehran, like district 1 and 2 and 3. Choosing this project location by a professional real estate department of a well-known bank in Tehran, was extremely useful for this investment opportunity.

Project Development Study: A series of comprehensive studies are managed to complete during last year. Some of the researches are as follows: comprehensive studies of strategic documents and pre-feasibility, comprehensive traffic studies, comprehensive geotechnique, geology and Seismotectonics studies. Symbolic Status: This project is unique regarding its location and height, cooperating with worldâ&#x20AC;&#x2122;s best architectures is planned and the exterior part of this tower is very important to the owners. So it is predicted to become a national project which all Iranians would be proud of and they will support it. Branding: Marketing and branding sections have an important roles in good sales and achieving success for this project in the future. The project is planned to be the Tehran- world trade center, which is enough to make the project famous from the beginning.

57 The Investment Perspective

Issued permit:The next remarkable point about Pardis Tejarat is its construction permit. The project construction permit is very exclusive, if we do not say it is impossible to obtain. It would be the tallest building in Tehran.

Note

The Investment Perspective