TAILIEUCHUNG - CE09-32-40.0-2012-04-27-15375663

FULBRIGHT ECONOMICS TEACHING 5, 2009NGUYEN XUAN THANHNON NUOC SERVICED APARTMENT Investment, a real estate investment fund, just secured a long-term lease from Da Nang City’ from 2009 to 2036 for hectares of beach front land in Non Nuoc. A luxury complex was to be developed on the landApartment project would construct 175 fully-furnished apartments for lease to long-term stay touristsNumberofapartmentsArea (m2)One-bedroom apartment6064Two-bedroom apartment93120Three-bedroom apartment22184Investment total investment cost in nominal term was estimated at VND billion, including, , furniture, swimming pool, soft costs, contingencies, and interests during unit construction cost was estimated at million per m2 of construction area (at ). The ratio of total construction area to apartment area was cost (at 2009 prices).One-bedroom apartmentVND180 mil per apartmentTwo-bedroom apartmentVND216 per apartmentThree-bedroom apartmentVND240 per apartmentCommon area (based on total construction area) per m2This case study was prepared by Nguyen Xuan Thanh, lecturer at Fulbright Economics Teaching Program. Teaching Program’s cases are intended to serve as the basis for class discussion, and not to make © 2009 Fulbright Economics Teaching Nuoc Serviced Apartment project would also construct a swimming pool and surrounding gardens with a total area of at VND5 million per m2In addition to construction costs, there are soft costs such as design, financing, insurance, permit,.marketing, legal fees, and project administrationSoft cost breakdown as a percentage of 2009price construction and accounting fees0,4%Administration5,0%The physical contingencies were estimated at 10% of the cost of each itemInterests during construction were calculated at billionThe project would be constructed during three years (2009-2011). The following table shows cost breakdown by year (based on 2009 prices):.200920102011TotalBuilding cost30%55%15%100%Furniture0%0%100%100%Swimming pool0%0%100%100%Design100%0%0%100%Financing100%0%0%100%Other costsInsurance100%0%0%100%Permit50%0%50%100%Marketing50%30%20%100%Legal and accounting fees35%30%35%100%Administration30%35%35%100% Investment would invest billion of equity into the project. be disbursed in 2009, accounting for 80 percent of the total investment cost in that year. ThePage 2 of Nuoc Serviced Apartment billion of equity would be disbursed in 2010, accounting for 30 percent of investment cost of 2010The rest of the total investment cost would be financed by a 16-year loan from a commercial bank. would be disbursed in 2009, 2010 and 2011. Interests during construction would be capitalizedThe loan would also have a grace period during the first four years of operation (2012-2015). , the loan principal would be paid back in equal annual installments from 2016 to 2025. The of the loan, including capitalized interests during construction, is billionThe loan would carry a floating interest rate which is based on the bank’s one-year deposit rate basis points. At the current deposit rate of 8 percent, the loan’s interest rate would be the first year since the initial investment costs would be depreciated by the straight line method as regulated by the Ministr

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