DTZ Central Eastern Europe Getting a Return

DTZ Central & Eastern Europe Getting a Return from Mixed Use Development A presentation by Gerry Brough, DTZ 24 th January 2006 www. dtz. com

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Getting a return from mixed use development – 7 Key Factors 1. Use advisers that: Ø Have experience of working with/for all potential stakeholders (property occupiers, buyers, property investors, public authorities and local communities) Ø Are knowledgeable about all aspects of the development cycle (Research >> Project Definition >> Development >> Delivery >> Impact Assessment) Ø Are committed to the development of their business in the Czech Republic, over the longterm 3

Getting a return from mixed use development – 7 Key Factors 2. Meet the developers/investors needs: Ø A well located site (near suppliers, customers, road links, labour supply)…. Ø No ownership or planning issues…. Ø To make as much profit as possible (low land price, high investment incentives, low build costs, no delays, high yields)…. Ø A plentiful supply of adaptable, skilled labour…. Ø No environmental liabilities…. 4

Getting a return from mixed use development – 7 Key Factors 5 3. Use an appropriate mix of advisers and cost/ benefit modelling to test various development options: Urban Designers/ Master planners Engineers/ Cost Consultants Stage 1 Baseline Assessment for each site • Property market appraisal • Value benefits of the site location • Economic “health check” • Ability of site to accept alternative land uses • Layout/massing/access etc • Major Physical site constraints • Highlight key “cost” risks Stage 2 Initial Conclusions • Current state of commercial property market • Local economic conditions • Identify alternative highvalue opportunities • Road and public transport connections • Mixed-use development potential • Environmental issues • Major costs associated with de-contamination, • Ground conditions, utilities infrastructure, etc Stage 3 Development Options Stage 4 Testing Options Establish and Compare Redevelopment Options for each site Construct and Use Cost Benefit and Financial Models to Test Options

Getting a return from mixed use development – 7 Key Factors 4. Determine the best development mix to meet all stakeholder aspirations: Supporting Existing Businesses and Protecting local jobs Maximising Profit Development Appraisal Maximising community benefits; public open space etc. Balance Needs of all Stakeholders Economic Impact Appraisal Maximising Future Local Economic benefits (e. g. New Job Creation) 6

Getting a return from mixed use development – 7 Key Factors 7 5. Identify and “manage” risks: Ø Risk associated with ‘doing nothing’ – environmental and socioeconomic Ø Risks associated with regeneration projects § § § Environmental obligations – need for possible future guarantees Planning approvals/permits - pressure groups, other ‘interests’ Environmental remediation - to what level? Financial risk – costs may exceed budget Market risks – are public sector anchor tenants or rental guarantees available? Ø Risks associated with securing/maintaining public sector support § Economic justification required (economic impact assessment)

Getting a return from mixed use development – 7 Key Factors 6. Determine the marketability of the final scheme before starting: Ø Initial Market Assessment should; § Be based on knowledge of local and international property market is essential § Assess different options (different schemes based on pessimistic, average and optimistic scenarios) § Determine likely investment market interest at some future stage Ø Reputable international property advisers should be involved from an early stage Ø Develop a realistic marketing strategy 8

Getting a return from mixed use development – 7 Key Factors 9 7. Ensure effective coordination of stakeholder and expert inputs: Ø Stakeholders = Site owners, main funding sources, planning authorities, local community groups etc. Ø Experts = Economic, Planning, Architectural, Environmental, Engineering, Cost, Building, Financial, Marketing Ø Dedicated management team (involving key stakeholders and key experts) should be established a. s. a. p. Ø Regular meetings with key stakeholders at each stage in the process Ø Regular public meetings to seek comments and secure public backing Ø An effective communications strategy (part of marketing strategy)

10 Summary What DTZ can offer; § Expertise in all aspects of economic and property development Ø Regeneration, Innovation, FDI, Performance Appraisal, Economic Impact Assessment, Master Planning, Development Appraisals, Market Appraisals § Expertise in each stage of the project management process Ø Research, Definition, Development, Delivery and Impact Assessment § Extensive Property Market Expertise § Expertise in advising Culture Products People Ø Developers Ø Property owners and occupiers Ø Investors § An international brand associated with = QUALITY Clients providing high quality expertise to demanding clients

Summary 11 What DTZ can do for Czech Regional Authorities; § Overall assessment of brownfield sites within the region Ø Work with Regional Councils to review zoning plans and identify the best potential development areas within the overall site, or wider region Ø Produce pre-feasibility studies for key sites § Development proposals for key sites Ø Acquisition strategies Ø Commercial development plans and funding proposals Ø Brownfield regeneration strategies, where appropriate § Developer/Investor search Ø Identify potential developers and investors Ø Prepare development briefs for key sites

12 Summary Previous Czech Experience; § Czech National Brownfield Strategy Project Ø Project managed by Gerry Brough, Director, DTZ Consulting & Research - on behalf of Czech. Invest, the Ministry of Trade & Industry and the EU Ø Involved the preparation of 5 regeneration projects, as examples of best practice • • • Ex-Thrall Wagonka factory, Studenka, Ex construction materials site, Poruba District, Ostrava Frantisek ex-deep coal mine, Horni Sucha, nr. Ostrava Ex- military site, Podborany, near Most Ex-gas works, Usti-nad-Labem

Summary Ex-Thrall Wagonka Factory - Studenka; § Demolition/Refurbishment Plan 13

14 Summary Ex-Thrall Wagonka Factory - Studenka; § Development Plan Phasing Phase 0 – site preparation Phase 1 Phase 3 Phase 2

Summary Ex-Thrall Wagonka Factory - Studenka; § Development Plan Phase 1 15

Summary 16 Ex-Thrall Wagonka Factory - Studenka; § Estimated Development Costs Ø Site Acquisition and site servicing Ø Demolition Ø Refurbishment costs for Phase 1 Ø Internal service connections for phase 1 Ø Car parking and landscaping for phase 1 Ø Preparation of serviced plot for new SME units in Phase 1 Ø Preparation of serviced development plots in phases 2 and 3

Summary 17 Ex-Thrall Wagonka Factory - Studenka; § Development Appraisal Ø Gross and net cash outflows/inflows estimated over a 15 year period (shown in graph and cash flow format) for each element of the development plan Ø Sources of cash outflows/inflows identified Ø Then, on a discounted cash basis, estimates are made for; • Net Total Development Costs [cumulative cash outflows (costs) + cumulative inflows (income)] (A) • Final Development Values (B) • Indicative Residual Value = (B-A)

18 Summary Ex-Thrall Wagonka Factory - Studenka; § Economic Impact Appraisal Ø Contextual Analysis Ø Analysis of ‘Do-Nothing’ Option Ø Analysis of Preferred Option(s) Ø Risk Appraisal Ø Conclusions. € Gross Jobs created 2, 397 Net Jobs created 1, 614 Whole Project Costs 83, 683, 063 Whole Project Revenues 21, 193, 988 Net Project Value/(Costs) -62, 489, 074 Net Present Value/(Costs) -46, 795, 713 Gross Public Sector Costs 40, 506, 406 Net Public Sector Costs 1, 365, 911 Public Sector receipts -39, 140, 495 Net Present Public Sector Costs -26, 565, 643 Gross Project Cost per additional job created 51, 842 Gross Public Sector Costs per additional job created 25, 094 Gross Value Added per annum Claw back per annum 19, 818, 300 2, 099, 589

Summary Ex-Thrall Wagonka Factory - Studenka; § Site Marketing Ø Marketing Strategy Ø Marketing Tools (Site Brochures, 3 -D models etc) Ø International exposure through DTZ’s Global network 19

Summary 20 What DTZ can do for the Zbrojovka site; § Undertake environmental risk assessment and determine main development § § § § § constraints (in partnership with a suitable environmental engineering company) Determine the optimum development scheme, based on a comprehensive property market assessment Oversee the preparation of the concept plan (in partnership with a suitable architectural company) Undertake a financial appraisal of the development scheme options Assess the economic impact (value) of any development Help secure potential sources of finance and/or equity/development partners Identify potential future occupiers Advise on all aspects of design and specification that will affect value Prepare and manage leasing strategy and marketing campaign for pre-letting opportunities. Co-ordinate preparation of an effective marketing campaign including the creation of a scheme ‘brand’. Prepare a management strategy for the completed development.

DTZ Consulting & Research Gerry Brough gerry. brough@dtz. com www. dtz. com and/or www. dtzpieda. co. uk 21