Manger Square Village Bethlehem

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Emmeline Mills
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1 Manger Square Village Bethlehem Feasibility Report September 2015

2 Contents Overview... 2 Project Description... 2 Project Parking Scope (B4, B4, B6, +Conventional)... 3 Project Retail Scope (B3, B2, B1, Ground and First and Second Floors and Mezz)... 4 Overall Project Built-up Areas... 4 Pre-Concept Project Design Renderings... 5 Basement (4-6) Automated Parking Plan... 5 Basement (3) Floor Plan... 6 Basement (2) Floor Plan... 7 Basement (1) Floor Plan... 8 Ground Floor Plan... 9 First Floor Plan Second Floor Plan Second Floor Mezzanine Plan Overall Cross Sectional View of the Complex Target Markets Benefits to the Region Project Management & Implementation Financials and Associated Assumptions Programmatic CAPEX Operations and Maintenance Revenue Financing Source and Application of Funds $K Financial Performance Pro-forma Financial Statements $K P a g e

3 MANGER SQUARE VILLAGE PROJECT Overview Bethlehem is widely recognized as an important historic center as well as one with significant religious distinction. This recognition has blessed the region with positive impacts and growing tourist awareness and activity. In addition, the tourism sector reflects one of the key economic sectors in Bethlehem since it alone is responsible for significant foreign currency inflows which, with knock-on effects, improve the prospects of other sectors (i.e., economic engine of growth). This in turn encourages the overall employment prospects of the Palestinian people as a whole. This project embodies both of these economic principals as well as fills the need to bolster the regions relatively undeveloped tourism infrastructure. Since the project also includes a major shopping and social gathering point focus, it is also important for the promotion of local organic culture and economy as well. Being the most important area of BDI interventions, the Manger Square and the surrounding area will be the heart of this major regeneration and development project. Moreover, the Bethlehem Development Initiative concluded in its Conceptual Master Plan that the main issue of Manger square that requires resolution is the traffic management and conflict between car and pedestrian circulation. This project endeavors to streamline traffic by including streamlining traffic in the square and surrounding streets and confirming availability of Parking and suitable drop-off zones and planted/ shaded areas. It also significantly increases the supply of high quality, safe, and secure parking spots. Project Description Located at the southern border of Manger Square, the proposed site covers a footprint of approximately 3,200 square meters and is currently used as a parking lot with the capacity of approximately 100 car spaces. The designation of a significant portion of the project to conventional and automated parking facilities is essential to the functioning of the square, especially after pedestrianizing the section between the two squares as per the conceptual design of the Manger Square area. 2 P a g e

4 Therefore, a 10 level development/design is proposed. The levels will be at differing elevations and will encompass 7 levels of commercial, entertainment and public spaces and traditional parking facilities. The lower (below ground) 3 levels will accommodate a spacesaving efficient automated parking facility. Project Parking Scope (B4, B4, B6, +Conventional) A combination of conventional and automated parking will be adopted where approximately 305 parking spaces will be provided. Space saving through efficient space utilization allows a greater number of parking spaces per unit of retail space. The lower 3 levels (B4, B5, B6) will consist of a fully automated parking system for 288 cars. Total BUA for these levels is projected to be 4,898 square meters. The system provides an engineered mechanized automated multi-level parking solution that exploits the full economic value and potential of the land. With diminishing land availability and rising land value, the need for innovative, efficient parking solutions is becoming increasingly paramount. Current conventional parking systems are outdated and in-efficient. Automated parking systems are secure and safe and provide savings in overall construction costs such as excavation, piling, de-watering, electro-mechanical, HVAC and finishing. There are also time savings in project execution resulting from the use of automated parking systems. Furthermore, the associated saved space can be utilized for alternative uses or revenue generating purposes. 3 P a g e

5 On both ground level and level B2 there will be space for some conventional parking spaces for around 17 cars for VIP users or quick-stops. The conventional parking space allows for a Civil Defense facility with Fire Truck access, a First Aid Station, and an Ambulance. Project Retail Scope (B3, B2, B1, Ground and First and Second Floors and Mezz) The seven commercial levels consist of retail space including souvenir and tourist gift shops, a supermarket, cafes and restaurants, and public leisure spaces. In general, the design philosophy revolves around having easy-flow spaces that naturally invite users from the surrounding sidewalks and from Manger Square into the lot with easy access to retail stores both above and below ground levels. The main idea is to allow the pedestrian movement to flow into the heart of the project (internal courtyard), which mimics the old souks and alleyways of Bethlehem, and then upwards onto the open air cafe/restaurants with direct visual access onto Manger Square on one side, and a view onto all of Bethlehem city on the other side at its highest point. The division of the volume of the project into smaller parts also fits into the morphology of Bethlehem city, rendering it to behave almost like a village instead of a retail-concentrated mass. Overall Project Built-up Areas The overall project will consist of a total of approximately 16,448 square meters of which 6,123 is allocated for all parking and 6,581 for commercial shopping use while the balance of 3,744 square meters is allocated for outdoor retail, horizontal and vertical circulation, services, etc. Sector BUA Sq Meters B6-4 B3 B2 B1 GF 1 Floor 2 Floor 2 Floor Mezz Shopping Area ,360 1,256 1, ,752 Outdoor Retail Cinema Circulation + Void , ,254 Services Parking (Conv) - 1, ,225 Parking Automated 4, ,898 Total 4,898 2,555 2,546 1,891 1,973 1, ,448 Totals BUA (Allocation by Function) B6-4 B3 B2 B1 GF 1 Floor 2 Floor 2 Floor Mezz Totals Parking 4,898 1, ,123 O/H , ,744 Commercial Area ,513 1,294 1, ,581 16,448 Note: Circulation and Services are non-revenue generating areas and as such are considered O/H. The commercial revenue generating area is assumed to be 85% of the gross commercial BUA. 4 P a g e

Pre-Concept Project Design Renderings The principal concept encompasses a 10 level design which includes 7 levels of commercial retail and 3 or 4 levels of parking (the lower 3 levels of parking will

6 Pre-Concept Project Design Renderings The principal concept encompasses a 10 level design which includes 7 levels of commercial retail and 3 or 4 levels of parking (the lower 3 levels of parking will be of the automated type plus the addition of conventional parking). Basement (4-6) Automated Parking Plan The automated parking facility calls for 288 spaces. Total built up area is expected to be approximately 4,898 square meters. Due to the modular flexibility of the Parking System, automated parking structures are designed and built from hundreds to thousands of parking spaces. Automated parking systems provide 2 or more times the number of available parking spaces than conventional self-park garages of the same volume, providing a faster return on investment and greater revenues. By reducing the width, the vehicles are stored by the robotic car park machines with precise control of the vehicle movement; Automated Parking Garages utilize much narrower spaces than self-park facilities. Additional space width is not required for door opening clearances or for maneuverability into the parking space. One can accommodate approximately 4 automated-parking spaces in the same width as 3 self park spaces. Layout of one of the levels of the automated parking facility 5 P a g e

7 Basement (3) Floor Plan The B3 floor plan consists of approximately 2,555 square meters of BUA. Approximately 1,225 square meters are included a conventional parking area, while 597 square meters is for retail areas. 733 square meters are dedicated to horizontal/vertical circulation, services and O/H, etc. Basement (3) floor plan 6 P a g e

8 Basement (2) Floor Plan The B2 floor plan consists of approximately 2,546 square meters of BUA. Approximately 1,513 square meters is for retail areas. 1,033 square meters are dedicated to horizontal/vertical circulation, services and O/H, etc. Basement (2) floor plan 7 P a g e

Basement (1) Floor Plan The B1 floor plan consists of approximately 1,891 square meters of BUA. Approximately 1,256 square meters are included in the commercial area.

9 Basement (1) Floor Plan The B1 floor plan consists of approximately 1,891 square meters of BUA. Approximately 1,256 square meters are included in the commercial area. The total outdoor space amounts to 38 square meters, while the horizontal and vertical circulation areas add up to 554 square meters. Service areas are 43 square meters. Basement (1) floor plan 8 P a g e

10 Ground Floor Plan The ground floor plan consists of approximately 1,973 square meters of BUA. This level includes 1,217 square meters of shopping space, and 713 square meters of horizontal and vertical circulation. Service areas are 43 square meters. Ground floor plan 9 P a g e

11 First Floor Plan The first floor plan consists of approximately 1,195 square meters of BUA. Approximately 670 square meters are included in the commercial area, while 200 square meters form the outdoor retail space. Horizontal and vertical circulation space takes up 288 square meters. Service areas are 37 square meters. First floor plan 10 P a g e

12 Second Floor Plan The second floor plan consists of approximately 922 square meters of BUA. Approximately 543 square meters are reserved for the shopping area, while 156 square meters are dedicated to outdoor retail spaces. The horizontal and vertical circulation spaces take up 186 square meters. Service areas are 37 square meters. Second floor plan 11 P a g e

13 Second Floor Mezzanine Plan The second floor mezzanine plan consists of approximately 468 square meters of BUA. Approximately 350 square meters are reserved for the shopping area, while 41 square meters are dedicated to outdoor retail spaces. The vertical circulation space takes up 40 square meters. Service areas are 37 square meters. Second floor Mezzanine 12 P a g e

Overall Cross Sectional View of the Complex Target Markets The Manger Square Village s parking facilities will be the only available parking in the area of Manger Square.

14 Overall Cross Sectional View of the Complex Target Markets The Manger Square Village s parking facilities will be the only available parking in the area of Manger Square. By building the commercial center with additional parking spaces, it will meet the requirement to mitigate the area s congestion and parking shortages. In addition, the parking will offer safe and secure spaces for individual visitors, especially during the Christmas and Easter seasons. Benefits to the Region The project will provide a good quality of life with ample public space where tourists and citizens alike can interact in the courtyards, alleyways, open spaces, and observation deck. Moreover the project will offer a safe, car-free environment, where pedestrians can freely walk around the Manger & Nativity squares, engage in shopping/entertainment activities and access the Multipurpose Parking Garage. As for the environmental impact, the multipurpose parking garage will reduce fuel consumption through added pedestrianisation and will provide an increase in natural air quality since emissions are reduced and cars are not running while being automatically 13 P a g e

15 parked. Trees and vegetation contribute toward beauty of nature, converting CO2 to oxygen, and providing habitat for birds and other wildlife. Walking yields health benefits from exercise as well as from better air quality. The buffer zone of trees or parking also increases pedestrian safety. In community terms, walking allows more frequent informal encounters between citizens. Pedestrian friendly streets give more mobility to those citizens who either don't drive or don't own a car, which allows for more involvement and connectedness, as well as addressing an issue of equity. In addition the Parking s automated parking system can use 66% less surface area compared to a conventional garage to fit the same number of parking spaces. More importantly, the parking s automated parking garage can save up to 60% of the cubic feet of a garage leaving more space for other more profitable uses. Project Management & Implementation The ownership and management of the entity to run the city center is still to be defined. The overall project partnership will consist of the Armenian Patriarchate, CCC, and local shareholders. In particular the project s shareholders will enter into a concession agreement with the Patriarch. Roles and responsibilities within the SPV for each ownership party will be called out in shareholders agreement. This project will be run and managed as a for-profit business and will require various administrative and financial support. The graphic below outlines the proposed structure. Concession Agreement General Points Project Development Involvement by Church (yes or no) Right to use land during concession period (free or compensated) Design, build, develop, operate and maintain the new asset Project Company owns Greenfield revenue generating assets during concession period Church Approval Rights Design, Construction, Operation & Maintenance Business types for rental General audit Terms of Final Transfer after concession period Investors right to a profitable return over concession period Project Dev Business Case Planning Financing Legal and Permitting Design/Construction Contract Tendering Decision Commencement Commissioning Contract Completion Certificate Operations & Maintenance Contract Tendering Decision Commencement Rental Agreements Financing and Equity Agreements Loan Agreements Shareholder Agreements 14 P a g e

16 Financials and Associated Assumptions The following section outlines the assumptions and financial results for the Manger Square Village Commercial project. This study relies on assumptions that draw upon experienced local business sources knowledgeable with the region s cost and revenue structure and associated economics. In addition, a verification study was performed by Price Waterhouse Coopers which provided validation for the study s assumptions and is available upon request. Programmatic For modeling purposes we have assumed a 25 year operational schedule. Other key Milestones appear below. CAPEX Project Development Go-Ahead 01 Jul 14 Financial Close 01 Jan 16 Construction Start 01 Jan 16 Construction Period 24 Months Operational Start 01 Jan 18 Operation 25 Years Total project capital expenditures are expected to be approximately $16.7M. The key assumptions are listed below. CAPEX BUAs Total Project BUA Sq Meters 16,448 Parking BUA sq meters 6,123 Commercial BUA sq meters 6,581 Circulation and Public (O/H) sq meters 3,744 Costs Construction Costs Parking $/sq meter 400 Construction Costs Building $/sq meter 1,000 Parking System Infrastructure & Equip $K 2,000 Land Lease/Goodwill during Construction $K 134 Pre Design, Design $K 1,566 Eviction Compensation 436 Development (Advisory, Permitting, Other) 477 Contingency % of Capex 5% 15 P a g e

17 Operations and Maintenance The key assumptions for O&M costs are listed below. OPERATIONS & MAINTANENCE Commercial O&M (% of Commercial Revenue) 20% Land Lease/Goodwill $K/yr 150 Parking Direct O&M $/movement 0.25 Parking Direct Labor O&M $K/yr 46 O&M Annual Escalation 2% Eviction Compensation $K/YR 3.6 * 150K years 1-5, 200K years 6-15, 250K years * The commercial O&M cost ramps up to 20% of commercial revenue by year 3. Before that a factor used is 16%. Revenue The key assumptions for revenue generation are listed below. REVENUE (Commercial) Commercial (Rentable Area) Sq Meters 5,594 Year 1 Commercial Demand Factor 30% Maximum Commercial Demand Factor 85% Max Commercial Demand Reached in Op Year (end) 3 Commercial Rent $/Sq M /Year 300 Commercial Rent Escalation 2% REVENUE (Parking) Max Number of Spaces Available 305 Year 1 Parking Demand Factor 60% Maximum Parking Demand Factor 90% Max Demand Reached in Operational Year (end) 3 Rate Plans % Cars that are on 1-2 hour Plan 20% % Cars that are on 2-4 hour Plan 55% % Cars that are on 4+ hour Plan 20% % Cars that are on Monthly Plan 5% Turnover of the 1 Hour Space (Per Day) 4.0 Turnover of the 1-3 Hour Space (Per Day) 3.0 Turnover of the 3+ Hour Space (Per Day) 2.0 Turnover of the Monthly Space (Per Day) 1.0 Tariffs Tariff $ Per Space 1-2 hrs 1.73 Tariff $ Per Space 2-4 Hour 3.45 Tariff $ Per Space 4+ Hour 5.18 Tariff $ Per Space Per Day (Monthly Plan) 0.50 Tariff Escalation 0% 16 P a g e

18 Financing The key assumptions for the project s financing are listed below. FINANCE Income Tax 20.0% Loan Rate (all-in) 5.0% Facility Fee 1.5% Loan Term (Years) 15 Depreciation Years 25 Equity 30% Debt 70% Source and Application of Funds $K APPLICATION OF FUNDS Project Cost (CAPEX) 16,708 Parking Structure + Conventional 2,449 Parking Infrastructure and Equipment 2,000 Commercial Area 6,581 Circulation and Public Areas 1,498 Pre-Design, Design and CM 1,566 Contingency 772 Eviction Goodwill Payments during Construction 570 Development 477 Interest During Construction, Facility Fee 795 SOURCE OF FUNDS Debt 11,695 Equity 5,012 Financial Performance Based on the above assumptions the project can expect to generate a project IRR of approximately 8+% while equity returns are projected to be 11%. 17 P a g e

19 Pro-forma Financial Statements $K Profit and Loss Profit and Loss Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Revenue ,062 1,232 1,239 1,247 1,255 1,263 Operational Costs (-) EBDITA Depreciation (-) Profit Before Int & Taxes (=) (7) (5) Interest (-) Tax (-) Profit After Taxes (359) (349) (151) Profit and Loss Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25 Jan-26 Jul-26 Jan-27 Jul-27 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25 Jan-26 Jul-26 Jan-27 Jul-27 Jan-28 Revenue 1,271 1,279 1,287 1,296 1,304 1,312 1,321 1,330 1,338 1,347 Operational Costs (-) EBDITA Depreciation (-) Profit Before Int & Taxes (=) Interest (-) Tax (-) Profit After Taxes Profit and Loss Jan-28 Jul-28 Jan-29 Jul-29 Jan-30 Jul-30 Jan-31 Jul-31 Jan-32 Jul-32 Jul-28 Jan-29 Jul-29 Jan-30 Jul-30 Jan-31 Jul-31 Jan-32 Jul-32 Jan-33 Revenue 1,356 1,365 1,374 1,383 1,392 1,402 1,411 1,421 1,430 1,440 Operational Costs (-) EBDITA 1,002 1,008 1,015 1,022 1,028 1,035 1,042 1,048 1,055 1,062 Depreciation (-) Profit Before Int & Taxes (=) Interest (-) Tax (-) Profit After Taxes Profit and Loss Jan-33 Jul-33 Jan-34 Jul-34 Jan-35 Jul-35 Jan-36 Jul-36 Jan-37 Jul-37 Jul-33 Jan-34 Jul-34 Jan-35 Jul-35 Jan-36 Jul-36 Jan-37 Jul-37 Jan-38 Revenue 1,450 1,460 1,470 1,480 1,490 1,500 1,511 1,521 1,532 1,543 Operational Costs (-) EBDITA 1,044 1,051 1,059 1,066 1,073 1,080 1,088 1,095 1,103 1,111 Depreciation (-) Profit Before Int & Taxes (=) Interest (-) Tax (-) Profit After Taxes Profit and Loss Jan-38 Jul-38 Jan-39 Jul-39 Jan-40 Jul-40 Jan-41 Jul-41 Jan-42 Jul-42 Jul-38 Jan-39 Jul-39 Jan-40 Jul-40 Jan-41 Jul-41 Jan-42 Jul-42 Jan-43 Revenue 1,553 1,564 1,575 1,587 1,598 1,609 1,621 1,632 1,644 1,656 Operational Costs (-) EBDITA 1,119 1,126 1,134 1,142 1,150 1,159 1,167 1,175 1,184 1,192 Depreciation (-) Profit Before Int & Taxes (=) Interest (-) Tax (-) Profit After Taxes P a g e

20 Cash Flow Cash Flow Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 EBDITA Principal Repayment (-) Interest (-) Tax (-) Cash Available for Distribution (232) (230) (71) Equity Injection (1,663) (1,103) (1,105) (1,142) IRR Cash Flow (1,663) (1,103) (1,105) (1,142) (232) (230) (71) Cash Flow Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25 Jan-26 EBDITA Principal Repayment (-) Interest (-) Tax (-) Cash Available for Distribution Equity Injection IRR Cash Flow Cash Flow Jan-26 Jul-26 Jan-27 Jul-27 Jan-28 Jul-28 Jan-29 Jul-29 Jan-30 Jul-30 Jul-26 Jan-27 Jul-27 Jan-28 Jul-28 Jan-29 Jul-29 Jan-30 Jul-30 Jan-31 EBDITA ,002 1,008 1,015 1,022 1,028 1,035 Principal Repayment (-) Interest (-) Tax (-) Cash Available for Distribution Equity Injection IRR Cash Flow Cash Flow Jan-31 Jul-31 Jan-32 Jul-32 Jan-33 Jul-33 Jan-34 Jul-34 Jan-35 Jul-35 Jul-31 Jan-32 Jul-32 Jan-33 Jul-33 Jan-34 Jul-34 Jan-35 Jul-35 Jan-36 EBDITA 1,042 1,048 1,055 1,062 1,044 1,051 1,059 1,066 1,073 1,080 Principal Repayment (-) Interest (-) Tax (-) Cash Available for Distribution Equity Injection IRR Cash Flow Cash Flow Jan-36 Jul-36 Jan-37 Jul-37 Jan-38 Jul-38 Jan-39 Jul-39 Jul-36 Jan-37 Jul-37 Jan-38 Jul-38 Jan-39 Jul-39 Jan-40 EBDITA 1,088 1,095 1,103 1,111 1,119 1,126 1,134 1,142 Principal Repayment (-) Interest (-) Tax (-) Cash Available for Distribution Equity Injection IRR Cash Flow P a g e

21 Cash Flow Jan-40 Jul-40 Jan-41 Jul-41 Jan-42 Jul-42 Jul-40 Jan-41 Jul-41 Jan-42 Jul-42 Jan-43 EBDITA 1,150 1,159 1,167 1,175 1,184 1,192 Principal Repayment (-) Interest (-) Tax (-) Cash Available for Distribution ,000 1,007 1,014 1,020 Equity Injection IRR Cash Flow ,000 1,007 1,014 1, P a g e

International Finance Corporation (IFC) World Bank Group Hungary Energy Efficiency Co-financing Project (HEECP) Models, 2004

International Finance Corporation (IFC) World Bank Group Hungary Energy Efficiency Co-financing Project (HEECP) Models, 2004 (Reference: World Bank GEF Energy Efficiency Portfolio Review and Practitioners