1.

Executive summary
With the vast opportunities that lie in the development of residential and commercial property,
this business plan has been formulated to present an investment opportunity for a mass scale
development of luxury housing projects in Ethiopia’s capital region, Addis Ababa.

With the current housing deficit in Addis Ababa and the high demand for ready construction,
Addis Ababa is a prime opportunity for development of Real Estate.

The objective of the business plan is to present the strategic combination of international and
local industry experts, collaborating, to handle the challenges of property development in
Ethiopia and capitalize on the construction boom.

There are a couple of challenges in the property development sector, which have been identified
in the SWOT analysis. All of these, however can be addressed to a large extent minimising the
risk as medium to low.

Rockstone - BIGAR Property Development will be set up as a residential and commercial property
development company focused on building quality developments in Addis Ababa by utilizing a
completed property development strategy which includes qualified sub-contractors and
maintaining strict quality control measures in every stage of the building process. The company
understands the importance of building a good brand.

The strategy involves inclusion of both local sub-contracting and construction companies such as
BIGAR Builders and Developers plc in Addis Ababa along with International contracting
companies such as Rockstone Real Estate from Germany.

The company plans on building luxury villas and condominiums in the price range of current
market value with a pre-estimated return of investment. These homes will represent excellent
value for the buyer and will feature elaborate but economical designs by BIGAR and Rockstone
that can be constructed. The object is to acquire plots in good locations around Addis Ababa, to
develop a design unmatched by existing developers and provide a turnkey solution from
inception to construction. Funding for the project will be secured before inception thereby
making sure that presales are avoided and position ourselves to complete the construction in a
span of 18 to 24 months. The revenue earned will be profit sharing with a higher margin. These
profits will be re-invested to develop new projects in continuity.

Although there are many developers that have invaded the real estate sector in Addis Ababa,
there is still a huge demand for premier housing with quality finishing. Due to limited financing
options, projects are experiencing a delay in delivery commitments. The key factor separating
Rockstone - BIGAR Property Development from the rest of the competition will be the right
combination of the team as well as the financing model of 100 percent in advance, ensuring all
projects undertaken will meet its delivery deadlines. This will be crucial in establishing Rockstone
– BIGAR Property Development as a reliable and trustworthy brand in the real estate sector of
Ethiopia.
The company’s growth strategy is straightforward. It will build its first developments, observe the
process contingencies, learn from them and then begin building additional projects on a targeted
schedule. Project timelines will be decided on the on-set and all project requirements will be
listed and addressed. Rockstone – BIGAR Property Development will use the initial project
constructed to build a solid client reference base that it can use as part of its marketing strategy.
It will reach potential clients in its target market by utilizing multiple marketing avenues.
 2. Overview of the business proposal
Opportunities:
1. Demand for property development - High
2. Supply of project management - Low
3. Supply of liquidity - Low
Team: Comprehensive & Efficient
BIGAR Builders and Developers (Local expertise)
Rockstone Real Estate (International expertise)
PROJECT 1
PROJECT 2
PROJECT 3
Strategy to acquire opportunity
1. Team: Establish the right team
2. Investment: Raise complete capital required
3. Provision: Turn Key solutions
Overall financial model stakeholders
1. BIGAR Builders and Developers
2. Rockstone Real Estate
3. Private equity
4. BANK
 3. Mission & vision statement
“To create a strategic combination of International and Local industry experts, collaborating
together to handle the challenges of property development in Ethiopia and capitalize on the
construction boom.”

The vision for the company is to be the market leader in the Property Development sector of
Addis Ababa, a name synonymous with trust, quality and excellence. Broadly outlined, the goal
is to achieve optimum quality through a judicious blend of experience, craftsmanship, teamwork
and technology. We strive to:
 Build quality developments that resonate excellence
 Establish our organization as industry leaders
 Satisfy our clients with quality
 Adhere to delivery schedules
 Apply modern technology and cost-effective methods
 Set benchmarks for industries to follow
 Provide a safe working environment

We to be the company of first choice amongst our customers to address their needs. Our mission
is to satisfy every customer's need for a better experience through quality construction and
employee contentment. The Company aims at building world-class real-estate concepts across
different business lines with the highest standards of professionalism, ethics, quality,
commitment, trust and customer service. In this respect our core values are:
 Sustained efforts to enhance customer value and quality
 Ethical and professional service
 Compliance and respect for all community, environmental and legal requirements.

Through strategic International and national partnerships, our mission is to build a world-class
company with international presence that creates sustainable value, delivers quality products
and services and attracts and develops quality human capital. Our commitment to value creation
is one major factor that sets us apart from our competitors and imparts a unique feel and
experience to each of our projects.
 4. Business environment in Ethiopia
Ethiopia is ranked 125th of 189 in the World Bank’s 2014 Ease of Doing Business Survey. Ethiopia
is ranked 168th in starting a business, 95th for employing workers, 109th in getting credit, 44th
in enforcing contracts, 113th in registering property, 157th in protecting investors, 109th in
paying taxes and 55th in dealing with construction contracts. Accordingly, the World Bank has
put forth approvals for $203 million to help Ethiopia exploit its geothermal energy resources. The
bank has also approved $178.5 million loan from its International Development Association unit
and a $24.5 million grant from the scaling-up Renewal Energy Program Trust Fund. The World
Bank estimates Ethiopia could earn $1 billion a year from exporting electricity by 2023 if all its
hydro-electrical projects are completed.
According to the International Monetary Fund, Ethiopia will grow as a nation by as much as 8.5
percent this year and next. With its Government investing to tackle infrastructure bottlenecks
such as power and transport networks that have been barriers for growth, the business climate
of Ethiopia is facing a transformation. The Government’s plan for Addis Ababa is critical to its
aspirations for developing into a middle-income country in about a decade. Foreign Direct
Investment initiatives are on the rise and this can clearly be seen by the number of international
players entering the market. The investment is funded by increasing tax revenue and more than
$3 billion a year in Western aid. According to the World Bank reports of 2013, public investments
accounted for 63 percent of growth in a fiscal year. Chicago based consulting firm that measure
the likelihood of an improved global standing over the next 10-20 years ranked Addis Ababa the
capital of Ethiopia as third. Some of the major cooperates that have entered or are entering
Ethiopia are:
 Unilever (UNA), the world’s second biggest consumer products marker
 Yum! Brands Inc. (YUM), the owner of KFC fast food chain also stated they are considering
Ethiopia as a ready market for expansions.
 MTN Group Ltd. (MTN), the South African telecommunication company that’s assembled
an energy markets mobile empire through acquisition, is on the hunt for more take overs
in Ethiopian market.
 Marriott International Inc. (MAR), the world’s second largest public trading hotel chain
aims to enter seven new African regions including Ethiopia as part of their growth strategy
and will invest $3 billion in new builds alongside developments.
 Saudi billionaire Mohammed al-Amoudi, the biggest private investor in Ethiopia, plans to
build two more cement factories in the Horn of Africa amidst improving investment
environment. This plant will add to the $351 million facility al-Amoudi’s MIDROC Derba
Cement housed in the capital city of Addis Ababa.

According to the Deloitte Africa Report of 2013, some of the noteworthy developments in
Ethiopia include the Ethiopian Renaissance Dam valued at USD 4.2 billion and Addis Ababa-
Djibouti Railway valued at USD 3.3 billion. Apart from this, international corporates that have
already successful set up operations in Ethiopia include Ras Al Khaimah based pharmaceuticals
firm Julphar with an capital investment of $9.6 million, Zamil Industrial Investment company with
a joint venture deal of $300 million, Dubai based company Limitless with an estimated
investment value of $294 million, Saudi Star Agricultural Development with an investment plan
of 2.5 billion by 2020 and MIDROC collaboration an Italian firm in the construction of a $764
million steel factory, to name a few.

The real estate sector has been one of the fastest growing segments of the Ethiopian economy.
Indeed, a review of GDP statistics shows that, had it not been for the expansion of this sector and
the closely affiliated construction sector, Ethiopia would not have registered double-digit
economic growth in the past five years.

The residential real estate market in Addis Ababa is evolving into a varied mix of extensive
government-built condominiums (ostensibly for lower-income groups), mid-market
developments by housing cooperatives, and largely high-end homes built by real estate
developers and/or homeowners themselves. Based on a survey conducted by an independent
firm, it was concluded that sale prices for even modest homes exceed Birr 1 million in many of
Addis Ababa’s residential neighbourhoods, while average sale prices for large homes (with 1000
square meters and four-or-more bedrooms) are now routinely above Birr 6 million in the most
expensive neighbourhoods. In these same high-end neighbourhoods, rental rates are in the range
of Birr 30,000–40,000 per month for large homes. From a cross-country perspective, home prices
and rents are beginning to match or exceed the levels seen in African countries with much higher
incomes than Ethiopia.

According to the ‘Doing Business’ Report 2014, Globally, Ethiopia stands at 55 in the ranking of
189 economies on the ease of dealing with construction permits. The diagram below reflects the
ranking of comparator economies and the regional average ranking.
The government estimates that the current housing deficit is between 900,000 and 1,000,000
units in urban areas, and that only 30 per cent of the current housing stock is in a fair condition,
with the remaining 70 per cent in need of total replacement. In Addis Ababa alone, 300,000 units
are required to meet the deficit. There is massive demand for serviced, healthy, affordable
housing. This demand stems from both the current housing deficit and the poor quality of the
existing housing stock that is beyond repair. Given the international attention on Ethiopia,
coupled with the need for state of the art housing projects, the opportunity for construction in
Ethiopia is vast and varied.

 Market Trends
Housing is a key element in the nation’s economy as the real estate sector has been one of the
fastest growing segments of the Ethiopian economy. The residential real estate market in Addis
Ababa is evolving into a varied mix of extensive Government built condominiums (primarily for
lower income groups), mid-market development by housing corporates and large high-end
homes built by real estate developers or home owners. Currently there is a demand for 450,000
household units in Addis Ababa alone. Based on a survey conducted by an independent firm,
Addis Ababa’s residential neighbourhoods, while average sale prices for large homes (with 1000
square meters and four-or-more bedrooms) are now routinely above Birr 6 million in the most
expensive neighbourhoods. In these same high-end neighbourhoods, rental rates are in the range
of Birr 30,000–40,000 per month for large homes. With respect to the commercial market, we
find that rental rates for office space in Addis Ababa average around Birr 100 per square meter,
though sometimes approach Birr 200 per square meter for prime, city-centre locations. Based on
the city-wide average, these square meter costs translate into rental rates of around Birr 5,000
per month for a small one-room office in a city-centre location. For businesses seeking to rent
half- a-floor or a full floor in a commercial building, average monthly rents are Birr 20,000 and
40,000 respectively.
The City of Addis Ababa occupies an area of 522 square kilometres (0.05 percent of the Ethiopian
landmass) and is comprised, according to official statistics, of an estimated 3 million inhabitants.
The city is sub-divided into ten sub- cities, each of which has an average population of around
300,000 people (see below); the three largest sub-cities by population are Kolfe Keranio (with
463,417 inhabitants), Yeka (374,583) and Nefas Silk Lafto (341,743). In terms of land area, the
largest sub-cities are Akaki Kality, Bole, and Yeka each of which covers an area exceeding 80
square kilometers. Population densities vary considerably among the sub cities, with Addis
Ketema and Arada showing the most densely populated neighbourhoods while Bole and Akaki
Kality are the least densely populated sections of the city.

Target Market
Rockstone - BIGAR Property Development has identified several factors that can be used to
favourably predispose potential customers to select the company’s quality built homes. These
customers are generally executive personals whose decision factors include:
 Higher value housing options
 Excellent workmanship
 Larger potential for property appreciation
 Excellent lot size
  Location of lot
 Excellent referrals

Rockstone - BIGAR Property Development believes it will be well positioned to take advantage of
these key factors to help assure its success. It will differentiate itself by providing highest quality
workmanship along with exemplary personalized services to each client requirement. Through
proper financing, the company intends to pursue the following initiatives to achieve its growth
goals:
 Establish a marketing process that reaches its target audience
 Establish a sales program to identify and secure its customers
 Identify and secure contacts with qualified sub-contractors
 Buy lots in key areas where demand is high
 Provided the highest quality construction at the most competitive pricing
 Provide a satisfying experience for every customer
 5. SWOT analysis

STRENGTHS:
 Local: Experience & Expertise
 International: Experience & Expertise
 All disciplines covered
 Complete capital approach

WEAKNESSES:
 New development company
 Low quality culture: Construction market
 Construction market
 Lack of skilled / semi-skilled labour in the construction market
 International supplies support poor
 Poor health & safety culture:
 Import challenges / delays

OPPORTUNITIES:
 High demand for property: Addis to double
 Political vote of confidence: United Nations, African union, Embassies etc.
 Economic vote of confidence: International companies setting up operations
 Poor liquidity in market opportunities for turn key sales instead of “off-plan” sales
 Low to medium quality provides opportunity for excellent quality
 Poor real estate trust opportunity for trustworthy RE

THREATS:
 Inflation
 National currency devaluation pressures
 Roadblocks from unforeseen government policies/development
 6. Complete capital
Construction project finance is key for meaningful development to take place. The objectives of
construction project financing include delivery of functional projects at the agreed time at
acceptable quality and within the project scope. Construction projects embark on an agenda to
meet some objectives which include cost of the project, the time in which it can be delivered,
and bench marked standards which determine the value of the project. If a construction project
is not delivered to meet these three criteria of time, cost and quality, the project is likely to be
unsuccessful. The current scenario of the Ethiopia construction industry indicates the ever-
growing demand for quality housing. However, the shortage of proper financing has an adverse
effect on project delivery timelines and quality workmanship. The overall view is that the
construction industry is majorly underfunded leading to many abandoned projects. Construction
projects suffer from ‘capital flight’, ‘capital stagnation’ and ‘capital sink’. Capital flight occurs due
to imported materials and imported technical inputs into the construction projects. Capital
stagnation occurs when a project has a time over-flow more than necessary. Inflated contract
sums and abandoned projects due to bad cash-flow form a part of the capital sink.

As a proposal to tackle insufficiency of project financing through loans from local financial
institutes and evade contingencies of operational costs, Rockstone - BIGAR Property
Development, proposes 100 percent project financing, in advance, to enable smooth operations
of all acquired projects, reduce risk of project delay and delivery, and establish strong creditability
in the market. A 100 percent finance will ensure certain risk associated with the project will be
mitigated. Such cash flow deficit risks include the following:
 Pre-Completion Risk: This is a risk that a project may encounter due to lack of funds on
completion deadlines thus affecting the revenues and profits earned.
 Pre-construction risk applies to all stages of the construction and does not arise only when
a project facility is already in existence or nearing completion. This risk can be mitigated
by fixed cost and budgets that will be considered at the on-set of a project.
 Operating Risk: These are risk involved in the actual running of the construction facility.
This would include cost of material procurement, manpower supply, cost of relevant
permits etc and can be mitigated with contractual agreements that cover the operational
cost and payments in timely manner to suppliers to ensure no delays in material delivery.
 Market Risk: Risk that may arise from delays in the project completion and committed
delivery. It is crucial to abide by set timelines to create strong market presence and brand
value. Projects that are completed within the project schedule will reinforce trust on part
of the end use and become a source of strong reference among potential buyers.
 7. Request for loan
As discussed in the various topics, BIGAR is in the process of establishing a new property
development company with Rockstone Real Estate. In addition to Rockstone Real Estate there
are various foreign stakeholders in the company that is being established. While establishing this
company BIGAR is contributing to the establishment both financially as well as an in-kind
contribution. The financial contribution that BIGAR is making will be partly our own funds and
partly a loan from the bank. BIGAR is asking for a 10 million Ethiopian Birr loan that has a grace
period of three years. We therefore request the bank to consider this application for a loan as a
package of the business that BIGAR will be bringing to the bank in the form of Rockstone – BIGAR
property development. We therefor request the bank to review the documents submitted with
this proposal and propose a loan structure that is attractive for BIGAR in terms of repayment
period, grace period and interest rate so as to allow BIGAR to invest the funds borrowed in the
company being established. In return to the banks assistance BIGAR will endeavour to establish
a business relationship between the bank and the company established thereby allowing a steady
influx of foreign capital to the bank.