A LIMITED LIABILITY COMPANY
UNDER THE LAWS OF THE RUSSIAN FEDERATION
14 Klara Zetkin Ul., Perm, 614010 - INN (Tax Reference Number) 5906103124, KPP (Tax Registration Reason Code) 590401001, c/a 40702810449500014785 in Zapadno-Uralsky Bank, PAO Sberbank of Russia, c/a 30101810900000000603, BIC 045773603
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Ref. No. ____ dated July 27, 2017 Att. Project Manager
Commercial Proposal
Our Company intends to implement an investment project (a hostel) with the purpose to get profit from its operation or from selling it, for a favorable price, as a ready-made business.
To implement this project, it is necessary to buy out and renovate an existing building (a dormitory facility of 4669.5 m2) located at 1 Mindovskogo Ul., Berezniki, Perm Krai. Estimated capacity: 720 persons/day.
Project design work duration: 5 months.
Renovation/reconstruction duration: 10 months.
Project cost estimate:
Pos. Description Cost, RUB
1 Buyout of premises in the building 30,000,000
2 Implementation of new technical specifications for utilities hookup 7,000,000
3 Reconstruction/renovation works 70,000,000
4 Equipment 15,000,000
5 Miscellaneous expenditures 6,000,000
TOTAL: 128,000,000
Duration of reconstruction works: 15 months.
Option 1: Operation of the premises
According to real estate agencies, the average cost of accommodation is in the range of 250-300 rubles per person per day; the percentage of hostel filling is 95-97%. The demand is high and constantly growing. To calculate the expediency, we accept the cost of living as 230 rubles per person per day and the hostel filling factor as 0.75%.
Estimated revenue:
Pos Premises at S, m2 No. of rooms No. of guests Daily Rate, RUB Daily Revenue, RUB Annual Revenue, RUB
1 4th floor 915 45 180 230 41,400 15,110,000
2 3rd floor 915 45 180 230 41,400 15,110,000
3 2nd floor 915 45 180 230 41,400 15,110,000
4 1st floor 915 45 180 230 41,400 15,110,000
5 Ground floor 546 Public catering Rent 400 RUB/m2 per month 2,657,200
6 Ground floor 250 Store Rent 500 RUB/m2 per month 1,500,000
7 Basement 213.5 - -
TOTAL: 4 669.5 64,597,200
Estimated hostel filling factor: 0.75
TOTAL: 48,447,900
Current Expenditures.
Pos Item RUB/m2 Annual Expenditures, RUB
1 Utility and operational costs 150 8,405,100
The payback period of this project is 3 years and 2 months (RUB 128M / (RUB 48.5M – RUB 8.4M) = 128 / 40.1 ≈ 3 years and 2 months. After this result is achieved, annual income will be RUB 40.1M.
Option 2: Selling the premises
The cost of the project is RUB 128M, i.е. RUB 27,414 per m2.
The sale price of commercial real estate in Berezniki is RUB 35,000 - 40,000 / m2.
Selling premises for RUB 37,000 per m2 brings profit of RUB 9586 per m2, that is RUB 44.757M.
Profit from investing in this project is 34.96% excluding taxation.
Net profit: 33M after interest on the loan.
Option 3: Operation of the premises with subsequent sale
This means first to repay the project by receiving income from operation of the premises and then sell it.
The total amount of necessary investments to date is RUB 128,000,000. At the exchange rate of the Central Bank this amounts to EUR 1,818,957.
Best regards,
ООО SK Region |
optchinarussia@outlook.com