RIGA TECHNICAL UNIVERSITY

Faculty of Engineering Economics and Management

SUBJECT: INVESTMENTS IN REAL ESTATE DEVELOPMENT

COURSE WORK

BUSINESS PLAN FOR "A RESIDENCE"

COMPILED BY :
AMRITA SHRESTHA
NITESH SHRESTHA
MOHIT DAGA
RAJ SAIFI
COURSE: MSc CIVIL CONSTRUCTION & REAL ESTATE MANAGEMENT

Riga - 2014

Table of Contents
1.0

2.0

3.0

Executive Summary

1.1

Business Opportunity

1.2

Product/Service Offering

1.3

Marketing Plan

1.4

Management Team

1.5

Financial Plan

Business Opportunity

2.1

Business Opportunity

2.2

Vision and Mission

2.3

Goals and Objectives

2.4

Nature of the Business

Market Analysis

3.1

Situation and SWOT Analysis

Table 1: SWOT analysis and strategy development

Industry Analysis

Elements of Success

4.1

Target Market

4.2

Competitive advantage & Unique Selling Proposition (USP)

3.2

4.0

5.0

6.0

Marketing Plan

10

5.1

Marketing Objectives

10

5.2

Marketing Mix

10

Table 2: Value Propositions

10

5.3

Action Plan

11

5.4

Sales Analysis and Forecast

11

Figure 1: Sales forecast

11

Legal Matters and Risk Management

12

6.1

Business Structure and Business Name

12

6.2

Registrations, Licences and Permits

12

Table 3: Listing of registrations, licences and permits

12

Contracts and Agreements

12

Table 4: Listing of contracts and agreements

13

Risk Management

13

Table 5: Risk assessment

13

Human Resource Management

14

7.1

Organisational Chart

14

7.2

Owner/Operator Skills and Experience

14

Table 6: Summary of owners knowledge, skills, qualifications, and relevant experience

14

Industry Knowledge and Experience of Key Personnel

14

Table 7: Details of personnel with specific industry knowledge and experience

14

Human Resource Requirements

15

Table 8: Analysis of human resource requirements

15

6.3
6.4

7.0

7.3
7.4

Page | 2

8.0

Financial Worksheets

16

a) Financial descriptive chart

b) Profit and Loss statement
c) Break-even analysis
d) Cash flow statement
e) Sources and use statement

9.0

Appendices

17

Appendix 1: Situational analysis external environment

17

Appendix 2: Situational analysis internal environment

18

Page | 3

1.0 Executive Summary

1.1 Business Opportunity
There is a rapidly growing demand for architecturally designed multi use building with commercial
and inner urban apartments to meet the lifestyle requirements of the working professional in the centre of
Riga, Latvia. This trend is expected to continue with the population of Riga, Latvia projected to increase by
15% in just over two decades.
While the Global Economic Crisis has caused a severe downturn in the building and housing
industry, there is still 5% projected growth for multi use building in Riga, Latvia for the next few years and
more importantly a strong cyclical upswing projected from 2014-15 onwards which presents a great
opportunity for the architectural & construction business to capitalise upon.

1.2 Product/Service Offering

Multi use building with commercial and creative and practical inner urban for the lifestyle of working
professionals. DIRECTOR of "ANM construction", is the business owner, who has over 35 years
experience of proven design capabilities and over 25 years in construction business as well as a great
reputation in Riga, Latvia for his modern multi use development designs. The business will be based in the
construction of an multi use apartment that was designed by the design team of ANM constructions. This
will provide the best tangible proof of ANM construction work to potential clients.

1.3

Marketing Plan

The marketing will differentiate the business from competitors by clearly positioning the business as
a specialist in this niche market, targeting working professionals and private firms for commercial use. The
key marketing goal is to gain a 80% occupancy rate within the next 12 months.
A competitive pricing strategy will be used in the initial stages to win work and gain occupancy for
the desired location. This will be supported by the DIRECTOR of "ANM construction", proven design
capabilities and excellent reputation in the construction industry for last 25 years. Both the competitive
pricing strategy and architectural skills and experience of the company will be used to differentiate the
business and gain housing share.
There will be a special launch event at the Company's office for key clients and stakeholders in this
housing industry. The office is in a prestige apartment development that the company designed &
constructed. This gives the company employees the flexibility to take their car to visit clients and also it is
convenient for clients to visit them and the site as well. The personal marketing activities of the company
employees will be the primary driver of business where 20% of the employees time will be spent on
business development activities. The company employees will have the latest mobile communication
technologies so that they can work remotely and still be highly responsive to client calls and emails at all
times. A marketing consultant with be engaged to develop an integrated marketing strategy and also will
be responsible for setting up the website and developing marketing collateral.

1.4

Management Team

The Director of "ANM construction" is the owner of the business. He has a degree in architecture
and over 35 years of design experience, specialising in multi use building developments. The company has
an excellent reputation in the industry as well as a network of contacts with key clients he worked with
previously.

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1.5

Financial Plan

Our projected performance is summarised below:

Sales: Year 1 5496204 EURO

Year 2 2333936 EURO

Net profit (before tax) of 206941.86 EURO in the first year, growing to 1595477.83 EURO in the second
year of operation.
Break-Even is estimated at first year sales level of 33.45%
Total cost has been calculated at 5150605.35 EURO and is to be funded by way of a 2008039 EURO
secured bank loan and 1506028.5 EURO in owners and investors equity. It is proposed that the loan be
paid back over one year period from strong profits in the next few years when the economy starts growing
again.

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2.0 Business Opportunity

2.1

Business Opportunity

There is a rapidly growing demand for architecturally designed Multi use building in the centre of
Riga, Latvia because of peoples desire to live in close proximity to where they work, play and socialise.
This demand is fuelled by the 0.85% per annum population growth in Riga, Latvia where in two decades
time it is expected to increase by 3%. This will place even greater demand for more multi use buildings and
inner urban apartments. In addition, government is supportive of high density urban development's where it
assists with infrastructure development (e.g. public transport services and bikeways) that makes these
developments an even more attractive proposition for many people.
While the Global Economic Crisis has caused a severe downturn in the building and housing
industry there is still projected growth for inner urban apartments and commercial space for the next few
years. More importantly, this presents an opportunity to gain a foothold in this niche market in the next few
year and become a leading specialist in order to take full advantage of the predicted strong cyclical
upswing from 2015-16 onwards.

2.2

Vision and Mission

Vision Premier Multi use building with commercial and residential apartment in Riga, Latvia for creating
contemporary urban development communities in the centre of Riga, Latvia
Mission Construct creative and community friendly inner urban apartments for the home and lifestyle of
the working professional with practical and creative commercial space.

2.3

Goals and Objectives

Goal one: To construct premier Multi use building with commercial space and residential apartments in
centre of Riga, Latvia
Goal two: To achieve 60% occupancy rate for both commercial and residential space in the first 18 months.

2.4

Nature of the Business

The Construction and business is based in Riga, Latvia where the Director, has over 35 years
experience as an architecture with proven design capabilities in designing creative and practical solutions
for inner urban apartments and commercial space. This business will be construction of Multi use building
with commercial space and residential apartments in centre of Riga, Latvia.
The majority of the work will be the construction of the building with small to medium apartment
developments and commercial space in the first floor because of their high architectural design content.
Most of the business will come from successful sale of the apartments and commercial space.

Page | 6

3.0 Market Analysis

3.1

Situation and SWOT Analysis

Table 1: SWOT analysis and strategy development

STRENGTH
STRATEGY
Strategy Clear focus and positioning of the Architecturally designed multi use building with
property in this architectural development area.
commercial and inner urban apartments to meet
the lifestyle requirements of the working
professionals and private firms.
Sales & Marketing Very good reputation and Spend 20% of the time on business development
network of contacts in this industry
with key contacts, clients and property investors.
Skills Over 25 years of experience and
specialist expertise in the design of high density
residential developments
Structure Modern architectural building with
latest technology.

Leverage this distinctive capabilities to win work

and engage a marketing consultant to market the
business in Riga initially.
Latest construction materials with main aspect
focussing in aesthetic value.

WEAKNESS
Sales & Marketing Limited contacts and
networks with clients and customers which is
difficult to find.

STRATEGY
Collaboration with real estate agencies to
expand the network of contacts and build
partnerships with full-service providers for sales
and marketing.

Finances Large accounts with only a small

numbers of stakeholders puts the business at
risk and also high lending interest rates by
banks.

Lawyers will be employed to conduct due

diligence on new investors as well as set-up the
contracts and payment terms. Take on several
smaller clients to reduce risk and dependency on
major clients. Debtors will be managed on a
regular basis and there is access to funds if
required
Occupancy rate - Low occupancy rate Offers to customers and clients with
prevailing in Riga, Latvia due to economic crises collaboration with bank for special housing loan.

OPPORTUNITY
Demographic Riga's population projected to
grow by approximately 5% in 2031. Also, 60%
projected increase in couples without children
and lone-person households this will generate a
huge demand for high density developments by
working professionals

STRATEGY
Business to be positioned as a leading
architectural building by creating several concept
designs for inner urban apartments and
commercial space.

Social/Cultural The standards of living are

constantly on the rise which means working
professionals without children will want attractive
places to live and socialise in their local
community as well as maximise their work to
leisure time by having a short commute to work

Urban apartments will be architecturally

designed for working professionals who dont
have any children because they are the largest
and growing demographic who will expect
attractive places to live in close proximity to
where they work.

Physical Factors Better infrastructure in the Develop relationships with key stakeholders and
form of better public transport services and businesses that play a part in the development of
bikeways as well as community hubs
these community hubs.

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THREAT
Economic Global Financial Crisis has caused
a severe downturn in the housing market
Multi use building - Disturbance to residential
floor customers due to commercial space

3.2

STRATEGY
Position the business to take advantage of the
projected cyclical upswing in 2015-16.
To provide separate entrance gate to residential
apartments and separate security barriers.

Industry Analysis

The industry is going through difficult times at the moment but the inner urban apartment market
segment and commercial space demand in the centre still presents both short-term and significant longterm growth opportunities. The main challenge is to prove your design and construction capabilities in this
market and have a luxurious residential space and modern, practical commercial space for big firms.
There is high level of competition which comes with many very small scale firms and sole
developers in this industry. The Global Financial Crisis will increase this level of rivalry even more because
there are lot more firms competing for fewer jobs as a result of the economic downturn. In addition, building
design and construction firms are now competing in this space which also increases the level of
competition.
The key industry success factors are concerned with the following elements in the marketing mix:

Product/Service Specialist knowledge and access to Housing markets

Place close proximity to target markets and clients
Promotion clear market position
People the success of the business is basically dependent on the construction of this modern
architectural multi use building :
o Develop a modern architectural landmark in the centre of the city.
o Consult, collaborate and negotiate with clients and key industry stakeholders
o Training and development programs for staff and employees to keep their skills up to date
Process - deliver on what you promised and have effective cost controls

The industry is fragmented, characterised by many very small scale firms which operate in local niche
housing markets.

Page | 8

4.0 Elements of Success

4.1

Target Market

Riga, Latvia was selected as the primary market because it is a large city in Latvia with a population
of 2.03 million people. It is projected to grow by approximately 5 % in just over two decades time. These
growth rates are stronger than any other major city in Latvia. This has resulted in significant short to longterm demand for inner urban apartment developments to accommodate the large number of people who
want to live in close proximity to the city.
In addition, the Office of Economic and Statistical Research forecast in the next two decades the
two main household types will be Couple without children and Lone-person households. Based on this
information and affordability of these apartments, the target market will be working professionals who want
the convenience and lifestyle of inner urban living. They are also in a better financial position to afford the
higher price tags for these types of apartments.
However, the business will need to build business-to-business relationships with property
developers who invest in these projects as well as form strategic partnerships with the marketing agencies
to achieve the desired goals.

4.2

Competitive advantage & Unique Selling Proposition (USP)

The main source of competitive advantage is the wealth of experience and talent of the company
employees in terms of proven design capabilities, excellent reputation and delivery of service within agreed
costs and timeframes.
This is where marketing will be used to clearly position the business as a specialist in this industry
with a proven track record of success. This is also the unique selling proposition for the business as most
competitors do not specialise in one particular area.
This strategy enables the business to focus on this niche housing market to gain an even greater
understanding of the needs, wants and expectations of people in this market. It will enable to business to
design even better inner urban developments that command a higher price tag which in turn delivers
greater returns on investment for the property developers.

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5.0 Marketing Plan

5.1

Marketing Objectives

To achieve 80% occupancy rate for both commercial and residential space in the first 18 months.

To promote the space most efficiently in the housing market and also increasing the reputation of
the company.

5.2

Marketing Mix

All seven elements in the marketing mix have been used to differentiate the business from
competitors and position the business as a leading one for this niche housing market:
Product/Service Specialist knowledge and access to Housing markets and also providing specialised
architectural building with a creative and practical solutions for inner urban apartment and commercial
developments that just focuses on this niche housing market.
Table 2: Value Propositions

Features

Benefits

Proven architectural building

design and construction
Specialist in a niche housing
market

Creative and practical solutions,

plus gain a good reputation
Attractive & desirable
apartments that are better than
others

Importance
(1 to 10)
10

Unique?
Y/N
No

Yes/No

Rating: 1 = Low, 10 = High

Price Competitive low prices will be used in the early stage as a penetration strategy to win work and
gain housing market share in order to demonstrate the credentials and capabilities of the business. When
the business has gained a foothold in the market a higher pricing strategy will be used to reflect the quality
and value of work done by the business.
Place (distribution) In the first year the business will be office-site work but this will be in the office that
the company has designed. This will provide tangible proof of the company's creative design talents of the
business. This presents an innovative and great way to promote the business.
Promotion The most significant of the promotional activities for the business is personal marketing and
networking. This involves going to where the clients and other key stakeholders are. The business will
collaborate with real estate agencies as this provides formal networking opportunities. Approximately 20%
of time will be allocated to building strategic partnerships with developers and customers. This will include
looking for opportunities to speak at community and industry events as well as writing articles for industry
magazines and newsletters. The personal marketing activities will be supported by other quality tangibles in
the form of:

Advertisements in industry magazine and national television, newspaper.

Printed materials, such as business cards, flyers and brochures
Website with photos of the apartments designed and client testimonials

People - one of the best construction company with over 25 years of experience and proven design
capabilities specialising in inner urban apartment and commercial developments.
Process Invest in mobile communication technology to enable the business to do work away from the
office and be highly responsive to calls and emails from clients. Also, because of the nature of the
Page | 10

business, 20% of the time is allocated to working on the business, particularly in terms of business
development.
Physical Evidence
The most important tangible for the business is the employees and staff themselves, which is why
their professional attitude and appearance will make a good first impression on prospective clients. Also, to
reinforce the calibre and credentials of the business, the office will be located in the place where the
company has designed which will provide the best possible tangible proof about the creativity, practicality
and quality of the company's work.

5.3

Action Plan

The key clients for ANM Constructions are the property investors, private firms and families. The
company will devote one day a week to build strategic partnerships with these key clients. The Director will
be responsible for all the active planned promotional strategies, such as:

Personal marketing to the key decision makers in key firms and customers ( Families).
Building relationships with Real estate agencies in parallel professions (e.g. Housing market)
Participating in industry events (e.g. active member of Build Designers Assoc. of Qld)
Writing articles for industry publications as well as speaking at networking events
Launch event at the office to showcase the business to potential clients

The passive promotional activities, such as marketing collateral, website and advertisements will
handled by a marketing consultant with the start-up and overall marketing strategy for the business in
which the performance will be reviewed in six months time.
The employees will be developing their business development skills by attending professional
training courses as way to better personally sell and market the business to others.

5.4

Sales Analysis and Forecast

Figure 1: Sales forecast

Page | 11

6.0 Legal Matters and Risk Management

6.1

Business Structure and Business Name

ASTOR Residence will be set up under a Trust name of ANM Constructions. This is part of a risk
management strategy to protect the assets of the business in the event that the business is ever sued.

6.2

Registrations, Licences and Permits

Table 3: Listing of registrations, licences and permits

Description of Registration/License
Registered Architecture
Registration of Trust
Registration of Business Name
Latvian business number
Design clearance from various
departments
Building permit with other provisions(water,
sewage, fire and safety)

6.3

Contracts and Agreements

Table 4: Listing of contracts and agreements

Agreement/Contract Type

Contract or
Agt
Yes/No

Business Purchase/Sale

No

Franchise

No

Plant & Equipment Purchase/

Maintenance

Yes

Advertising Contracts

Yes

Intellectual Property

No

Distribution Rights

Yes

Purchase/Supply Contracts

Yes

Service Contracts

Yes
Page | 12

Loan Documentation

Yes
Yes

Agreements with Customers and

Contractors
Cooperative Agreements with other
Businesses

6.4

Yes

Risk Management
Table 5: Risk assessment

Likelihood

Impact

Priority

(L=low, VL=very low, M=medium. H=high, VH=very high)

Preventative Action

Dependency on
small number of
large clients for
work

Take on a larger number of

small clients to spread the
risk and also build strategic
partnerships with others.

Have a contingency fund to

manage the cash flow between
jobs

Clients dont pay

Procedure for collection of

outstanding debts. Perform
due diligence on new clients
and have formal contracts
in place

Engage lawyer for advice

Unable to work for

extended period of
time

VL

VH VH

Take out insurance to cover

for the loss income and
have a disaster recovery
plan in place to notify clients
and associates

Subcontract work out

Theft of
equipment

Purchase from alternative

suppliers or use suitable
substitute products

Equipment
malfunctions

Take out insurance to cover

for the replacement of
equipment as well as
deadlocks on the doors and
security screens
Regular maintenance and
proper storage. Also service
agreement in place with
supplier for repairs and/or
replacement of equipment
within 24 hours

Unable to find
occupants

New promotional and

marketing strategies and
offers with loan with banks

Low price sale in starting to

obtain minimum occupancy in
the starting.

Risk Description

Contingency
Plans

Leasing of equipment and

machines.

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7.0 Human Resource Management

7.1

Organisational Chart

DIRECTOR

PROJECT
MANAGER

DESIGN

7.2

CONSTRUCTION

MARKETING

ADMINISTRATION

LEGAL

SERVICES

Owner/Operator Skills and Experience

Table 6: Summary of owners knowledge, skills, qualifications, and relevant experience

Name

Position

Mr. XYZ ABC

Director

7.3

Knowledge, Skill, Qualifications and

Experience
Degree in Architecture and over 35 years
experience in designing apartments, hotels
and retail shops, commercial space.

Industry Knowledge and Experience of Key Personnel

Table 7: Details of personnel with specific industry knowledge and experience

Name

Position

Mr. XYZ ABC

Director

Mr. DEF UVW

Project Manager

Knowledge, Skill, Qualifications and

Experience
Degree in Architecture and over 35 years
experience in designing apartments, hotels
and retail shops, commercial space.
Degree in project management and over 20
years experience in project management of
Multi use buildings and commercial space.

Page | 14

7.4

Human Resource Requirements

Table 8: Analysis of human resource requirements

Administration
Architectural
Accounting/ Bookkeeping
Construction development
Site maintenance
Computer
Business Development
Legal Matters
Marketing/ Sales
Management
Personnel
Production
Research/ Technology
Secretarial
Strategic Planning
Other

Page | 15

8.0 Financial Worksheets

The following documents have been attached.
a) Financial descriptive chart
b) Profit and Loss statement
c) Break-even analysis
d) Cash flow statement
e) Sources and use statement

Page | 16

9.0 Appendices
Appendix 1: Situational analysis external environment
Threat

Influence
(1-10)

Stage of the economic cycle

Yes

Current interest rate

Yes

Average disposable income

Yes

Population growth and make-up

No

Family structure

No

External Environment

Opportunity

ECONOMIC:

DEMOGRAPHIC

Geographic distribution

Yes

Level of education

Yes

Innovations in the construction process

Yes

Technological developments (substitute

products)

Yes

TECHNOLOGY:

SOCIAL/CULTURAL
No

Corporate social responsibility

Environmentally friendly green products

Yes

Percentage of work to leisure time

7
No

Standard of living

Yes

8
8

POLITICAL/LEGAL:
Regulatory environment and legislation

Yes

Compliance with standards and codes

Yes

ENVIRONMENTAL
Climate Change & Carbon Trading

Yes

6
Yes

Eco-efficient Construction

PHYSICAL FACTORS:
Climatic conditions

Yes

Water restrictions

Yes

Yes

Infrastructure - transport, communications

and services
Rating: 1 = Low, 10 = High

Page | 17

Appendix 2: Situational analysis internal environment

Internal Environment

Strength

Weakness

Factor (1-10)

STRATEGY
Competitive advantage - able to differentiate

Yes

Key drivers of the business are known

Yes

Strategy for growth

Yes

Detailed action plan

Yes

Clear evidence of market need for your

housing market
Know your specific market & competitors in
detail

Yes

10

Know your target audience intimately

Yes

Focus resources and efforts on current

customers

Yes

Competitive and profitable pricing strategy

Yes

Your marketing plan and budget

Yes

Measure, learn from and adapt your

marketing activities

Yes

Business structure to maximise wealth and

minimise risk (e.g. sole trader, company,
trust)

Yes

Organisational Structure

Yes

Distribution and sales to target markets

Yes

Are your buildings and facilities adequate?

Yes

Is your equipment effective and up to date?

Yes

SALES & MARKETING

Yes

STRUCTURE

Yes

Able to protect your IP from being copied?

SYSTEMS
Information and management systems (e.g.
CRM)

Yes

Performance measurement and rewards

Yes

5
Yes

Documented processes and systems

Accounting and debt collection systems

Yes

Purchasing systems and inventory

management

Yes

Yes

STAFFING & SKILLS

Recruit the right people

Yes

Training and development of staff

Staff motivation, satisfaction and
remuneration

Yes

7
8

Page | 18

Internal Environment

Weakness

Factor (1-10)

Diversification of management and staff skill

base

Yes

Management skills, experience & track record

Yes

Establish complementary areas of skills (e.g.

trusted advisors with skills you dont have)
Distinctive competencies reside in the
business

Strength

Yes

Yes

10

People understand why the business exists

Yes

Shared understanding of the vision

Yes

Describe ways in which the business is

distinctive

Yes

Do you have access to further funds?

Yes

Manage budgets, cash flow and debtors

Yes

SHARED VALUES

FINANCES

Is your cash flow adequate for growth

Yes

Manage and analyse performance against

financial indicators in your industry
Management understand and use their
financial accounts on a regular basis

Yes

Yes

OTHER FACTORS:
Rating: 1 = Low, 10 = High

Page | 19