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

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

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

5 Getting a return from mixed use development – 7 Key Factors 3.Use an appropriate mix of advisers and cost/ benefit modelling to test various development options: Stage 3 Development Options 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 Current state of commercial property market Local economic conditions Identify alternative high- value opportunities Road and public transport connections Mixed-use development potential Environmental issues Major costs associated with de-contamination, Ground conditions, utilities infrastructure, etc Stage 1 Baseline Assessment for each site Stage 2 Initial Conclusions Stage 4 Testing Options Establish and Compare Redevelopment Options for each site Construct and Use Cost Benefit and Financial Models to Test Options Urban Designers/ Master planners Engineers/ Cost Consultants

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

7 Getting a return from mixed use development – 7 Key Factors  Risk associated with ‘doing nothing’ – environmental and socio- economic  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?  Risks associated with securing/maintaining public sector support  Economic justification required (economic impact assessment) 5.Identify and “manage” risks:

8 Getting a return from mixed use development – 7 Key Factors  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  Reputable international property advisers should be involved from an early stage  Develop a realistic marketing strategy 6.Determine the marketability of the final scheme before starting:

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

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

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

12 Summary  Czech National Brownfield Strategy Project  Project managed by Gerry Brough, Director, DTZ Consulting & Research - on behalf of CzechInvest, the Ministry of Trade & Industry and the EU  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 Previous Czech Experience;

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

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

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

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

17 Summary  Development Appraisal  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  Sources of cash outflows/inflows identified  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) Ex-Thrall Wagonka Factory - Studenka;

18 Summary Ex-Thrall Wagonka Factory - Studenka;  Economic Impact Appraisal  Contextual Analysis  Analysis of ‘Do-Nothing’ Option  Analysis of Preferred Option(s)  Risk Appraisal  Conclusions. € Gross Jobs created2,397 Net Jobs created1,614 Whole Project Costs83,683,063 Whole Project Revenues21,193,988 Net Project Value/(Costs)-62,489,074 Net Present Value/(Costs)-46,795,713 Gross Public Sector Costs40,506,406 Net Public Sector Costs1,365,911 Public Sector receipts-39,140,495 Net Present Public Sector Costs-26,565,643 Gross Project Cost per additional job created51,842 Gross Public Sector Costs per additional job created25,094 Gross Value Added per annum19,818,300 Claw back per annum2,099,589

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

20 Summary  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. What DTZ can do for the Zbrojovka site;

21 DTZ Consulting & Research Gerry Brough and/or