This Development is located on the riverbank in central Prague. The land is part of Smichov, which is widely recognised as the 2nd centre of Prague. The area contains the Andel Retail complex as well as commercial and entertainment areas. The Andel shopping complex is seen as Prague’s premier shopping mall and is located just a 5 minute walk away from the site. Transport links are very close by with Smichov railway station and Smichov and Andel metro stations within short walking distance.
The area is rapidly growing with office accommodation built by Skanska reaching full occupancy prior to completion and a new Schmicov City planned to start late 2015 bringing employment, accommodation and more retail into the area.
The land has been on purchase option whilst they secured change of use, planning and zoning to develop a large luxury 360 bed conference hotel. Intercontinental Hotels had agreed terms for a 20 year operating lease. Vinci, one of the largest construction companies in the world had committed to purchase the construction work for the hotel taking on all risk to deliver a turnkey solution to a set construction deadline.
Changes in the market have seen the hotel market move away from large hotel real estate instead preferring smaller hotels. Intercontinental are still committed to the site but on a smaller hotel footprint. My clients have embraced this and are now looking to change the planning to a 50/50 split hotel and office or hotel and residential development offering marina facilities to the owners.
My clients have already contributed more than €1m+ and a significant commitment in time to gain planning consents and source contractors to fund the site and developers to purchase the site. and clients for the site. The want to purchase the land outright with an equity partner to realise the planning gain.
CBRE have recently valued the hotel project sale at €54m with a profit of €19m. Vinci are still interested in purchasing construction contract which would fund the development for circa 5% pa. The demand for such a large hotel may not be readily available and therefore one of the following options is preferred.
Hotel and Office
As a large hotel is already consented it will take less time to gain planning for a smaller hotel of 160-180 bedrooms and a small office block. Intercontinental Hotel Group are still interested in purchasing a smaller hotel on this site. CBRE have estimated the sale price for this would be €45m with a profit of €18m.
Hotel and Residential
This option needs full building consent which would take approx. 12 months to gain the necessary permissions before any sales can be effected. The sales value and profit do reflect this with sales value at €50m and a profit projection of €30m.
An equity investor will need to contribute €1m initially to secure their stake which will be held in an Escrow account and detail the investment agreement. At the point of sale the remaining €8m will be required to purchase the land outright.
Once the land is purchased the land can be held in the investment agreement and the developers brought in to build out the development at the pre-agreed finance rates with the contractor. This will maximise the profit potential.
Alternatively the land can be sold to a developer with the planning consents for a €18-19m. This gives the quickest return for an investor.
Much more detail is available to serious investors who have the equity available immediately.
Finance for Property Developers Limited