PROMISE: Municipal PROperty Management In South-Eastern Cities South East Europe Work Package 6: Developing Projects on Municipal Real Property Management Activity 6.3: Develop a pre-feasibility study of a classified property for business use purpose Deliverable 6.3 Pre-Feasibility Study of Bucharest former City Hall building- business purpose Version 2.0 ● April 10, 2012 The Pre-feasibility Study of the Bucharest City Hall building for business purpose is a deliverable corresponding to Work package 6 of the PROMISE project and presents the results of investigating the possibilities to ensure an efficient use of the former City Hall building based on an effective management of this property. © AESB, 2011. All rights reserved.Page 2 of 118 Pre-Feasibility Study of Bucharest former City Hall Building – business purpose Academy of Economic Studies of Bucharest Piata Romana 6, sector 1 RO-010374 Bucharest, ROMANIA Tel: + 4/021-319-19-01 Fax: +4/021-319-18-99 Last edited: April 10, 2012 © Academy of Economic Studies of Bucharest, 2011. All rights reserved. No part of this publication may be reproduced, transmitted, transcribed, stored in a retrieval system, or translated into any language, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission from Academy of Economic Studies of Bucharest. All copyright, shall remain the sole and exclusive property of Academy of Economic Studies of Bucharest However, no responsibility is assumed by Academy of Economic Studies of Bucharest for its use, or for any infringements of patents or other rights of third parties resulting from its use. All other trademarks are the property of their respective owners Pre-Feasibility Study of Bucharest Former City Hall Building – Business Purpose, PROMISE Project Version 2.0 Pre-Feasibility Study of Bucharest former City Hall building- business purpose Academy of Economic Studies of Bucharest, Romania PROMISE Project Version: 2.0 Date Created: April 10, 2012 Project Coordinator: Prof. George Petrakos Email: [email protected] Telephone: +302421074468 Project Financial Manager: Dr. Ageliki Anagnostou Email: [email protected] Telephone: +302421074596 © AESB. All rights reserved. Page 4 of 118 Pre-Feasibility Study of Bucharest Former City Hall Building – Business Purpose, PROMISE Project Version 2.0 Table of Contents 1. Executive Summary _______________________________________________________ 8 2. Purpose and Structure of the Pre-Feasibility Study ______________________________ 9 3. Pre-Feasibility Study ______________________________________________________ 10 4. REFERENCES ___________________________________________________________ 11166 Page 5 of 118 Pre-Feasibility Study of Bucharest Former City Hall Building – Business Purpose, PROMISE Project Version 2.0 Document History Revision History Revision Number Revision Date Summary of Changes Author Version 1.0 December 5, 2011 Document created Alina (Iosif) Balalia, Raluca Petrescu, Daniela Constantin, Ion Gh. Rosca, Dorel Ailenei, Zizi Goschin Version 1.1 January 31, 2012 Applied updates submitted Alina (Iosif) Balalia, Raluca by Daniela Constantin Petrescu, Daniela Constantin, Constantin Mitrut, Marius Profiroiu, Liviu Vlad Version 2.0 April 10,2012 Document Finalized Alina (Iosif) Balalia, Raluca Petrescu, Daniela Constantin, Ion Gh. Rosca, Dorel Ailenei, Radu Ioan Reference Documents Please see the following documents for more information: Document Name Version Author IFRS 13 Fair value measurement, 21 st century real 2011 Ernst & Young estate values “Implications for the real estate and construction industries” Romanian Market Real Estate Review, Bucharest 2010 Colliers International Bucharest City Reports 2011 Jones Lang Lasalle Development and conversion on hotel segment 2011 Micut C. (pdf presentation), Sixth edition of the HRB expert conference - Hospitality Forum ( in Romanian: Dezvoltarea si conversia pe segmentul hotelier) European Green City Index – Assessing the 2009 Siemens environmental impact of Europe’s major cities © AESB. All rights reserved. Page 6 of 118 Pre-Feasibility Study of Bucharest Former City Hall Building – Business Purpose, PROMISE Project Version 2.0 Distribution List This document has been distributed to: Name Position Company/Institution SEE JOINT TECHNICAL SECRETARIAT SEE JTS SEE JTS Greek Unit of Audit and Control Single Paying Ministry of Finance and Authority Economy LP. University of Thessaly, DPRD, Greece Project Lead University of Thessaly Partner PP1. Municipality of Athens Development Project partner Municipality of Athens Agency, S.A., Greece PP2. Academy of Economic Studies of Project partner Academy of Economic Studies of Bucharest, Romania Bucharest PP3. Municipality of Bucharest, Romania Project partner Municipality of Bucharest PP4. Province of Rimini, Italy Project partner Province of Rimini PP5. University of National and World Economy Project partner University of National and World Sofia, Bulgaria Economy Sofia PP6. Institute of Technologies and Development Project partner Institute of Technologies and Foundation, Bulgaria Development Foundation PP7. Sofia Municipality, Bulgaria Project partner Sofia Municipality PP8. Trikala Municipal Enterprise for Social Project partner Trikala Municipal Enterprise for Development , DEKA, Greece Social Development IPA PP1. City of Zagreb, Croatia Project partner City of Zagreb 10% ERDF PP1.University of Tirana, Albania Project partner University of Tirana 10% ERDF PP2. Municipality of Tirana, Albania Project partner Municipality of Tirana 10% ERDF PP3. Municipality of Cajetina, Serbia Project partner Municipality of Cajetina Page 7 of 118 Pre-Feasibility Study of Bucharest Former City Hall Building – Business Purpose, PROMISE Project Version 2.0 Executive Summary The Pre-Feasibility Study of Bucharest former City Hall building describes the analysis undertaken in order to identify the solutions for the efficient use of this building for business purposes, based on its effective management on behalf of municipality. It is constructed within the Activity 6 – Pilot Actions, in implementing the project: “PROMISE: Municipal PROperty Management In South-Eastern Cities”. The PROMISE project has been approved by the Community Initiative: South East Europe: Transnational Cooperation Programme, and it will be implemented during the period: March 2009 - May 2012. The current document has been commissioned by the Academy of Economic Studies of Bucharest and it serves as deliverable of the Pilot Action 6.3 - Develop a pre-feasibility study of a classified property for business use purpose. This document has been designed for delivering such a study, which focuses on a real property belonging to Bucharest Municipality with the business purpose in view. The study has analyzed three different scenarios for the efficient use of the former Bucharest City Hall building for business purpose. These scenarios have taken into consideration the authorities intentions on the use of the building and the purposes of the historical buildings within the Old City Centre area. In addition, a high importance was allocated to Zonal Urban Plan that specifies certain rules that have to be obeyed by the management of an historical building. For each scenario both a market analysis and a financial analysis are conducted. In order to obtain a complex and well documented pre –feasibility study regarding Bucharest City Hall building (BCHb) three scenarios have been constructed, as follows: the first is a mix between offices at the upper levels and retail space at the ground floor of the BCHb; the second is composed of offices at the upper levels and museum at the ground floor; and the third scenario is projected for hotel destination. Bucharest, in general, and the Old City Center, in particular, has enough potential for new office and retail lettable spaces and the area is considered an attractive variant for tenants. Also, hotel could be an attractive variant for investors as far as they are aware of the necessary level of investment and the large payback period. Finally, the financial analysis indicated that the best scenario that could be adopted for the BCHb for business purpose is the mix of offices and retail (first scenario). © AESB. All rights reserved. Page 8 of 118 Pre-Feasibility Study of Bucharest Former City Hall Building – Business Purpose, PROMISE Project Version 2.0 Purpose and Structure of the Pre-Feasibility Study This study aims to expose and analyze three main hypotheses regarding the efficient use of the former City Hall building. In this final version of the study a classical model of development appraisal is developed in order to expose the scenario that leads to the best use of the former Bucharest City Hall building. With this purpose in view the study has been structured into three main parts, namely the initiation phase, the pre-feasibility and the final report. Part 1 of this pre-feasibility study starts with the description of some general aspects regarding Bucharest and a consistent exposure on the Bucharest City Hall building site, ending with a SWOT analysis. Moreover, the three scenarios are expressed and the regulatory framework of the BCHb is presented. Part 2 is the most representative for the pre-feasibility study as it contains two major and representative directs of analysis, namely the market analysis and the financial analysis. Well documented market analysis was conducted for each scenario. Starting with the national perspective on each market and