Waltz on the Danube

4990 words 20 pages
Waltz on the Danube

Executive Summary
The purpose of this case is to establish the viability of the €75 million shopping center project located along the Danube River in the city of Gyor. As the director of Hungarian operations for ECE Projektmanagement Dr. Philipp von Wilmowsky had worked for two years on the 30,300 square meter shopping center. So while Gyor lack significant a shopping center thus creating a site that had great potential there were several major questions that would define the success of the project.

The question that transcends the project is whether equity investors be sufficiently rewarded to justify there financing interests. The answer to this question is dependent on several factors including the
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The anchors included a supermarket, an electronics store, a sports equipment store and a clothing store. These stores would comprise 14,300m² of the total 30,300m² gross rentable area, leaving just 16,000m² of rentable area to be filled by small retail shops and the food court. If this scenario were to play out the ECE could support this development even without the hypermarket. These anchor stores should be enough to attract shoppers to the center and increase client turnover in the shopping center.
Since all leases would be 10 year contracts the long term visibility of future cash flows would be relatively secure once contracts were filed. The anchors would provide average cash flows of €108 per m² per year while the inline stores would provide average cash flows of €264 per m² per year. An addition common area maintenance fee (CAM) would be paid by all tenants. These recurring revenues would generate substantial operating cash flows when offset against the incremental expenses.

Since a certain part of the average revenue comes from a percentage of sales while the rest comes from a base rate payment it is very important that the tenant clients have significant sales to support the project. Anchor tenant would need minimum required revenue of €1,397,820 per square meter and in-line stores would need €2,688,070 in order to ensure the rental costs are less than or equal to 12 percent (see Table 1). Having stores that have strong


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