1

F E A S I B I L I T Y S T U D Y EPITOME

R I V E R T E R R A C E

H O T E L

2

INDEX

1. PREFACE ......................................................................................................... 7

2. EXECUTIVE SUMMARY .................................................................................... 8

3. PROJECT DESCRIPTION ................................................................................. 9

3.1. LOCATION ............................................................................................... 9

3.2. HOTEL DESCRIPTION ............................................................................ 16

4. MARKET RESEARCH AND STRATEGY, SWOT ANALYSIS....CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

4.1. MARKET RESEARCH .............................. CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

4.2. STRATEGY ............................................. CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

4.3. SWOT ANALYSIS ................................... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

5. PROJECT MANAGEMENT AND HUMAN RESOURCES ..........CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

5.1. ORGANIZATION SCHEME...................... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

6. TECHNICAL DESCRIPTION OF THE PROJECT ............................................... 26

6.1. ARCHITECTURAL ................................................................................... 26

6.2. CONSTRUCTION IMPACT ON THE NEIGBOURING STRUCTURES ........... 28

6.3. ENVIRONMENTAL IMPACT .................................................................... 29

7. PROJECT RISK, PROJECT FEASIBILITY ........................................................ 32

7.1. RISKS .................................................................................................... 32

7.2. CASH-FLOW ........................................................................................... 33

7.3. PROJECT VALUE ACCORDING TO RESIDUAL VALUE METHOD ......... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

7.4. FINANCIAL INDICATORS ...................... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

8. CONCLUSION ................................................................................................ 36

9. REFERENCES ............................................... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

9.1. PROJECT MANAGER/OWNER ................ CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

9.2. PROJECT ARCHITECTS .......................... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

9.3. TECHNICAL DESIGNER ......................... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

9.4. COST PLAN ........................................... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

10. APPENDICES ............................................ CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

10.1. APPENDIX 1 CONSTRUCTION COSTS, INVESTMENT MANAGEMENT, PROJECT DOCUMENTATION AND FINANCIAL COSTS .... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

10.2. APPENDIX 2 HOTEL EQUIPMENT ...... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

3

10.3. APPENDIX 3 SENSITIVITY ANALYSIS OF ADR AND OCCUPANCY OSCILLATION .................................... CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

10.4. APPENDIX 4 SELECTED HOTEL TRANSACTIONS IN THE CEE REGION IN THE YEARS 2000 T0 2007 ............ CHYBA! ZÁLOŽKA NENÍ DEFINOVÁNA.

4

ABBREVIATIONS:

NPV Net Present Value

IRR Internal Rate of Return

RP Repayment period

CEE Central and Eastern Europe

ARR Average Room Rate

ADR Average Daily Rate

RevPAR Revenue Per Available Room

CSO Czech statistical office

F&B Food & Beverages

EBITDA Earnings Before Interests, Depreciation, Taxes and

Amortization

LIST OF FIGURES

Figure 1: Satelite view of Prague 1 and 5 .............................................................. 9

Figure 2: Hotel location ....................................................................................... 11

Figure 3: Hotel location - view from Rasin riverside during day and night. ........ 12

Figure 4: Other significant hotels of 4 or 5 * ....................................................... 13

Figure 5: Smichov district development .............................................................. 14

Figure 6: Faktory Office Center ........................................................................... 15

Figure 7: Smíchov Land ....................................................................................... 15

Figure 8: Smichov station development study .................................................... 15

Figure 9: Entrance lobby with reception ............................................................. 18

Figure 10: Restaurant ......................................................................................... 19

Figure 11: Room visual during day ...................................................................... 20

Figure 12: Room visual during night ................................................................... 20

Figure 13: Congress hall ...................................................................................... 21

Figure 15: Hotel organization scheme ........................ Chyba! Záložka není definována.

5

LIST OF GRAPHS

Graph 1: GDP development in 2004 to 2009 .............. Chyba! Záložka není definována.

Graph 2: Inflation development from 2000 to 2008 .. Chyba! Záložka není definována.

Graph 3: Unemployment ration from 2000 to 2008 ... Chyba! Záložka není definována.

Graph 4: Exchange rate CZK to EUR in 2000 to 2008 . Chyba! Záložka není definována.

Graph 5: Development of interest rates in 2000 to 2010 (forecast) .. Chyba! Záložka není definována.

Graph 6: GDP per head in EUR ................................... Chyba! Záložka není definována.

Graph 7: Direct foreign invesmets in CR .................... Chyba! Záložka není definována.

Graph 8: ADR in EUR and occupancy rate development in 2000 to 2008 ....... Chyba! Záložka není definována.

Graph 9: Position of Prague in CEE region .......................................................... 28

Graph 10: Market phase in CEE ........................................................................... 29

Graph 11: Yields development in 2000 to 2008 ......... Chyba! Záložka není definována.

Graph 12: Number of passengers passed though Prague airport Chyba! Záložka není definována.

Graph 13: Number of guest in Prague accommodation services monthly and yearly ......................................................................... Chyba! Záložka není definována.

Graph 14: Number of visitors and spent nights in Prague ........... Chyba! Záložka není definována.

Graph 15: Number of guest in five star hotels in Czech republic Chyba! Záložka není definována.

Graph 16: Forecast of newly opened room for 2008 - 2011 ........ Chyba! Záložka není definována.

Graph 17: Efficiency of Prague hotels ........................ Chyba! Záložka není definována.

Graph 18: Investment transactions according to source country and sector . Chyba! Záložka není definována.

Graph 19: Investment transactions in Prague from 2002 to 2008 ..... Chyba! Záložka není definována.

Graph 20: EBITDA and its modification development Chyba! Záložka není definována.

Graph 21: Sensitivity analysis of ADR and occupancy in year 1 .. Chyba! Záložka není definována.

LIST OF TABLES

Table 1: area review ............................................................................................ 16

Table 2: Significant Prague Hotel Operators ....................................................... 17

Table 3: Congress oportunities in Prague ............................................................ 22

Table 4: Yield comparison in 2008 for CEE region ...... Chyba! Záložka není definována.

Table 5: Planed hotel development in Prague ............ Chyba! Záložka není definována.

6

Table 6: Year to year comparison of Prague hotels in January ... Chyba! Záložka není definována.

Table 7: Congress activities in Czech Republic ........... Chyba! Záložka není definována.

Table 8: Congress activities in Prague........................ Chyba! Záložka není definována.

7

1. PREFACE

This study tends to introduce the project RIVER TERRACE HOTEL and evaluates project’s

location and economic outcome on the current hotel market.

Study is focused on technical and economic properties of the project, evaluates future

construction costs, furniture and equipment costs, and economic figures. Economic figures

are calculated based on future cash flow. Analysis also explores sensitivity of the future cash

flow in relation to possible changes in interest rates.

It should also provide the client (future investor) independent view of the Prague hotel

market and on the financial demands with focus on possible risks and ways of elimination of

the risks.

8

2. EXECUTIVE SUMMARY

Project name: RIVER TERRACE HOTEL

Project location: Hořejší nábřeží, Praha 5 – Smíchov

Land plot: 553/2, 557/3, 557/4, 558/3, 558/4, 4984/3, 5077/2

Registration n.: 3118

Permitting: Zoning permit (Územní rozhodnutí) dated 24.7. 2007

Project owner: River Terrace a.s., Ovocný trh 572, Praha 1

Construction type: new built

Purpose: four to five star hotel

Location: Project is situated on the Vltava left riverside, district Prague 5 –

Smíchov.

Description: Building consists of 8 floors:

2nd underground floor – building technology, underground parking

1st underground floor – technology, congress center, restaurant

ground floor – main entrance, reception, restaurant

1st to 6th floor – hotel rooms and related equipment.

Overall area is 22 090 sqm, from this 8 527sgm per hotel rooms,

1 093 sqm per restaurant, 2 547 sqm per conference facilities and

2 572 per parking spaces. Remaining 7 351 sqm form the technical

and administrative facilities.

Hotel capacity: 326 rooms

97 parking spaces

Congress facility for more then 1000 participants consists of main hall

and 6 flexible conference rooms.

Program: 12 month building permit phase

24 month proposed construction period

12 month finishing works, landscaping, test operation

Financial figures: Acquisitions costs 12 810 000 EUR

Construction costs including interest 43 063 000 EUR

Developer’s fee (25%) 9 188 000 EUR

Equipment costs 4 488 000 EUR

TOTAL 69 557 000 EUR

IRR 7,75 %

Repayment period 13 years

9

3. PROJECT DESCRIPTION

3.1. LOCATION

3.1.1. LOCATION DESCRIPTION

The RIVER TERRACE Hotel is located on the Vltava left rive side at the Smíchov district.

Location offers unique opportunity for construction on the riverside and in the city centre.

This part of Prague use to be a gateway to the city with extensive vinery settlements, hop-

gardens and orchards. Centuries later Smichov district became industrial suburb of Prague

with majority of machinery industry.

Today Smíchov is formed by historic like residential block development from 19th century.

City blocks are bordered by green area of Petřín hill, Sacre Coeur peak and Mrazovka peak.

These hills form the characteristic Smichov panorama.

Smichov district is one of the fastest developing Prague centers. In past 10 years it change

to modern center of business and entertainment with variety of hotels, residential building.

These addresses are now assessed as on of the most prestigious in Prague. District also

offers plenty of parks by the riverside, several islanda now used for relaxation and sport.

Figure 1: Satelite view of Prague 1 and 5

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10

Together with Smíchov development a new flooding barrier system was established in order

to prevent large floods in 2002 same as in other parts of Prague.

In near future a new development of south and central Smichov district will be launched on

the properties of Czech Railways. It will offer approximately 350 000 sqm of land for office

and retail construction. This stage would finish the transformation of the district to one of

the most important Prague city centers, place with unique and prestigious address for

business and retail, place dedicated to conference and other social events.

3.1.2. HOTEL LOCATION

Hotel’s unique placement is defined by several factors. One of them is the growing potential

of Smichov district as a modern city centre of business, retail, services, residential housing

and entertainment. Additionally very important factor is the fact that the land lot is one the

last available property for construction on the river side in the central part of Prague.

Properties by the riverside in all international cities are considered as most valued and

prestigious. Hotel building will become a new dominant of Prague’s riverside. It will allow

use of the water area within Prague.

Hotel building will be protected against floor with barrier system. It is designed for

protection up to “thousand year reoccurrence flood” and is connected to the modern all city

protection system. Protective barrier consists of system of concrete walls and openings that

can be filled in case of danger with mobile barriers. Flood protection system is an important

part of the project design.

Smichov is even now very well accessible from the Prague airport thank to tunnels

constructed from Prague 6 to Prague 5. Traffic situation is affected by large and long term

construction of new tunnels in Prague 6 and 7 which limit traffic connection from airport to

Old town and other districts. Situation will even improve after completion of the ring road in

the south west of Prague after 2009.

Historical city centre is within a walking distance from the Hotel. Also use of very attractive

water transport directly from the Hotel may be considered. Metro station line B – Andel is

within 10 minutes walking distance.

11

Figure 2: Hotel location

Within a walking distance Metro station Smichovske nadrazi (Smichov railway and bus

station) and Andel can be found. Also trams and buses offer quality transport service to the

historical center and other parts of Prague.

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12

Figure 3: Hotel location - view from Rasin riverside during day and night.

3.1.3. LOCATION OF OTHER HIGH QUALITY HOTELS

Other hotels of 4 stars and more such as Kempinski of Marriott are located in the historical

part of Prague. Most of these hotels cannot offer such view of Prague Castle panorama and

cannot offer use of the water front as our RIVER TERRACE can.

13

Fig

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4: O

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ifican

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tels o

f 4 o

r 5 *

Charles Bridge National Theatre

Old Town square

Wenceslas Square

Mandari Oriental Rocco Forte

Hotel Movenpick

andel´s hotel

RIVER TERRACE HOTEL

Radison SAS

Hotel Jalta

Muzeum

Hotel KEMPISNKI

Boscolo Carlo

Hotel Intercontinental

Petřín

Prague Castle

Hotel Esplanade Mariott HILTON Old Town

HILTON

Four Seasons

Buddha Bar

Park Inn

14

3.1.4. DISTRICT DEVELOPMENT

Smichov are is now one of the most desired office and retail locality in whole Prague. It is

due to long tradition of this area which is easily accessible from historical centre and also

other parts of Prague. It also has a comfortable access to the D5 motorway (to Pilsen) and

to the Prague airport Ruzyne. This comfortable transport and traffic condition is desired for

companies which require both city centre location with easy access to the airport and the

whole Czech motorway system.

Figure 5: Smichov district development

Office buildings

FOC – Factory Office Center located between Nadrazni and Rozkosneho streets, directly

above line B metro station and tram station – Smichovske nadrazi. Project is under

construction and will offer 9 floors of office premises.

15

Figure 6: Factory Office Center

„Smíchov Land“ office building

Office building will Offer approximately 5 800 m2 of new office premises.

Figure 7: Smíchov Land

Facility is situated directly opposite to the RIVER TERRACE hotel, between streets Svornosti,

Hořejší nábřeží and Na Valentince.

Smíchov station development

Project is under development. It consists of revitalization of Smíchov railway station and will

offer about 350. 000 m2. Within few years period a new complex of offices, retail and

residential premises will rise in this area.

Figure 8: Smichov station development study

16

3.2. HOTEL DESCRIPTION

3.2.1. HOTEL DESCRIPTION

Hotel is designed in four star category and consists of 8 floors. Two of them underground

floor, 6 above ground floors. Project will offer 326 rooms, 97 parking spaces, 4 bus parking

spaces, conference facility for mote then 1000 participants. Conference and restaurant

facility is connected with the riverside and though offers outstanding opportunities and

environment for event organizing.

Complex consists of three buildings connected in a way it completes the district block

development and becomes a new dominant of the Vltava south left riverside. Roofing is

designed as green and flat. Only part by the Horejsi nabrezi street has saddle roof.

Main entrance to the building will be from Horejsi nabrezi with several valet parking bays

located near the entrance. Congress facilities are located in the west part by the main road

and accommodation and restaurant facilities are located in the east part with view to

neighbouring park, Vltava River and the riverside.

Spacious lobby with reception and greenhouse has glazed roof and provide access to all

facilities such as hotel rooms, restaurant, bar and congress centre.

Table 1: area review

Floor -2 -1 0 1 2 3 4 5 Total in

m2

Lobby + bar 1 741 1 714

Restaurant 670 423 1 093

Conference hall 1 830 717 2 547

Hotel rooms 2 358 2 292 1 860 1 425 592 8 527

Offices 212 267 479

Kitchen 303 236 250 789

Technical premises

933 236 1 169

Corridors, elevators and staircases

94 145 205 573 603 492 411 201 2 724

Parking, access ramps

2 572 2 572

Storages, cleaning 71 28 46 96 30 30 20 321

Atrium 155 155

Total in m2 3 973 3 484 3 604 2 977 2 991 2 382 1 866 813 22 090

Source: Zoning permit documentation

17

3.2.2. HOTEL STRATEGY AND MARKET POSITION

Hotel will be focused on congress and incentive clients both domestic and foreign. It is

congress and incentive tourism which brings the highest income due to synergy with other

services such as catering etc.

Within direct competition in terms of number of hotel rooms no other hotel offers such

conference facility comparable to RIVER TERRACE hotel. Same is the situation within Prague

5 district.

Table 2: Significant Prague Hotel Operators Hotel name Category

* Occupancy

% Rates in

EUR Number

of rooms

TOP Hotel 4 60 95 930 Hilton Praha 5 70,36 120-230 788 Corinthia Praha 5 78,3 275-292 450 Diplomat 4 73 195 398 Hotel Intercontinental 5 150-265 364 RIVER TERRACE 4-5 From 140 326 Hilton Old Town 5 130-230 305 Mariott 5 82,6 222-282 293 andel´s hotel Smíchov 4 83,9 130 290 Park Inn Vyšehrad 5 60-232 210 Radison SAS 5 169-900 206 Yasmin 4 67,92 145 198 Angelo Hotel Smíchov 4 69,8 125 168 Boscolo Carlo 5 265-360 150 Four Seasons 5 od 325 143 Movenpick 4 155 136 Rocco Forte 5 Od 290 101 Mandarin Oriental 5 od 370 99 Jalta 4 195 94 Kempinski Hybernská 5 od 275 75 Esplanade 5 119-269 74 Hotel MaMaison Pachtův Palác 5 149-399 50 Buddha-Bar 5 od 388 39

3.2.3. HOTEL EQUIPMENT

Lobby and reception

Entrance lobby is situated towards main access street Horejsi nabrezi. Lobby area is design

for approximately 180 guest reception due to congress clients focus. Large congress groups

can be accepted also by mobile reception. There are several facilities present in the lobby. It

is reception for four receptionists, baggage storage, area for office services and desk for

concierge.

18

Vertical traffic will be secured by 6 elevators with electronic access control which will

partially limit guest traffic around the hotel. For guest’s comfort a waiting and relax area is

designed in the lobby.

Lobby bar will be also available for the guests same as the restaurant with capacity for 200

guests.

Figure 9: Entrance lobby with reception

Two escalators and one of the six elevators will connect the lobby with the congress facility,

restaurant and yacht club.

Restaurant

Main restaurant is accessible from the entrance lobby and is located on the first

underground floor. Restaurant’s capacity is 180 to 200 places. Restaurant services are

designed as buffet system with chef’s workplace for preparing fresh dishes.

Concrete restaurant and kitchen technology and design will be adapted to future hotel

operator’s demands.

Lobby bar

Lobby bar continues from the reception area. Capacity is proposed for 80 guests. Bar offer

will depend on the future operator. Bar has sufficient back house facilities including storage.

19

Multi purpose restaurant

Restaurant is situated in the first underground floor, on one side in neighbours with the

congress facility, on the east side a glazed wall will offer view to the Vltava river and the

opposite riverside.

Restaurant will offer not only gastronomic services but will also social and entertainment

events. Technology and design will be adjusted to future demands, now it is prepared for

buffet system accompanied by regular “A La Carte” offer. Part of the kitchen is designed

opened to the restaurant so the chef will be in contact with the guests. Due to the

restaurants location and view the restaurant is considered as high standard with higher

revenues.

Restaurant will also provide catering services for conference events.

Figure 10: Restaurant

Hotel rooms

All 326 hotel rooms are designed in four star standard.

Rooms are air-conditioned with inner regulation, with glazed façade. Door locks with quite

operation will be equipped with electronic access system. The card access system will be

also used for light control. Other equipment will depend on the final operator, now wireless

phone, internet access, minibar, fridge, safe and flat TVs are proposed.

20

Figure 11: Room visual during day

Figure 12: Room visual during night

Bathroom is proposed with sink, shelves, bathtub or shower, toilet, ventilation, power plugs,

hair drier and a mirror.

Rooms will be equipped with standard furniture according to the hotel design. Furniture

consists of wardrobe, work desk, chair and armchairs, small coffee table. Bed will be

according to the room type, one double bed or two single beds.

Finishes are suggested with carpet on the floor and painting or wallpaper on the walls.

21

Congress hall

Main congress hall is situated in the underground floor and is accessible by two escalators

from the entrance lobby. Congress centre consists of main congress hall with 700 persons

capacity and six additional conference room for 360 guests. Total capacity depends on the

layout, can reach up to 1060 guests. For ball events the capacity is approximately 400

guests.

Figure 13: Congress hall

Concept of the congress hall is multi purpose so it can accommodate all kinds of events

required on the market. Hall will be equipped with sufficient ventilation, lighting and heat

and sound insulation.

The additional meeting rooms 3 in underground floor, 3 on first floor, will be flexibly divided

by mobile partitions. Congress facilities will be equipped with compact furniture. Technical

equipment such as data projectors, flipcharts, video conferencing, wireless internet

connection and translating devices should be also present in all meeting rooms.

RIVER TERRACE congress centre will become one of the largest in Prague. With it’s capacity

of 1000 participants fill the gap on the market between large congress centres with capacity

of 2500 guest such as Clarion Congress Hotel Prague, TOP Hotel or Prague Congress Centre

and the smaller centres with capacity 500 to 700 people such as Diplomat, Corinthia Tower,

Hotel Palace.

22

Table 3: Congress oportunities in Prague

Hotel name Category *

Congress capacity

Location

TOP Hotel 4 5 000 Praha 4 Kongresové centrum Praha 2 764 Praha 2 Clarion Congress hotel Prague 5 2 500 Praha 9 Hilton Prague 5 1 500 Praha 8 RIVER TERRACE 4 1 060 Praha 5 Hotel Diplomat 4 820 Praha 6 Hotel Pyramida 4 500 Praha 6 Corinthia Hotel 5 420 Praha 4 Hotel Movenpick 4 300 Praha 5 Hotel Palace 5 300 Hotel Jalta 4 250 Praha 1

Catering services for the congress centre will be secured by the restaurant on the

underground floor. Access to the riverside with view over the Vltava river and Vysehrad is

available from the restaurant.

Exclusivity of the congress centre is also defined by the availability of water transport or

other activities.

3.2.4. HOTEL LAYOUT

2nd Underground floor 1 Parking 2 Technical premises 3 Kitchen premises 1st underground floor

Figure 14: Layout of hotel floors

23

2 Techn. premises 3 Kitchen premises 4 Offices 5 Congress hall 6 Restaurant

Ground floor 4 Offices 5 Congress hall 6 Restaurant 7 Recepcion, lobby 8 Lobby bar 9 Bus parking

1st floor 10 Hotel rooms 11 Storage, cleaning

24

2nd floor 10 Hotel rooms 11 Storage, cleaning

3rd floor 10 Hotel rooms 11 Storage, cleaning

4th floor 10 Hotel rooms 11 Storage, cleaning

25

5th floor 10 Hotel rooms 11 Storage, cleaning

26

6. TECHNICAL DESCRIPTION OF THE PROJECT

Technical description is from “Documentation for the Zoning Permit Change” for the project

“Hotel Smichovske Nabrezi” elaborated by AED Project a.s. in April 2006.

6.1. ARCHITECTURAL

Architectural solution focuses on operation effectiveness, quality of used materials. The

design carefully completes the current built up city area.

Facades are proposed in combination of stone cladding, through out coloured plaster,

corroded cooper cladding Tecu and glazed cladding. Windows are of aluminium profiles with

aluminium or textile shading. Rails at the full size windows is of safety glass, rail on the

balconies and terraces is proposed as steel structure filled with milky glass of regular clear

glass. Project architect is the atelier ŠAFER HÁJEK ARCHITEKTI. Reference projects are

stated in the chapter 9.

6.1.1. STRUCTURAL

Building is designed as structurally independent with underground floors forming one whole,

and the above ground floors are divided into structurally independent wings.

Bearing structures are proposed mainly from monolith reinforced concrete frame with

central bracing communication cores and walls. In high loaded areas some steel columns

and beams are proposed.

Typical module distance in above ground floors in 4 m, in underground floors it is

approximately 8 by 8 m.

Foundations

Building will be founded on bored piles with diameters from 630mm to 1200mm. Piles will

be combined with foundation slab of 500mm. Piles will also secure the building from floating

in case of flooding. Foundation of angled column will be on footing supported by piles.

Riverside wall is proposed to be founded on several isolated bored piles of 630mm in

diameter. All piles will have to be done with metal sheeting protection.

Foundation pit protection

Pit protection will be difficult and will be subjected to separate project due to presence of

the river. Bottom part of the pit will be permanently below the underground water level with

27

enormous incomes which are impossible to treat by draining. Pit has to be thou secured

from underground water leaks. A pile wall is proposed on the pit perimeter. The wall will be

incorporated in to the rock bed.

Bottom of the pit will be equipped with minimally 8 pieces of draining wells in order to drain

rain water and eventual leeks from the bottom or foundation walls. Pit will be protected

before flooding (five years reoccurrence flood). A reinforced concrete slab of the riverside

will be placed on the pile wall by the river side. The mobile flood barriers will be anchored to

this slab.

Dilatations

Underground floors are proposed with one dilatation joint in order to allow volume

expansion. No differences in settlements are expected, however dilatation should allow for

small horizontal transitions.

Above ground floors will not have to be dilated. It is however necessary to us use adequate

concrete mixture for minimizing of the volume changes.

Materials of the bearing structure

Concrete structures: Concrete class C25/30, C30/37, C35/45

Reinforcement: class 10 505(R)

Steel structures: Steel class S235, S 355

Substructure

Substructure will be permanently under the underground water level and will be insulated

with common surface waterproofing. Perimeter walls and the foundations slab are design to

bear the hydrostatic pressure from the water. Walls are proposed 300 to 400mm thick, slab

is proposed 500m thick.

Inner walls will be from 200 to 300 mm, columns will differ according to the load.

Floor slabs in underground floors are suggested to be 250mm. In column support a visible

head could be used.

Superstructure

The above ground scheme is quite similar. Transverse walls are proposed 200mm thick and

are placed every 4m. They are connected by two axial walls. Floor slabs are proposed 200

mm thick.

28

Structurally the biggest load is in the outside corners of the over-hanged structures due to

lack of column support. In these areas it will be necessary to use thicker floor slab and use

bearing walls in the facade. The over-hanged structures will be founded on the underground

structure and partially on the angled columns founded separately outside the underground

layout.

Conference hall

Hall roofing will be supported by steel truss of 1 to 1,2 m height placed every 4,2m.

Structure is dilated from the concrete walls and acts independently. Design is prepared for

light construction of the green roof of the hall with only minimum thickness of the soil.

Bearing capacity is proposed to be 2kN/m2 at maximum.

Flooding protection

Foundation slab is proposed in the height of +184,2 m above see level, ground floor is

+192,2 m. Stable level of the underground water is at +187,2 m, Q5 (five year reoccurrence

flood) is at +188,95 m, Q20 is at +189,73m.n.m, Q100 at +190,73m and Q2002+300mm

(flood level from the year 2002 with 300mm allowance) at +192,47m.

Flood protection is proposed against the Q2002 + 300m together with controlled flooding of

the second underground floor.

Controlled flooding is proposed in order to control pressures caused by the raised water

level and to reduce expenses for such protection in the foundation structure. It is possible to

allow approximately 2,5 m of water in the underground floors. Control flooding would

though have to begin when the water level reaches +192,47 – 2,5m = 190m. That matches

the Q20 (20 year reoccurrence flood).

6.2. CONSTRUCTION IMPACT ON THE NEIGBOURING STRUCTURES

Noise and vibration protection

Noise and vibrations during the construction will occur mainly during demolition works, earth

works and material transport. According to Czech legislation highest possible noise level

inside a building within urban built-up area is from 6.00 to 7.00 and from 21.00 to 22.00 55

dB; from 7.00 to 21.00 65 dB; and from 22.00 to 6.00 45 dB. General contractor will have to

respect these limits, noisy operation shorten to a minimum and exclude works that would

overcome these limits.

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General contractor will be also obliged to use plants in good technical condition with

vibration limits within allowed limits.

Protection against public pollution and air dust protection

Vehicles leaving the construction site have to be cleaned in order to prevent pollution from

dirt. Eventual dirt on public roads have to be cleaned repeatedly.

In order to prevent dust pollution during earthworks, site has to be watered, soil material

have to be transport fast and loaded carefully. Soil materials on trucks have to be covered.

Precautions have to be made in order to prevent pollution of the surface waters and drain

the sewage system. Same precautions have to be made to prevent pollution of the

underground water.

Impact of public property occupation and traffic exceptions

Services connections and asphalt laying will cause dome traffic limitations. Problem will be

solved in further stage of the project by separate project documentation.

Site traffic organization

During construction all site traffic has to be minimized close to existing building in order to

prevent pollution. All construction waste will have to be treated according to valid legislation

and it will be a duty of the general contractor. Eventual leaks of oils have to be treated

immediately by adequate substances and further eliminate these substances.

Visual environment disturbance have to be reduces by cleaning the site surroundings and

maintaining the site in order.

6.3. ENVIRONMENTAL IMPACT

Impact on the citizens

In the proposed concept there will be no intentions that could cause higher risk of health

hazards of the citizens not dangerous materials will be stored.

Emergency situation such as fire will be treated by automatic systems. During usual

operation on the site no limit of environmental assessment will be exceeded. Construction

will be organized in a way that will prevent any significant limitation of access roads.

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Impact to the ecosystems, flora and fauna

Project realization will not cause any greenery demolition since the trees were already

removed in accordance with an issued permit. Current greenery will have to be protected

during the construction.

With the project realization no animal or plant life will be extinct. Due to absence of any

significant biotope construction cannot cause any deterioration.

Project will improve the environment with new greenery areas with new varieties of

vegetation with reduced amounts of allergens.

Impact on visual and esthetical values of the environment

Generally the new construction should bring significant improvement to the architectural and

urban esthetical value of the locality.

Impact on present use of the area

After completion project will become part of an existing and functional system, it will

sensitively expand the area and widen the services and qualities. No harm to the current use

will happen.

Impact on the noise level in the area

Due to project’s character no deterioration of the noise parameters can be expected in the

area.

Air pollution impact

It is expected that the new project will not influence the air quality even when added to the

background factors. Air pollution study was performed in 1998 and since then following

improvements from the air pollution point of view happened to the project:

� With completion of the Strahov tunnel number of passing traffic decreased 30%

� Since 1998 the car traffic produces less pollution

� No significant sources of pollution were established in the area

Impact to the underground water

Underground water forms one level together with Vltava river. Depth of the level is above

the project’s foundation slab, however the construction, nor the operation can cause any

damage to the currents springs of water streams.

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Cleaning the surface water coming from the asphalt and other hard surfaces will prevent

any contamination of the underground water.

Impact to the surface water

Geology survey did not identify any surface springs or water streams so no damage can be

caused by the construction.

Cleaning the surface water coming from the asphalt and other hard surfaces will prevent

any contamination. In accordance with the site drainage system the surface waters are

protected sufficiently and no contamination should be caused by regular operation.

Drain water treatment

Purpose of the water treatment objects is to drain and clean the waste water resulting from

the facility operation. In the site there will be following waste waters:

� Waste water from the building operation, they will be drained to the public sewage

� Rain water from roads and parking, will be drained to the public swage

� Clean rain water from roofs, sidewalks and not hardened areas will be drained

mainly to the river, partially to the sewage system.

Impact to the soil

Construciton will not cause any change of the soil character in the area.

Impact to the anthropogenic systems

Construction will not influence architectural or archaeological monuments. Nor it will

influence any cultural values or damage of geological and paleontological monuments.

Impact on the structure and use of the area

Construction will not influence any surroundings structures, nor the development of

infrastructure and will respect the recreational character of the area.

Waste from the building operation

Wastes from the construction will be monitored and eliminated. In further stages of the

project valid legislation will be respected regarding the waste treatment.

Conclusion

Proposed construction does not represent any risks or negative impacts to the environment.

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7. PROJECT RISK, PROJECT FEASIBILITY

7.1. RISKS

Risks represent circumstances that may occur and significantly influence the project

realization. Risks are divided into several categories:

Business

Main business risks are the variances in the demand which directly influence revenues.

Variances in the occupancy rate and ADR and its result to EBITDA is evaluated in the

sensitivity analysis and attached as Appendix 3.

Risk can be eliminated by detail market research, marketing strategy. Also high quality work

power can improve the overall effect, especially in case of conferences and other event

organizing.

Construction

Construction cost plan calculates with some allowance. Cost plan is attached as Appendix 1

and is calculated base on the documentation for Zoning permit.

Business/technical operation issues

Growth of human resources cost can significantly influence operational cost and depend on

HR strategy of the employer. Suggested salary calculations are based on average salaries in

CR in the field of accommodation and services.

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7.2. CASH-FLOW

Basic parameters of the cash-flow calculations ADR and occupancy rate are base on the

market analysis. Calculation is projected for 10 years. The outcome evaluates the factors

RevPAR (revenue per available room) and GOPPAR (Gross operating profit per available

room).

For the discounted cash-flow analysis a 9% discount rate was selected.

7.2.1. SIGNIFICANT FACTORS FOR THE CASH-FLOW CALCULATION

Occupancy

Overall occupancy rate of all Prague hotels decreased in 2007/2008 in almost 20%. In case

of premium hotels the occupancy is lower in general, it was decided to anticipate occupancy

rate of 50% during the first year operation with growth to 65% in the fourth year when we

expect market stabilization. Another factor is the fact that the hotel will be new on the

market and will need some time to settle down to full use of its potential. (e.g. Hotel

Kempinski reached 50% occupancy after 7 month).

Occupancy rate development assumes:

� Interesting development of the locality, unique location, attractively of the riverside

development.

� Improving opportunities for entertainment and other activities in Prague

� Growing Prague’s potential as business and congress destination

ADR

Average daily rate does not include inflation and for the cash flow calculation a rate of 140

EUR per day and room was considered in the first year. In next year the calculation expects

the ADR to grow up to 195EUR per day in the tenth year. Proposed ADR is significantly

lower then in case of five star hotels located in the historical centre.

ADR can be considered even higher due tu unique opportunities and location. Similar

waterfront view can offer only Four Season hotel, but without direct access to the water,

without congress facility and for double ADR.

RevPAR

RevPAR shows Revenue per Available Room. This feature however shows only revenues

from accommodation and does not consider additional incomes from the congress facilities.

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Careful should also be the comparison between small and large hotels, since small facilities

can more easily reach higher occupancy and though higher RevPAR.

GOPPAR

Gross operating profit per available room provides more accurate evaluation of the hotel

economic efficiency. GOPPAR takes into account both fixed and variable expenditures. Large

hotels have lower variable expenditures due to savings from the extent where smaller hotels

have lower fixed cost, but larger variable costs per room. GOPPAR is sensitive to changes in

RevPAR so it should be only an additional indicator.

Revenue profile

Main part of the incomes is generated by accommodation services, approximately 65%,

26% provide Food and Beverages services, other services provide 3,5% and 4,5% can be

dedicated to conference hall letting, however the last point estimation can be very difficult in

the times of economic recession.

Expenditures

Cost estimated for room maintenance are 30% of the income from the room. The fee

includes salaries and other expenditures related to room maintenance.

In case of F&B sector a 70% of the revenues from this sector are calculated as expenses.

Expenses from other services form 50% of the income of the sector in the calculation. In

case of congress centre expenses of 10% are anticipated.

Expenses for housekeeping of hotel rooms and F&B should have decreasing trend in time

due to improvements in effectiveness and growing efficiency in other supplies. Special

expenditures for organizing event in the congress facility are not included; it is assumed that

they will be re-invoiced to the organizers.

Operation related expenses

These costs form approximately 30% of the revenues. Item contains expenses for

administration, salaries, marketing, repairs, maintenance and energy.

Costs of HR represent approximately 10,5% of the overall revenues. Average salary per 1

employee is 23 600 CZK per month which represents gross wage 17 500 CZK per month.

Average salary in the business was 16 100CZK per month in 8/2008.

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Management bonuses are not included, they are 2% of the revenue. Expenses for marketing

and PR are going to decrease in future. Cost of energy and maintenance form 2,5% of the

revenues and will have a growing trend.

Other fees

This item includes real estate tax, insurance, reserve fond payments etc. Reserve fond shoul

be kept separately and used at least every 10 years for furniture and other equipment

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8. CONCLUSION

Hotel market is experiencing recession; decrease can be estimated to be about 15 – 30%.

This situation crates strongly competitive environment, in 2008 few new hotels were opened

in 2008 such as Sheraton and Kempinski. These new hotels however represent

refurbishments project which has its limits.

RIVER TERRACE has not only a unique location on the riverside which brings opportunities

for water activities, but also allows to built completely new modern facility in the wider city

center. These attributes make the RIVER TERRACE one of the most attractive projects in

general, project outstands from the other projects realized in dense built up area.

Unique location properties are underlined by excellent traffic connection from all motorways

and also Prague airport. All kinds of public transport (metro, tram, buses, trains) is as well

within a walking distance. It is thanks to the location, very good traffic conditions and

opportunities for business and entertainment, why Smichov is experiencing very dynamic

development and is becoming prestigious location for both business and residential

premises.

Project’s location results in higher construction costs due to need of flood protection

construction. However comparing to the refurbishments in the city center the new

construction is about 6% cheaper in the cost per square meter calculation. This difference

makes 51 million CZK difference in case of overall construction cost of 850 million CZK. More

advantages of the new build project is the absence of limits in construction standards,

hygienic requirements and other limits resulting from refurbishments.

Hotel design and material quality focuses on sensitive completion of the urban development

of the current historical built up area of Smichov, on the other hand from the view from the

opposite riverside the hotel tower as a new dominant of the Smichov riverside, where the

panorama continues with green hills of Bertramka, Sacre Coeur and Petrin.

Financial model is calculated as pessimistic alternative where 100% of the finance is

outsourced with an interest rate of 9,6% and construction period of 4 years.

Market analysis shows that Prague has still enough potential to absorb future offer of

accommodation especially due to perception of Prague as an interesting tourist, business

and congress destination not only in the CEE region.

Market position of the RIVER TERRACE will be supported by the presence of own congress

facility with sufficient capacity. Prestige of the organized events can be increased by the

possibility of use of water activities.

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From the financial point of view the project is feasible, future incomes strongly depend on

the marketing and strategy. Feasibility calculation considers the interest rate of 9% which

appears to be on a safe side.

Value of the projects is based on input parameters and future development of ADR,

occupancy rate and portfolio of revenues and expenses. Revenue method estimates the

value of the project to be more the 69 557 million EUR. Acquisition costs of 12,810 million

EUR allows for developer’s fee of 25% after consideration of construction cost, equipment

cost. Fee of 25% is nowadays considered extremely attractive.