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PDG

Realty S.A. in Syria Business Plan


Anik Basu
2014-2015

S t u d e n t I D : 4 1 9 4 2 M 1 E D H E C B u s i n e s s S c h o o l

Table of Contents
Table of Contents...1
Executive
Summary2
Brief outlook of the Company.2
Business Description..2
Mission Statement..3
Strategy..3
Industry Analysis.......4
Environmental Analysis.....4
Competitor Analysis..6
Target Market Analysis8
Operational Plan and Strategy8
Location10
Process.10
Sales & Marketing10
Negotiation12
Labor..13
Financial Analysis..14
Appendix.24
Bibliography.26


Executive Summary



PDG Realty S.A. is the second largest real estate & Construction Company in
Brazil, based in Rio de Janerio. Since December 2012, the official website of the
firm has been the most visited real estate franchise web site. It boasts global
operation throughout Europe, Latin America, the Middle East and Asia.

The company s strategy aims at growth through investments in subsidiaries and
direct investments in projects. Its real estate projects include residential projects
for various class, from the economy segment (focus) to high-income, developing
luxury condominiums and investments in ventures with focus on generating
income through leasing, developing residential lots, investing in commercial real
estate projects and commercializing residential and commercial properties. The
company also involves in real estate brokerage and consulting business.

Its presence in Syria has been scarce and the current financial situation of the
country poses an excellent opportunity for the firm to stake its stronghold in the
market. The main agenda is to offer safe and modern touch to the housing
conditions in Syria.

We will buy the properties that have left aside and in dreadful situation at cheap
and modernize it with sate of art equipment and amenities, and we will do it
using local labor, providing them with training in construction and we will use
local dealers of raw materials like cement, marbles, steel to make its people more
self-sufficient.

Start up capital will be low because we will enter into partnerships with local
construction agents who will provide us with the required raw materials and
workforce. This will enhance the image of the company by providing social
services and therefore create an entry barrier to other competitors.

Brief Outlook of the company



PDG Realty S.A. Empreendimentos e Participacoes engages in the development of
residential and commercial properties primarily in Brazil. The company
develops residential projects for various income classes; and residential lots. It
primarily focuses on medium and lower-income residential projects. The
company also invests in commercial properties, as well as engages in real estate
brokerage business. In addition, it involves in the securitization of real estate
receivables. The company was founded in 1998 and is based in Rio de Janeiro,
Brazil.

Business Description



The company plans to have its Syrian operational headquarters in the city of
Aleppo. It will be a limited liability partnership, leveraged through private
investments including local banks to carry out the investments in construction of
housing facilities.

The services we plan to offer

Refurbished housing with modern amenities (Wi-Fi, safety measures)

Provide safe environment by entering into partnerships with local community
leaders and police forces

Establish a reputation in the community for the extent of local services provided

Make fruitful long-term partnerships with local suppliers and property managers
for future joint ventures and long -term projects.

Provisions for rental service in response to growing rental demands in the
capital and suburbs.

Provide home search database through the company website. Use its e-
marketing strength to build brand awareness.

Mission Statement



Our mission is to be Real Estate company involved in construction of housing
and building rental units with unmatched levels of customer service and
attention to the demands of Syrian community.

Strategy



PDG S.A will target the opportunity that rises from decreasing valuation of Syrian
pound compared to dollars. As such, we will initially focus our efforts on buying
and developing existing properties at lower than market price with the strength
of dollars.

Once the properties are purchased, each unit will be wired with internet access,
state-of-the-art amenities, and safety measure will be implemented ensuring
cutting edge safe environment. Effective utilization of capital will be key to the
business as we aim to establish and maintain close contacts with residential real
estate listing services, and other service organization such as mortgage service
companies, as well as local providers of construction raw materials.

Local citizens with unemployment and expatriates will be hired and will be
provided with required training and assistance in use of machinery.

Listing the refurbished property in dollars will ensure increase in worth by more
than 15-20%, and it can be made to look affordable by further reductions to
attract buyers.

We will work with local ad agencies and construction promoters for added
visibility, and to maximize opportunities to sell their home at the best possible
price within acceptable time frames.

Industry Analysis



Large areas of Aleppo, in Tartous and Swedia, even in rural areas far away from
the cities, rental rates have grown as a result of growing demand, and they
continue to rise amid a general inflation of prices and a decline in the value of
Syrian pound. Rental rates have increased by between 30% and 50% during the
month of January 2015 alone.

The monthly rent for a small one-bedroom house with a salon in Damascus is
now 20,000-25,000 Syrian pounds ($89-$100), which may house two families
with children. Often in the regions of Jarmana and al-Daweila in the Damascus
countryside, one will find shells of houses apartments without furnishings,
windows or doors which rent for about 20,000-30,000 Syrian pounds ($89-
$125). It has become an familiar sight in Syria to see these houses inhabited by
families, after their seal open windows and doors with nylons and cloth curtains.
Many of the houses rented out are not suitable for living some have no
windows or ventilation, while others are not equipped with kitchens or other
necessities. Many are not connected to the water supply, forcing residents to buy
water at a price of 1,500-2,00 Syrian pounds ($6-$8) per cubic meter. Power
outages occur constantly, and malfunctions are only repaired after a week or
more. Many of these apartments are in areas lacking services, with dirt roads and
no streetlights. Real estate and rent prices are dreadful, and can only be afforded
by big businessmen and those with a lot of money.

Environment Analysis (PEST)

Political Factors:

Political Stability - Even though political unrest may continue, the Syrian
Investment Commission recently launched a first Foreign Direct Investment
report, which covered 241 companies included in foreign direct investment with
54 companies located in industrial cities and free zones. In 2010, total FDI flow
to the country was 76.971 billion Syrian pounds. Outside oil and gas sector, most
of investment turned towards manufacturing, real estate and money. 99.7% of
FDI in this sector was new investment while remaining 0.3% of it took the form
of mergers and acquisitions through a bargain that was conducted between

Sodic company of Investment and Palmarya Company for Real Estate


Development.

Military intervention - Terrorist advances have been a common occurrence in
Syria led by the Islamic State of Iraq and Levant abbreviated ISIS. Soldiers from
U.S, Bahrain, Jordan, Qatar Saudi Arabia and the United Arab Emirates launched
airstrikes in Syria against ISIS by allying with some Syrian rebel groups. The
aligning of joint forces against ISIS gives Syria much more security with less
chance of military invasion in future and thus paving a better environment in
Syria for future operations.

Economic Factors:

The Syrian pound has depreciated to a record this year, dropping more than 40
pounds on the black market in a few days. The sudden slide caused panic among
Syrians struggling with the soaring prices of the commodities as inflation hit
40%, according to central bank Governor Adib Mayaleh.

The Syrian pound will continue to decline against the U.S dollar and other major
currencies this year, because of the European Union embargo on imports of Syria
oil. Add to that, sharply lower oil exports, coupled with fall-off in tourism and a
substantial decline in foreign investment, which will worsen the existing
shortage of foreign exchange.

Rankings on Doing Business (Scale: rank 189 center, Rank 1 outer edge) Source:
Doing Business database*

Social Factors:

There are no job opportunities in Syria with unemployment rate exceeding 70%.
No other sources of income exist aside from some remittances sent by
expatriates to their families inside the country. Syrians are forced to receive
money in Syrian pounds with foreign currency priced at up to 15% less than its
actual value Due to large number of displaced Syrians, with no homes provided
by the government in their current capacity, locals have increasingly looked to
rent homes in areas of its capital and suburbs.


The largest concentration of Syrian dispora outside the Arab world is in Brazil.
Brazil is the first country in the Americas to offer humanitarian visas to Syrian
refugees. Hence, there is a connection of trust and amity between the two
countries, which can only be strengthened by the partnerships in construction
sector.

Technological factors:

Education - There are plenty of universities that offer higher studies in
engineering and business management and thus offer plenty of local talents that
can be hired for the project.

Construction Permits- There are parameters involved in this like construction
licensing, architects, civil engineers, construction lawyers, and construction
firms. There are utility service providers and public officials who deal with
building regulations.

Electricity Permits - Procedures for connection involve:
Submitting all relevant documents and obtaining all necessary clearances
and permits
Completing all required notifications and receiving all necessary
inspections
Obtaining external installation works and possibly purchasing material
for these works
Concluding any necessary supply contract and obtaining final supply.

Competitor Analysis


We have analyzed the competitiveness of the industry through use of Porters 5
forces. Through this analysis we have determined that the environment is
relatively competitive. There is low threat of new foreign entrant due to political
instability and raids. Even if there is one , there is considerable risk due to high
investment and the market success being based on lowest cost tender. Threat of
substitution is also low, since the market environment isnt likely to change.
Supplier power is high, as they can choose not to enter into partnership and
reduce the prices. So, we have to appease them by showing the kind of
humanitarian efforts being put into the project. Buyer power is low as they wont
get similar housing arrangements from other construction companies.

Competition among Rivalries:

3 competitors are big enough to be named as our main completion. They are

Name
Type
Analysis
Arabtec
Construction Residential
and Largest
construction

PJSC (Dubai)

Commercial Construction company in Persian gulf


company
by market value. It has
business
agreements
with a number of major
construction
conglomerates across the
world. Announced plans
to expand to MENA
countries and ranked as
104th largest Global
constructor, based on
total firm contracting
revenue.
Consolidated
Oil and gas and Heavy Largest
construction
Constructors Company civil
engineering company in the Middle
(Greece)
construction company
East and ranks among
the top 25 international
contractors
with
a
revenue of 5.3 billion
USD. It has offices and
projects in over 40
countries
and
a
workforce of more than
130,000 employees.
Syrian-Qatari
Holding Local holding company
Founded in 2008 and
Company
(Damascus,
equally
owned
by
Syria)
governments of Sri and
Qatar. With a declared
capital of 5 billion USD, it
is Syrias largest holding
company. In October
2009, it signed a
memorandum
of
understanding
(MoU)
with the Syrian Ministry
of
Holding
and
Construction to invest in
wastewater treatment. It
has plans to further
invest in real estate in
Syria.

Competitor Response to Entry:

Competitor response will be based on the kind of strategy they have chosen to
pursue in Syria. If it is like heir other ventures, then they wil face stiff
competition among themselves as they will be fighting over the same customer
segments, i.e the rich Syrian families with USD in their hands. We can ensure our
success above them through emphasizing our competitive advantage and

utilizing early mover advantage to set up a strong client base. Where the others
will look to employ their own supplier chains, we will introduce ours formed
entirely of partnerships with local dealers.

Competitive Advantage:

Our strategy will be based on entering into alliance with existing suppliers and
local dealers in the region and will be based on six attributes of strategic
alliances for application to construction organizations trust, commitment,
interdependence, cooperation, communication and joint problem solving. These
attributes are proposed as a tool for use in tender evaluation process for public
works, which will the broader indicators of the construction firms performance
in the eyes of people of Syria.

Target market Analysis



We aim to provide modern housing amenities for common middle class working
people who are always in the run, being jostled from one place to another. They
face the prospect of eviction each month because of ever increasing demand
from tenant and real estate brokers. Black market contracts are also being
exchanged and security forces have forced renters to renew contracts every year,
for obtaining security permits. Such harassment of security services forces
people to pay ore taxes in renewing the contract for social warrant.

We aim to appease these exploited people by providing a stable and secure
housing facility for permanent or on rental basis, with security charge and taxes
at a moderate level, without compromising safety. We can ensure this at a time
when people are willing to pay more for safety & stability and entering into
government partnership will help us ensure that.

Thus there is a definite market for our service. The nature of service we provide
is quite differentiated. The market is quite profitable if we can capture it. The
strength of Syrian pound has been waning in comparison to other major
currencies in the world, and people would be more motivated to buy these
housing facilities and rent it out in the future so as to make money for
themselves. Clients usually deal with real estate companies based on their
reputation of professionalism and quality of services rendered in the past. This
reputation is difficult to obtain by new firm such as us unless you build a
partnership and amity with local construction material dealers and suppliers.
The hiring of local labor also makes a positive impression in the minds of people
who are happy to see unemployment rate go down.

Operations Plan and Strategy





Strategy:

Our strategic focus is on Capital Acquisition from local banks like Bank of Syria,
which allows investors and government extend funds to real estate sector. It also
helps to control all the foreign exchange and trade transactions and give priority
to our transactions. Another key focus will on Human resource and Labor
Acquisition as well as on Management Excellence. To ensure our success, we
need to ensure we have capable talent, and that they are managed effectively to
produce optimal results. Optimal training program is key to make sure we get
the most out of the local labors. Wages will be according to the labor market,
which according to Syrian Government statistics is less than 100 USD. Labor
forces are going over the border to Lebanon to seek work. We should make it
possible for them to stay in their country and find work and develop their skills
in construction works. We will also be looking to hire civil engineers and
architects from local universities to help ease the transmission of the whats
required out of labors more seamless as they would be well proficient of how to
get local people more motivated. Government officials recognize that the
economy is not growing at apace sufficient to create new jobs and hence any
efforts to do the same will be appreciated by government and Syrian
businessmen who would then invest in the project.

Organizational Structure:

The structure will be utilizing a flat divisional structure. The to mos in the
hierarchical ladder is Managing Director. Under him is the Project General
Manager and Business Development department. Much of the day-to-day
responsibilities of running the construction project fall on the shoulders of the
cadre of the project manager. Business development department looks at the
sales and the marketing side of things. The chiefs oversee staff with a range of
duties ranging from sales, development, operations, engineering and
construction. The chief financial officer directs the kind of viable operations from
a finance point of view. The managers directly beneath the chiefs or project
supervisors are responsible for a particular building or redesign effort and look
over several line workers beneath them. Once the project is completed, these
managers will then move on to the next project drummed up by the sales or
development departments.

Several types of managers will be unique to manufacturing or construction
business. Safety directors or environmental managers will be there in operations
or development departments to ensure compliance with regulations and to avoid
unnecessary pollution or injuries. Managers unique to construction trade will be
found in departments such as chief estimator, lead architect/designer and
surveying chief. These managers will often be involved with project managers in
the construction department, particularly in the beginning of a new project.

Our main function will be as follows:

1. Human Resources: It will be responsible for the execution of our strategic
focus of human capital.

2. Legal: It will take care of compliance with environmental and safety


norms and regulations.
3. Sales Development and Marketing: They will determine the kind of
projects we will pursue in future and try to acquire information of the
kind of services our customer segment wants.
4. Tender: They will estimate the scale of project to be undertaken.
5. Quality: They will ensure the quality of materials being used.
6. Operations: It will ensure the safety, construction execution and transport
duties.
7. Finance: It will take care of accounting, and tracking purchasing,
inventory and costing details of the project.


Location:

We will choose Aleppo as the operational hub from where we will operate. The
primary reason for this is the strategic location of Aleppo as a commercial center
in Syria. IT has trade routes across the sea from India, Tigris, Euphrates, South
America, and Damascus via land. Aleppo is a major center fro manufacturing of
metals and stones and is home to large number of suppliers. It is a place where
industries are booming and so many villagers and inhabitants are migrating to
Aleppo in an effort to find better job opportunities.


Process:

The process of functioning is simple. Project supervisors will navigate and
deliver suitable real estate properties to be bought and will enter into
negotiation with governments or promoters. Next they will carry out a tender
process for construction of housing facilities for common people to live in. They
will highlight the features of such modern facilities and the employment of local
youths and engineers of Syria for involvement in the project. Later, if they get a
go ahead, hey will get into contact with local suppliers and dealers of raw
materials for constructions and sort out a long term contract with them.

The marketing and sales team will focus their effort on coming up with viable
locations and premises to start up a project and enter into negotiations with the
government to ease the operations.

Sales and Marketing Plan



Our approach will be based on the fact that there is no one size fits all solution
or magic program. Rather, we will look at the whole picture and understand
that marketing s not a single act or a strategy in and of itself but rather a
complimentary force to sales efforts and a key addition that both builds upon
and enhances the core strengths of a sales team.

10

1. Build a team: We will structure a team whereby a marketing person will


typically support a commercial real estate broker or a team of brokers
who then conceptualizes and carries out services both in business
development and property marketing strategies in order to grow the
business unit.
2. Possess/ Develop core abilities: In an era of unprecedented lack of trust in
financial institutions and financial services, it is important that a real
estate salesperson possess certain core abilities as a prerequisite to doing
business in that they understand not just the products and services they
are selling, but the environment in which they are conducting business, as
well as the needs and wants of the customers. A real estate salesperson
here will at least have the financial wherewithal, business acumen, and
understanding of the legal landscape in order to handle a variety of multi-
faceted, complex, and multi-part interactions both efficiently and
effectively.
3. Promote perception of ability: Focus will be on maintaining good
reputation in the market and leverage your perception through public
relations effort whether it be
Speaking at an industry event
Writing a column for a local business journal
Sharing a case study that is relevant to the communitys economic
development efforts.

4. Be consistent: Being consistent helps in garnering reputation and trust. If


it is to produce a monthly newsletter, a quarterly report, a reoccurring
event in the market, or always returning calls within a certain amount of
time, establishing consistency in your business will build trust over time:
the foundation of solid relationships with the promoters.
5. Create S.M.A.R.T goals: We will formulate goals that are specific,
measurable, attainable, relevant to the business, and timely, S.M.A.R.T
goals are most fastidiously realized and achieved.
6. Cultivate right relationships: Whether it is to sell properties, gain market
share, represent more buyers, or be a resource to a community at large
we will make that we are spending time formulating the types of
relationships that lend themselves to accomplishing such objectives.
7. Focus on being productive, not busy: There will be brokers who talk
about doing things and there will be brokers who get things done. We will
spend time accomplishing goals and objectives, resolving issues, and
being proactive as opposed to filling in extra time with distractions,
unnecessary meetings that do not affect your bottom line, or activities in
general that do not tie in with your overall strategy.
8. Find ways to efficiently match buyers and sellers There are countless
technologies, both proprietary and subscription-based, that strive to
quickly and efficiently match buyers and sales opportunities. We will not
purchase mailing lists and email lists as this type of marketing practices is
generally frowned upon. and is not sustainable. We will instead focus on
leveraging opt-in communication, nurturing leads, and being a present,
integrated force in the local market well versed in respective needs of
buyers and sellers.
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9. Leverage platforms There are variety of platforms like our company


website where we can promote product and service offerings and by
continuously monitoring the effectiveness of such platforms we can
adjust usage of each service to meet the level that most effectively
matches our business plan.
10. Create an inbound marketing plan Inbound marketing is a much
effective plan than outbound marketing nowadays, where you can put out
your information and resources out to the world via social media like
LinkedIn and Twitter.

In short we have to cover every little details to get as much visibility as we
can and that requires a stout strategic approach.


Negotiations

Investors/Local suppliers and vendors

Negotiations will be conducted directly by our sales team to solidify contracts
and set a price. Arabs make up roughly 74% of the population. Arabs will often
speak in vague terms, generalities, stories and metaphors during negotiations.
We should make it a must not to insult potential business partners through blunt
demands or rejections, as that could be fatal to a deal. Syrian Arabs are charming
to the core. The idea of signing a strategic partnership or Memorandum of
Understanding (MoU), which is a regional favorite, with a foreign company is
very appealing. Thus, several nascent Syrian local companies will readily agree
to become your partner without necessarily thinking about our expectations of
them and drive to help and support us in our services. Whilst there are several
benefits to working with local partners and it is in fact compulsory in most
places in republic, we should not rely on being flooded with leads and new
orders.

Local partners and dealers can be difficult to track and manage and may lead to
high maintenance. The best way to approach this is to look for commercial
synergy between two companies and intellectual synergy between the people
from both parties. We should clearly define the roles and responsibilities that are
expected out of our partners in the operation and we should look in our new
partner the means for them to open new markets or contacts for us.

Business and personal friendship are similar for Syrians and therefore we will
take some time to personally know our potential investors and government
officials or dealers and suppliers. Small talk is more than just a courtesy, it is
way of finding out whether both are compatible with each other. We will engage
with them freely and enthusiastically in conversations and have a few stories in
our back pocket to break the ice.

Much of these can be made easier by hiring a local professional intermediary
who will assist us in dealings with business associate or influential friends in
finding prospective customers. We can contact one of our prospects existing

12

suppliers/vendors or form a sales taskforce in order to clinch a deal and avoid


bottlenecks.

Much of the decisions regarding negotiations may take a lot of time, probably
longer than we are used to, but we should never be impatient, as this will reflect
poorly in our character. We have to be flexible and prepared to accommodate
shifting schedules based on how lucrative the deal is. Syrians consider meeting
face to face as more intimate and thereby more friendly. Therefore a personal
visit to our partners is the best option.

Labor

There is a lot to look into the flexibility in the regulation of employment,
specifically as it affects the hiring and the redundancy of workers and the rigidity
of working hours. The regulations in the labor employment also includes social
protection schemes and benefits as well as local disputes.

Over the period from 2007 to 2011 improvements were made to align the
methodology fro the labor market regulation indicators with the letter and spirit
of the International Labor Organization (ILO) conventions.

Difficulty of hiring covers 4 areas:
(1) whether fixed term contracts are prohibited from permanent tasks
(2) the maximum cumulative duration of fixed-term contracts
(3) the minimum wage for a cashier, age 19, with 1 year of work experience and
(4) the ratio of maximum wage to the average value added per worker.
The average value added per worker is the ratio of an economys GNI per capita
to the working-age population as a percentage of the total population.

Difficulty of hiring index
Data(Doing Business database 2015)*
Fixed-term contracts prohibited for
No
permanent tasks
Maximum length of a single fixed-term
5 years
contract (months)
Maximum length of fixed-term
60
contracts, including renewals (months)
Minimum wage applicable to the
260.64
worker
Ratio of minimum wage to value added
0.68
per worker

Rigidity of hours index

Rigidity of hour index
Data (Doing Business database 2015)*
50-hour workweek allowed for 2
Yes
months a year in case of seasonal
increase in workload
Maximum working days per week
6
Premium for night work (% of hourly
0%

13

pay)
Premium for work on weekly rest (%
100%
of hourly pay)
Major restrictions on night work
No
Major restrictions on weekly holiday
Yes
Paid annual leave for a worker with 1
14
year of tenure (in working days)
Paid annual leave for a worker with 5
21
years of tenure (in working days)
Paid annual leave for a worker with 10
30
years of tenure (in working days)
Paid annual leave (average for workers
21.7
with 1, 5 and 10 years of tenure, in
working days)

Social protection schemes, benefits & labor disputes

Social protection schemes and benefits Data(Doing Business database 2015)*
& Local disputes indicator
Availability
of
unemployment
No
protection scheme
Health
insurance
existing
for
Yes
permanent employees
Availability of courts or court sections
Yes
specializing in labor disputes

There will be 3 type of contracts-
a. Hiring of temporary employees
b. Hiring of employees on fixed term contracts
c. Hiring of employees in permanent scheme

Syria recently eliminated the severance payment obligation but increased the
notice period applicable in case of redundancy dismissals. We will therefore
implement a 100% pay premium for weekly holiday work and decrease the total
term of fixed-term contracts.

Financial Analysis



Projected Financial Plan

The initial capital investment will come form variety of sources. The firm will
contribute to the working capital. Depending on the number of investors, the
amount will vary.
The remaining amount will be funded through external credit supplied by Bank
of Syria, in consultation with the government. The credit will directly be taken
from the bank, and will be repaid in full over each profitable year. Government

14

grants received by the Government will also be repaid as each profitable year
arises.


Fig. Showing distribution of Start-up venture capital resources of PDG S.A
We have budgeted enough investment to cover any potential losses and have
additional personal financial resources available for equity investment if sales do
not match predictions.

(000 $)
START-UP REQUIREMENTS
START-UP EXPENSES


Legal
800
Insurance
1,500
Utilities
200
Rent
3,000
Accounting fess
2,000
Expensed equipment
8,000
Advertising
6,500
Other
8,000
30,000
TOTAL START-UP EXPENSES
START-UP ASSETS


Cash required
44,500
Other Current Assets
3,500
Long-term Assets
5,000

15

53,000
83,000

TOTAL ASSETS
TOTAL REQUIREMENTS

START-UP FUNDING
Start-up Expenses to Fund
Start-up Assets to Fund

TOTAL FUNDING REQUIRED


Assets
Non-cash Assets
Cash Requirements
Additional Cash Raised
Cash balance on Starting Date

TOTAL ASSETS
Liabilities and Capital
Liabilities
Current Borrowing
Long-term Liabilities
Accounts payable (Outstanding Bills)
Other Current Liabilities (Interest-free)

TOTAL LIABILITIES
Capital
Planned Investment
Additional Investment Required

TOTAL PLANNED INVESTMENT


Loss at Start-up (Start-up Expenses)

TOTAL CAPITAL
TOTAL
CAPITAL
LIABILITIES

AND

30,000
53,000
83,000

8,500
44,500
0
44,500
53,000


15,000
45,000
3,000
0
63,000
10,000
10,000
0
20,000
(30,000)
(10,000)
53,000

Total Funding
83,000

Important Assumptions

We are assuming approximately 15% sales on credit and average interest rates
of 10%. These are considered to be conservative in case our predictions are
erroneous.

GENERAL



ASSUMPTIONS

Year 1
Year 2
Year 3
Plan month
1
2
3
Current Interest
10%
10%
10%
rate
Long-term
10%
10%
10%
Interest rate
Tax rate
30%
30%
30%
Other
0
0
0

16


Break-even Analysis

Gross margin is assumed to be 100% and we base or break-even analysis on that,
which means we will have insignificant direct cost of sales. An average of 10%
commission rate is expected on average profitability rate for the first three years.
We expect one home sold per month to guarantee a break-even point.

BREAK-EVEN ANALYSIS

Monthly Revenue Break-even
8,198
Assumptions

Average Percent variable Cost
0%
Estimated monthly Fixed Cost
8,198


Projected Profit and Loss

The following will list the revenues and associated costs. We will have higher
costs in marketing and advertising as we attempt to build sales volume. We can
expect more or less consistent monthly profits to begin in year 3.



17

18


Pro forma Profit and Loss

PRO
FORMA (000 $)
PROFIT & LOSS

Year 1

(000 $)

(000 $)

Year 2

Year 3

19

Sales
117,800
160,000
195,000
Direct Cost of
0
0
0
Sales
Other Cost of
0
0
0
Sales
TOTAL COST OF
0
0
0
SALES
Gross Margin
117,800
160,000
195,000
Gross Margin %
100%
100%
100%
Expenses



Payroll
46,500
49,000
58,0000
Sales
and
6,000
6,000
8,000
Marketing
and
Other Expenses
Depreciation
0
2,500
2,500
Rent
18,000
18,000
20,000
Utilities
3,400
3,600
4,000
Insurance
1,100
2,000
2,000
Payroll taxes
6,975
7,350
8,700
Travel
2,000
3,000
5,000
Other
14,400
16,000
17,000
Total Operating
98,375
107,450
125,200
Expense
Profit
Before
19,425
52,550
69,800
Interest and Taxes
EBITDA
19,425
55,050
72,300
Interest Expense
5,805
5,090
3,940
Taxes Incurred
4,086
14,238
19,758
Net Profit
9.534
33,222
46,102
Net profit/Sales
8.09%
20.76%
23.64%


Projected Cash Flow

The following is our cash flow as expected. Short-term loan is expected in two
equal payments in year 2-3.

20



PRO FORMA CASH (000 $)
FLOW

Year 1
Cash Received

Cash
from

Operations
Cash Sales
100,130
Cash
from
14,899
Receivables
SUBTOTAL CASH
115,029
FROM
OPERATIONS
Additional Cash
Received
Sales Tax, VAT,
0
HST/GST
Received
New
Current
0
Borrowing
New
Other
0
Liabilities
(interest-free)
New Long-term
0
Liabilities
Sales of Other
0

(000 $)

(000 $)

Year 2

Year 3

136,000
23,007

165,750
28,427

159,007

194,177

2,000

2,000

2,000

2,000

21

Current Assets
Sales of Long-term
0
Assets
New Investment
3,000
Received
SUBTOTAL CASH
118,029
RECEIVED
Expenditures

Expenditures

from Operations
Cash Spending
46,500
Bill Payments
60,318
SUBTOTAL SPENT
106,818
ON OPERATIONS
Additional Cash

Spent
Sales Tax, VAT,
0
HST/GST Paid Out
Principal
0
Repayment
of
Current
Borrowing
Other Liabilities
0
Principal
Repayment
Long-term
3,600
Liabilities
Principal
Repayment
Purchase Other
5,000
Current Assets
Purchase Long-
7,500
term assets
Dividends
1,000
SUBTOTAL CASH
123,918
SPENT
Net Cash Flow
(5,889)
Cash Balance
38,611


Projected Balance Sheet

PRO
FORMA
BALNCE SHEET

Year 1
Assets

Current Assets

Cash
38,611

163,007

198,177

49,000
73,539
122,539

58,000
87,320
145,320

0
8,000

0

7,000

5,000

7,000

5,000

5,000

2,000
142,539

6,000
170,320

142,539
59,080

170,320
86,937

Year 2


59,080

Year 3


86,937

22

Accounts
Receivable
Other
Current
Assets
TOTAL CURRENT
ASSETS
Long-term Assets
Long-term Assets
Accumulated
Depreciation
TOTAL
LONG_TERM
ASSETS
TOTAL ASSETS
Liabilities
and
Capital
Current Liabilities
Accounts Payable
Current
Borrowing
Other
Current
Liabilities
SUBTOTAL
CURRENT
LIABILITIES
Long-term
Liabilities
TOTAL
LIABILITIES
Paid-in Capital
Retained Earnings
Earnings
TOTAL CAPITAL
TOTAL
LIABILITIES AND
CAPITAL
Net Worth










2,771

3,764

4,587

8,500

8,500

8,500

49,882

71,343

100,024


12,500
0


17,500
2,500


22,500
5,000

12,500

15,000

17,500

62,382

86,343

117,524


4,448
15,000


6,187
9,000


7,266
4,000

2,000

4,000

19,448

17,187

15,266

41,400

36,400

29,400

60,848

53,587

44,666

23,000
(31,000)
9,534
1,534
62,382

23,000
(23,466)
33,222
32,756
86,343

23,000
3,756
46,102
72,858
117,524

1,534

32,756

72,858

23

Appendix



1. SWOT Analysis


Strengths

S W

Well diversified
Numerous partnerships and
joint ventures throughout
the history
Current financial condition
and future cash generation
leaves company in a
favorable position
Second largest real estate
company in Brazil

Complex corporate
structure
Some investments lack more
visibility
Acts a co-developer, pairing
with other companies in this
sector.
Presence limited to Brazil
and Argentina

New market outside for low


income population
Acquisitions and Merger
possibility
Gain visibility by
coordinating projects in
foreign lands

New competitors in the low


income market
Too much dependent on
Goldfarb cash flow in
operations

24

2. Organizational Structure



Project
Supervisor/Board/
Sponsor

Business Development
Department

Project General
Manager

Sales

Estimating
/Tenderin
g /QS
Departme
nt

Human
Resources &
Administratio
n Department

Human
Resources

Development

Operations
Departme
nt

Constructio
n Execution

Marketing

Financial
Departme
nt

Costing

Estimators
Administratio
n

Accounts
Safety
Purchasin
g

Quantity
Surveyors
Quality

Transport
Stores

Legal

25
Insurance

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26