Technical-Economic Feasibility Studies for Establishing a Botanical Garden in the Sorkheh Hesar Forest Park in Tehran

The increasing population of Tehran, along with the establishment of some densely populated areas of the city in the southeastern region, has increased the demand for recreational and tourism services in this part of Tehran. Sorkheh Hesar Forest Park is located within the boundaries of District 13 of the 22 districts of Tehran Municipality. Considering the development goals of the park such as preserving the forest environment, environmental goals, cultural goals, and economic goals, the development of Sorkheh Hesar Park’s uses requires specialized technical and economic studies in this area. Therefore, the purpose of the present study is to assess the technical and economic feasibility of establishing a botanical garden in Sorkheh Hesar Forest Park and to prepare an investment partnership model for this project. The results of the project’s net present value index show that considering a 30% discount rate, the project will have a net profit of about 2.2 billion Tomans and an internal rate of return of about 65%. Also, among the public-private partnership models, the built-operation-lease-transfer model was identified as suitable for the project. Therefore, this project has the potential to be handed over to private sector investors for launch, and it is suggested that this issue be pursued by the municipality.
Introduction
One of the problems that urban management has been facing, especially in recent years, is the lack of a development budget for investing in infrastructure and maintaining the ecological characteristics of urban parks. Therefore, to solve this problem, it is necessary to devise a measure that will make the management of these parks and gardens financially self-sufficient, that is, to define environmentally friendly uses and investment packages in them so that the costs of maintaining and revitalizing the park can be paid from their revenues. This requires conducting feasibility studies and preparing and proposing investment opportunities, which is the subject of this study for the Sorkheh Hesar Forest Park.
Methods and Material
Since in the "financial benefit-cost" analytical framework, revenues and costs occur in different years, in order to summarize and calculate financial indicators and compare the results, it is necessary to transfer these items to a common base year using the principles and techniques of engineering economics. The most important financial evaluation indicators are net present value, benefit-cost ratio, internal rate of return, and payback period, which are explained below.
Also, one of the types of public-private partnerships used in Iran is the construction, operation, exploitation, lease, and transfer of ownership method. In this method, the private sector undertakes the implementation and exploitation of the project through a contract with the government for a certain period of time, and after the return of the capital spent, it returns it to the government and also pays rent during the exploitation period. It is the most appropriate model for tourism projects between the government and the private sector and will be examined in this study.
Results and Discussion
Considering the assumptions provided and the net rentable space and saleable services in the physical plan of the proposed project, the total operating income from renting the infrastructure and premises at the base price of 1401 is about 1.6 billion Tomans. The net cash flow of the project shows that in the first year, the net cash flow is negative and requires capital of about 1.6 billion Tomans, but in the following years the project is profitable and net income is generated.
Also, the cumulative net flow of the project at current prices shows that this flow will be positive from the third year, which means that the project's investment return period is appropriate. Based on the cash flow tables and engineering economics relations, the net present value index of the project shows that this figure is positive and that in total the construction and operation will be profitable considering the discount rate or opportunity cost of 30% and according to the estimate made at the price of 1401, it will have a total net profit of about 2.2 billion Tomans. The internal rate of return index also indicates that the expected annual profit rate of the project will be about 65 percent, which is 30 percent higher than the discount rate, and the project is economically justified.
It should be noted that the assignment model is a build-lease-operate-transfer model, and the results of the following indicators have been calculated after deducting the rental cost or the employer's share of income from the investor's perspective. According to the results of the indicators calculated for the financial evaluation, the internal rate of return of the project, which represents the annual profit rate of the project, is 47.5 percent. These rates are higher than the discount rate or opportunity cost of investment (the 30 percent rate of this study), and therefore this project is financially justified.
The net present value index indicates that in total and at the base year price, during the life of the project, a net profit of about 0.8 billion tomans will be obtained. Also, the benefit-cost ratio indicates that on average, for every rial of cost in the project, 1.11 rials of benefit will be created. Given that the aforementioned number is greater than one, it is considered a confirmation of the justifiability of this plan from the perspective of financial studies.
Conclusion
The study of the existing uses of Sorkheh Hesar Park clearly shows the lack of diversity and multiplicity of recreational and tourism uses in this park. Accordingly, the general market summary and comparison of future supply and demand for the use of the botanical garden in this park show that there will be an attractive market for the entry of recreational and tourism service providers. Also, the results of the financial evaluation of this project show that the project has appropriate profitability from an economic perspective. Also, the public-private partnership model in the form of a build-lease-operate-transfer model can be a suitable format for attracting private sector investors who, while paying a rent of 15 percent of the annual income, will still be financially attractive to the investor. Therefore, it is suggested that this investment package be publicly announced by the municipality and steps be taken to attract investors and implement the project.
Acknowledgments
This article is derived from part of the results of a research project entitled "Technical-economic feasibility studies and preparation of investment packages for Sorkheh Hesar Forest Park", which was carried out with the support and sponsorship of the Tehran Investment and Public Participation Organization at Shahid Beheshti University. Therefore, the Vice Chancellor for Research of the university and all those who helped in some way in conducting this study are gratefully acknowledged.
Keywords: Sorkheh Hesar Park, Economic Feasibility, Market Analysis, Botanical Garden
JEL Classification: L1, D61