South Reclamation Properties Hard to Sell (Sept. 2006)

Lack of interior roads discourages investors

By Wilfredo Rodolfo III
Cebu Daily News
Last updated 07:48am (Mla time) 09/04/2006

Joel Mari Yu was walking around his office while talking over his mobile phone to an investor - a representative of a Middle Eastern company interested in getting 20 hectares from the South Reclamation Properties (SRP) and develop it into an amusement park...

"They only want to lease? The mayor might have some hesitations. But if they're going to buy, I could make it a lot easier for them," said the executive director of the Cebu Investments Promotions Center (CIPC).

When he put down the phone, Yu explained to Cebu Daily News (CDN) the situation at the 240-hectare SRP, which has tied down the city to a multi-billion debt up to 2025.

Most investors only want to lease the properties on the SRP, which means less money for the city compared to directly selling the lots. Investors also want interior roads branching out to the South Coastal Road.

Yu, who has been tasked to sell SRP abroad, said many potential investors also want the city to fill up the crater of about eight hectares wide near the coastal road, which is already about one meter below sea level.

But the problem is that the city government has limited financial resources to build the roads and to fill up the gaping hole.

"The city needs the cash now," Yu said.

Five years after the SRP was completed in 2001, not a single development has been put up by an investor.

So far, only two buildings have been erected at the reclamation project - an unoccupied Association of Barangay Councils building and an administration building.

It also has a fort-like wall and a stage - huge selling points when the national government promised to bring the main office of the Department of Tourism to the SRP, which, up to now, has yet to materialize.

In the meantime, almost a quarter of the city's annual budget goes to repayment of the loan of about 12.3 billion yen (about P6.3 billion) from the Japan Bank of International Cooperation (JBIC).

In 2006 and 2007, the city is expected to shell out close to P1 billion in loan amortizations. The Land Bank of the Philippines had estimated earlier that the city would shell out P10 billion more in the next 15 years until the loan was fully paid.

But Yu explained that the SRP is not short of interested locators - from development companies wanting 100 hectares to commercial establishments asking for a few hundred square meters.

"The problem is how to put them all together," he said.

Cebu City Mayor Tomas Osmeña explained that there are plans to build the interior roads that will not further burden the city government financially.

"We have no plans of just building roads. We will build it according to specific needs of the investors," he said.

The mayor's plan is to use sandbags as the main carriageway of the four-lane roads.

Osmeña explained that the two outer lanes would be made up of sandbags, while the two inner lanes would have sandbags with asphalt poured over them.

"We will test this for one year and see what will happen," he said.

While the city prefers property buyers, the mayor said he is not shutting his doors on lessors, especially those that will bring in more employment.

"We will only lease to companies that would be employing many people," he told CDN.

If leased, each square meter at the SRP will be priced at P45 per year. This means that for every hectare, about P450,000 will go to the city's coffers every year.

But if a piece of SRP property is sold at Mayor Osmeña's "fire sale" price of P10,000 per square meter, a hectare of land will easily snatch up P100 million. A fire sale is defined as a sale of assets at reduced prices in order to raise money quickly.

If the city can sell the entire 240 hectares, it will easily bring in P24 billion.

In order to consolidate the buyers and the lessors, Yu keeps track of all the feelers, plots their land size requirements and fits them into the rectangular SRP map like a jigsaw puzzle.

"When they are all consolidated maybe we can lease the land and raise the cash to build the roads," Yu said.

Conceived as early as the 1970s, the SRP was envisioned to draw in billions of investments and create 100,000 jobs for Cebuanos. On its beachfronts, condominiums and hotels were supposed to rise.

But 11 years after the first truck dropped dirt into the sea off the coast of Barangay Mambaling, the promise has yet to be fulfilled.

Still, Osmeña, who fought tooth and nail to secure the foreign loan to build the project, remains very optimistic about the project.

With the sandbag roads in place, he said the first construction equipment from a locator might come in by first quarter of 2007, Osmeña said.