Talk back: The South Road Properties

Sun.Star
Tuesday, May 01, 2007

By Joel Mari S. Yu
Managing Director
Cebu Investment Promotions Center

HENRY Louis Mencken (the famous American Editor) once said…”To every problem, there is a solution that is simple, direct and wrong!” Ang atong SRP naay dako nga utang. Atong iuli sa National Government haron wala na tay problema.” Simple, direct and wrong!

Cheking Seares was right. Mary Ann de los Santos fumbled on the SRP, Cheking said, and we applaud, “She doesn’t see it as the most valuable real estate in Cebu, which it will be, once it finally becomes the hub of growth and progress of a city increasingly in need of more space.”

Then Mary Ann fumbled a second time. Instead of letting the issue die, she responded to Cheking’s comments on her faux pas by trying to backtrack and instead claim that “she is open to suggestions.” However, she continues her response by miring herself deeper in her naïve arguments, all backing up her original proposition to turn-over the SRP to the National Government (NG).

These are the facts, devoid of political color.

1. The country’s biggest taipans would all have given their eyeteeth for the opportunity to have done the SRP. Make no mistake about it, real estate is all about location, location and location. The SRP is a one-piece greenfield waterfront property, in an island setting, five minutes away from the Central Business District and the port of Cebu, and not more than 30 minutes away from the International Airport. As a matter of fact, it is 300 hectares of prime space in the heart of the 2nd largest and fastest growing economy in the Philippines. It is not in the boondocks. Its value has since been enhanced tremendously by its being declared a Special Economic Zone by PEZA and Malacañang. No easy feat, even for a Taipan.

Then there is the other issue of privilege. The City of Cebu was granted the exceptional privilege of undertaking and owning this project without having to share land with the NG, and being allowed to avail of Official Development Assistance by way of concessional loans normally only available to the NG. Any other entity undertaking this project would have had to share land with the NG and would have had to raise the money from commercial loans which are at least double what the City of Cebu is paying for our SRP loan.

By the way, greenfield means the property is like a blank piece of paper. It provides the owner 100 per cent latitude on planning, devoid of obstacles like existing structures or squatters. Greenfield is every property developer’s dream.

2. Paying back the loan was never an issue. We have demonstrated that the country’s biggest and most qualified taipans are all interested in acquiring the entire SRP. And mind you, they will willingly borrow money at interest rates much higher than what we are currently paying, to buy it from us – at a tidy profit for us, notwithstanding. And these are the best business minds in the country. If Mary Ann de los Santos turns over the SRP to the NG, it will immediately turn around and sell the property to the same taipans who are trying to deal with us, and make the profit for themselves….making all of us Cebuano’s look like idiots.

At today’s exchange rate, the cost of land (principal plus interest) at our SRP stands at not more than P3,000 per square meters. Even if we only sold it for a measly P5,000, even Mary Ann will not doubt that the property will sell like hotcakes. Every qualified Tom, Dick and Harry will beg, borrow or steal to acquire land at our SRP for that price. The banks will unload their excess liquidity for a land banking opportunity that cannot be greater than this. And we would still make P2,000 profit per square meter, which will come up to a nice tidy figure of no less than P20M per hectare or P4 billion for a net area of approximately 200 hectares.

What is also not common knowledge is that our status as Special Economic Zone grants us franchise on all utilities within the SRP. The City of Cebu has negotiated with Veco for franchise fee of no less than P0.20 on every kilowatt hour sold in the SRP. The selected water operator will pay us P5.00 per cubic meter of water sold and the City will charge up to 10 per cent of gross receipts for all telecommunications receipts there. This does not include fees from LPG and other gasses, and all other fuel vendors, plus service fees from all other contractors and concessionaires in the SRP.

If Mary Ann or anybody else for that matter is impatient over the SRP, it is because the City is evaluating alternatives in the search for an optimal solution that will secure its financial obligation and at the same time provide if the control it will lose if it expediently sold the property to a taipan. The City of Cebu will not lose its shirt by being evaluative and prudent.

Knowing this, would you still turn over the SRP to the NG? In fact, turning over the SRP to the NG is like SM or Ayala or San Miguel asking the banks to take over their enterprises in spite of their assets, revenue and profits, because they don’t like debt.

In closing, I ask, let us not be our own worst enemies, which is what the international community thinks of us. The SRP is not just a revenue stream, it is our future. We need it to grow, physically and economically, and no Cebuano should doubt this.