Court dumps plea vs. City South Road Properties deals

Tuesday, May 22, 2007


A CEBU judge found no basis to issue a temporary restraining order (TRO) on Cebu City Government officials’ transactions for the development of the South Road Properties (SRP).

Regional Trial Court (RTC) Judge Soliver Peras ordered the presentation of “affirmative defenses” tomorrow by Cebu City Mayor Tomas Osmeña, the City Council, Cebu Investment Promotions Center (CIPC) Inc. and the Register of Deeds.

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This is in relation to the civil suit Tinago Barangay Captain Joel Garganera filed to prevent the City Officials, CIPC and the Register of Deeds from marketing, selling, disposing of or leasing the SRP.

Quoting the Court of Appeals, Peras ruled, “For the issuance of the writ of preliminary injunction to be proper, it must be shown that the invasion of the right sought to be protected as material and substantial, that the right of complainant is clear and unmistakable, that there is urgent and paramount necessity for the writ to prevent serious damage.”

He said the “presumption of validity and regularity” in the performance of public functions “cannot be defeated by mere allegations that the said acts are unconstitutional or invalid without any evidence supporting such allegations.”

The judge found basis in the President’s issuance of Proclamation 843, which transferred ownership of the SRP from the National Government to the Cebu City Government and declared such lands as alienable and disposable.

Around two hectares of the property has been leased to Bigfoot Entertainment Philippines, Inc. for 25 years.

This was one of the transactions questioned by Garganera, who said that the President cannot, without congressional authority, amend an earlier proclamation that reserved parcels of land in Pardo and Talisay as public domain.

But since the President’s proclamation was done upon recommendation of the Department of Environment and Natural Resources, Judge Peras said, “The President acted within the confines and limits of the power vested in her by the Constitution.”

In the same 17-page order, Peras also ruled that Garganera is eligible to pursue his lawsuit, but denied the appearance of the Association of Barangay Councils (ABC)-Cebu City Chapter in the case.

While the respondents questioned Garganera’s personality to sue as a taxpayer, the court stated: “When the matter before the court entails public interest, more so that it involves the economic development of the country, the disclosure provision in the Constitution would constitute sufficient authority in upholding the standing of a petitioner.”

The same cannot be said of the ABC, which, Judge Peras said, does not have a direct interest on the matter.

The ABC had wished to intervene in the case since its office is located at the SRP. (JGA)

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Tom to sell South Road Properties lots to pay off city’s debt

Tuesday, May 22, 2007
The Freeman

Pending the resolution of the case filed by Tinago barangay captain Joel Garganera seeking the court’s help to stop the sale of the South Road Properties, Mayor Tomas Osmeña has announced that he will sell more than 30 hectares of lots to pay for the loan from the Japan Bank for International Cooperation.

Osmeña said the SRP lots that he wants to sell are located to the right side of the Mambaling access road.


The mayor expects the city to earn up to P3 billion from the lots if these are sold at P10,000 per square meter.

Osmeña said there are many investors who are interested to join the bidding.

The city’s debt from the JBIC that was used for the reclamation project has already ballooned to more than P5 billion. The city is setting aside P1.7 million everyday to pay for such an obligation.

Osmeña said while the city has a huge debt due to its reclamation project, the SRP has 295 hectares of land that may rake in billions of pesos if these are sold.

But Garganera, who is allied with the opposition leaders in Cebu City, argued that the SRP lots are still not owned by the city because when President Gloria Arroyo issued a proclamation ordering the transfer of the ownership to Cebu City, she made it without congressional authority.

This prompted Garganera to file a civil case before the court in order to clear the issue.

Osmeña flew to Manila on Sunday to see Tony Meer, who used to be the lawyer of former senator Serging Osmeña Jr. and an expert of issues regarding reclamation projects, to get ideas on how to handle the case. — Rene U. Borromeo/BRP

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CIPC to sell 28 hectares of South Road Properties

Sun.Star
Thursday, May 10, 2007

IMMEDIATELY after the elections, the 28-hectare lot 1 area of the South Road Properties (SRP) will be bid out and sold to potential investors.

This was announced by Joel Mari Yu, Cebu Investment and Promotions Center (CIPC) executive director, in a press interview during the ground-breaking ceremonies of Big-foot Entertainment at the SRP last Tuesday.



CIPC is the marketing arm of the 295-hectare SRP.

“It’s a bid for sale, and not lease,” Yu said in an interview.

The SRP management, he said, is looking at a minimum value price of P10,000 per square meter, which means the entire area will cost P2.8 billion.

He said this early, business tycoons are eyeing the prime lot. Yu said both the Sy-led SM Group and the Gokongwei-led Robinsons Group are among those showing great interest to bid for the property. The list is followed by Filinvest, the Ayala Group and Megaworld.

Megaworld is another leading property developer in the country, he added.

Yu said the successful bid out of the 28-hectare property will mean the City Government will not necessary sell the other lots.

“If that is at P2.8 billion, we can already pay half of the balance loan which means other areas can be put up for lease,” he said.

Earlier, SM Prime Holdings Inc. offered to undertake a joint venture with the City Government in developing the entire SRP.
Obligation

In its multi-billion-peso proposal, SM said it also wants to take full obligation of paying the balance of Cebu City Hall’s P6.3-billion loan with the Japan Bank for International Cooperation.

But Yu said the mayor has declined to accept SM’s proposal but will instead provide them a “big chunk,” depending on the detailed financial package submitted.

Based on the proposal it presented to the CIPC, SM wants to build a mall, information technology buildings, residential condominiums and hotels at the SRP.

In a separate interview, Cebu City Mayor Tomas Osmeña is optimistic the entire SRP will undergo fast development in the next three years, contrary to negative speculations that land value will go down.

He said the price of SRP lots will not go down but will instead double in the next few years.

“Everybody likes SRP because of its strategic location. It’s the gateway to the south,” Osmeña said.

Other investors that showed earlier interest to locate at the SRP include Taiwanese firm Paul Yu Group of Companies, JY Construction, Arcenas Group, Pakna-an Central Development Corp., Mactan Rock Industries Corp., King Group of Companies and the University of Cebu.

Integrated

Osmeña said the City Government, the developer of SRP, wants an integrated development for the reclaimed property that includes hospitals, hotels, offices, call centers, business process outsourcing companies and restaurants.

Bigfoot Entertainment, which will lease a two-hectare property at the SRP for 20 years, plans to put up a development similar to Hollywood, USA, complete with restaurants, boutiques and sidewalk shops.

Bigfoot’s soundstage facility will be 4,800 square meters or four times bigger than the 1,200-square-meter (not 370 square meters as earlier reported) facility in Bigfoot Lapu-Lapu City.

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Legal Issues vs. South Road Properties fail to Stop Investors

Sun.Star
Wednesday, May 09, 2007


THE Cebu City Government expects a tremendous impact of Bigfoot Entertainment in terms of livelihood, as the company broke ground at the South Road Properties (SRP) for its “state-of-the-art filmmaking facilities.”

Matt Lubetich, Bigfoot chief operations officer, said the company does not mind the legal issues hounding the SRP, adding that they knew the risks.



“Our chairman’s outlook in life is that opportunity comes so fast. This is a great opportunity and we will take that opportunity no matter what happens. If we will wait (for the issues to be settled), it might take years,” he said.

In a speech, he said they see the potential of Cebu City and the changing landscape of the SRP.

In an interview, he said they will be investing in local talents. The company has even brought in foreign trainers to teach here.

Supportive

“We want to show that we are supportive of Cebu and will put our money down. We’ve been doing that for years. We train you and you work for us,” he said.

Lubetich said that even neighboring Talisay City, whose claim over portions of the SRP delayed its titling for several years, will benefit from their investment at the property.

Impact

Mayor Tomas Osmeña said he knew how a movie industry impacts on the lives of the people and economy where it is based, having lived in the US for 15 years and saw for himself what Hollywood did to the US.

“Beverly Hills would not be there if not for the movie industry. Restaurants, beauty parlors would shut down without the movie industry,” he said.

Yesterday’s ground-breaking was for phase one of Bigfoot’s project in the city.

While it is just renting two hectares of the SRP, it plans to buy 16 hectares more.

Last February, Bigfoot and the City Government signed a memorandum of agreement for the lease of a two-hectare property at the SRP where four studios and a helipad will be built, among others.

Cebu Investments Promotions Center executive director Joel Mari Yu said Bigfoot is preparing for the expansion of its International Academy of Film and Television at the 300-hectare SRP. (RHM

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Bigfoot breaks Ground at South Road Properties

Sun.Star
Wednesday, May 09, 2007


DEVELOPMENTS in Cebu’s film and entertainment sectors are seen to outshine the call center industry, which has been growing fast, a local official said.

Cebu City Mayor Tomas Osmeña is optimistic of the industry’s growth following Bigfoot Entertainment’s 20-year lease of a two-hectare property lot at the South Road Properties.



“The potential of the movie industry to grow is more than the call centers since it requires high end, high volume, and high quality type of employment,” Osmeña said during the groundbreaking ceremonies at the SRP yesterday.

With Bigfoot’s expansion, he believes the move will catapult Cebu as Asia’s next “Hollywood.”

While he views putting up an international film company a “risk,” Osmeña lauded the company for being SRP’s first locator and has pledged to support its endeavors, especially one that will boost the country’s tourism and employment sectors.

Matt Lubetich, Bigfoot Entertainment chief operating officer, said that apart from choosing SRP as a prime location for growth opportunities, he also cited Cebu’s pool of world-class human resource with a high proficiency in the English language, its telecommunication facilities, infrastructure and accessibility as reasons for choosing the province as an investment location.

“Cebu is what we are and what we want. We are here to raise Cebuano’s skills. Filmmaking is a specialty craft but the workforce potential in Cebu is incredible. We have lots of hope here and we are keen on bringing Cebu to the world,” Lubetich told reporters.

To signify its confidence in the province’s local film and entertainment industry, Bigfoot will invest some $3 million to build state-of-the-art filmmaking facilities, office spaces and a hotel.

Four times bigger

According to Lubetich, Bigfoot’s new soundstage facility in SRP will be “four times bigger” than the 370-square-meter facility in Lapu-Lapu City.

The first phase of the development is the construction of the country’s first 4,800-square-meter quad shooting building, comprising four separate studios and a helicopter pad. It also includes production offices, dressing rooms and suites, camera and equipment rooms, among others.

Another facility is a fabrication and mill building, inclusive of a complete set of facilities and equipment for the construction of individually fabricated elements like props, slide sets and more.

Also set to rise are executive suites and a condotel that will serve not only its clients but the public as well.

The hotel will have 85 studio-type suites, a roof deck swimming pool, spa and massager services, gym, café, business center, park and mini-zoo.

Lubetich said the entire development will mirror that of Hollywood, USA, complete with neon lights, big colorful billboards, restaurants, boutiques and sidewalk shops.

He said construction of the buildings will start immediately after the company has secured a building permit. Phase one of the project is targeted to be completed in the next two years.

With regard to its 8,200-square-meter facility in Lapu-Lapu City, he said it will continue to exist, but major operations will now take place in the new site.

Bigfoot Entertainment, which began in 2001, is the parent firm of Bigfoot Productions, Bigfoot Production Services, International Academy of Film and Television, Bigfoot Partners and Bigfoot Sound-works. (MMM)

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Talk back: Half-truths, lies, and the South Road Properties

Sun.Star
Friday, May 04, 2007

By Paul Villarete
Project Manager

ARDHA-Satya Mithya Apeksa Bhayankara. It’s an old Bengali proverb which roughly means, “Half-truth is more dangerous than falsehood.” Another Yiddish proverb states exactly the same thing: "A half-truth is a whole lie."

And half-truths take many forms. Sometimes, it’s mere exaggeration, but oftentimes, it’s stating minimal facts while hiding other more meaningful ones. Whatever it is, the intention is to lie or deceive.


Mary Ann de los Santos’ facts

Let’s try to look at Mary Ann’s alleged facts:

1. The City owes JBIC P7.6 billion for the SRP: The outstanding balance of the loan from JBIC is Yen 11,092,600,000 (source: Land Bank of the Philippines).

Using an exchange rate of 1 Yen = 0.3969 Pesos (Banko Sentral ng Pilipinas, May 3, 2007), the total outstanding loan of Cebu City from JBIC is P4,402,652,940.00. The P7.6 Billion figure is not true, not even a half-truth, but is actually an absolute lie.

2. Every man, woman and child in the City share a debt burden thereon of roughly P70,000.00: If what she says is true and knowing that the population of Cebu City is at least 718,821 (NSO census, 2000), then the total debt of the city must be P50 billion! It’s a flat blatant lie meant to deceive the minds of Cebuanos she wants to be mayor of.

3. The City is paying almost P2 million a day for debt service: In 2006, the City’s amortization was only P566,932,279.97 or approximately 1,553,239.12 a day. The figure given was another exaggeration which is a half-truth meant to sway people’s minds.

But what is significantly withheld is the fact that as of today, one-third of what was remitted actually went to, and became an income of, the national government. The exaggeration and intentional withholding of facts indicates the intent to deceive the public with half-truths.

4. Real estate taxes, business taxes and license fees have been increased tremendously in order to service debt of SRP: One may wonder where the “tremendous” increases are. Increases, if there are any, had been pursuant to the Local Government Code, which mandates such, and not to service debt. It is significant to note that the Code even allows sourcing of funds through loans while limiting debt servicing to 20% of budget, and the City has not exceeded that cap.

To even suggest that incurring such debt payments, which is clearly allowed by the framers of the Local Government Code, is a bad provision of law, makes those honorable gentlemen and ladies, and Congress itself look like idiots! The statement is not true.

Tragedy

But what happens if we imagine of the unrealistic scenario that Mary Ann does win and become mayor?

This kind of tragedy will kick in:

1. The entire SRP is mortgaged to the Land Bank of the Philippines, which means that “turning over” the SRP means going to the LBP and asking them to foreclose on our property because we are unwilling (as opposed to unable) to service our loan.

2. Granting that can be accomplished, we will immediately lose our credit standing, not just with LBP, but will all other banks (domestic and foreign) that will see a Cebu that copped-out of a financial obligation without even trying to make it work. No financial institution, in their right mind, will lend a centavo to a City under this kind of a Mayor.

3. If Mary Ann thinks she can run the City without debt, then God help us…hello, are you on planet Earth? Advanced countries like Germany and Japan used to be the most debt-ridden among the rest, and it is precisely that they have access to capital that they were able to develop! Even Australia has a higher debt than the Philippines.

Half-truth

The debt to every Cebuano is a half-truth. What is conveniently hidden that with the P5 billion loan, we have a property which has a value of at least P15 billion. And that’s even a conservative estimate with the actual value probably ranging from P25 – 35 billion. For every debt a Cebuano is supposed to owe, he/she owns property three to seven times worth.

This is not to mention the other benefits of employment and economic production the SRP will bring in that land we call the SRP that we, each and every Cebuano own. Now, a candidate for mayor proposes to throw that away? Give back to national government P25-35 B worth of properties just to escape the P5 B debt? She’s not even mayor yet and she’s escaping problems instead of facing and solving them head-on as a mayor should.

And throw away P25 – 35 B of our property?

The inadequacies of the City, including all those mentioned by Mary Ann existed before debt-service on the SRP started.

Even without the SRP, the Cebuanos, and their mayor will face the same problem, as any other city in the Philippines or any other developing country. I agree with Joel Mari Yu. “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.”

South Reclamation Project

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Osmeña: South Road Properties is a gold mine

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By Antonio V. OsmeÑa
Estatements

THE 2,872,369-square-meter South Road Properties (SRP) of the City of Cebu, assuming that the tract of land is planned as a commercial or light industrial development and that, under the highest and best use, it appears best to subdivided and area into 1,000-square-meter lots.

Assuming further that the balance of the land is devoted to streets, traffic isles and other public uses, then it presumed that a typical development will be done, such as water mains, sanitary sewers, street grading and cement paving, curbs and gutters and other costs, including survey, legal, filing, sales, brokerage, overhead, and cost of raw land should show the developer’s profit.


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Assuming again that the total saleable area is 2,010,658 square meters and the selling price is at P25,000 per square meter, then the possible gross income of the project will amount to over P50 billion.

If the selling schedule is properly programmed, then the selling price could go beyond P35,000 per square meter.

It is unfortunate that politicians are putting down the SRP when, in fact, the citizens of Cebu City are the legitimate owners of the reclamation project.

It is the responsibility of Mayor Tomas Osmeña as chief executive of the city to make the SRP profitable.

It is also the responsibility of all concerned citizens, including politicians who are against Mayor Tom, to support and recommend positive suggestions to make the SRP successful and not allow it to happen at the North Reclamation Projects’ political influence of destruction.

Some of our politicians do not realize the great amount of work and expenditure that are required to “produce” land even in a modest urban or suburban development.

Often inaccurate or unfair references are made to the seemingly large spread existing between the developer’s land costs on a per hectare basis and his asking price per square meters of a lot.

The analysis of development costs reveal that the sale price of a site in an average development must yield three to four times the cost of the “raw” land if the undertaking is to prove financially successful.

Although it is difficult to set forth with accuracy specific development costs that will apply to all the various economic areas of the region, an attempt has been made to set forth concrete measures of the kind and amount of expenditures which may be anticipated when subdividing and developing a project area.

Caution, however, needs to be exercised in accepting peso expenditures as typical or representative.

Cost, obviously, will vary with lot and street width, population density, kind and number of utility services, and mode and quality of development improvements.

Mayor Tom’s consultants at the SRP should provide information to the public of such problem so as to determine the highest and best use of the land, to prepare and submit alternate subdivision and development plans, to ascertain by market analysis the prices which the developed sites would command, and the price or value per hectare of the land.

Whenever land is to be allocated to competing uses, care must be taken so as not to violate the economic law of “highest and best land use.”

Since the highest and best use is always determined by the present worth of future rights to income or amenities, consideration must be given to the existence of demand for the use and purposes to which certain sites are dedicated in the overall subdivision plan.

Because business properties are known to bring a much higher price per unit of land, it is a common error to over-provide the amount of space required for commercial use.

Simply designing an area as a business property does not make it one. There must be a demand for business property and that demand, generally, is in direct proportion to the number of people or better, to families, residing in the area.

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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.

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