Target: 3 South Road Properties deals by June

By Linette C. Ramos
Sun.Star Staff Reporter

THE marketing arm of the South Road Properties (SRP) remains optimistic about the sale of the 295-hectare project this year, even if only P25 million has so far been recovered from the P1.56 billion the Cebu City Government paid for its loan in 2007.

City Hall officials are looking forward to a more promising year.

The Cebu Investments Promotion Center (CIPC) has projected the sale of half of the titled reclaimed lots this year or at least 100 hectares of land, with one to three deals closed by June.

Joel Mari Yu, managing director of CIPC, revealed yesterday that they are already in the final stage of the negotiations with the three buyers, following the release of a memorandum on the price of the lots.

Yu said the bidding for the sale or lease of the lots can begin soon after Mayor Tomas Osmeña signed the memorandum establishing the minimum floor price of the SRP lots, which were divided into three lot categories.

Both the City and the developers of mixed-use projects will be ready to enter into a sale contract by the first or second quarter of 2008, he added.

Each buyer wants to purchase 40 to 50 hectares, and construction will begin by June if any of the deals are closed.

The much-awaited sale will not only help pay for the loan the City incurred for the 295-hectare SRP in 1995. It will also fund projects that have been shelved for lack of funds, including the annual cash gifts for all senior citizens and the renovation of the City-owned Gotiaco building.

Records of the City Treasurer’s Office showed that the City paid P1,564,208,449.04 from 2005 to 2007, more than half of the amount going to interest payments.

P902,000 a day

Of the amount, P678,821,589.50 was for the payment of the principal for the 12.292-billion yen loan (P5.958 billion as of August 2006) while the remaining P885,386,859.54 covered the interest.

In 2007 alone, the City shelled out P579,836,436.05 for the principal and interest payments.

With P329,149,159.69 paid for the interest of the loan last year, the City was shelling out roughly P902,000 a day for interests alone.

Payments are made in two tranches every year, in February and August. The City has until 2025 to pay the loan but it may opt to pay in advance if all the lots are sold before that.

For 2008, P504.98 million of the City’s P2.5-billion annual budget was earmarked for debt servicing for the SRP but the actual loan payment could be less, especially if the peso continues to gain strength this year.

The City has so far earned only P25 million from the facility, which represents the advance payment of Bigfoot Global Solutions for a 25-year lease on two hectares.

Commissions

“Even if only one of the three proposals is closed this year, we feel we’ve already made a very big win for Cebu City. But we have to remember that we will earn not only from the sale or lease of lots. The bigger income will come from our commissions on all utility firms that will operate there,” Yu told Sun.Star Cebu.

The amount has not been established yet but certain Philippine Economic Zone Authority (Peza) rules allow the City Government, as owner of the facility, to collect commissions from the income of utility firms that will operate in the SRP.

Peza has accredited the SRP as a special economic zone.

The City is entitled to commissions from suppliers of electricity, liquefied petroleum gas, telecommunications, security companies, concessionaires and canteens, among others, Yu said.

“Our income from that will far outweigh what we will get from the lease or sale of lots because the latter is a one-time deal, while the commissions will be a permanent source of cash flow for the City,” he continued.

Before leaving for the United States for the holidays, Osmeña also said he is optimistic the City will sell some lots in the early part of the year.

He earlier announced that the first sale will be made in the last quarter of 2007 but negotiations on the minimum floor price of the lots took longer than expected.

Negotiations

After the minimum floor price has been set, Yu expects the final stage of the negotiation to wrap up soon.

Based on the mayor’s memorandum, the sale offer for lots on Pond F, which makes up the entire 1.4-kilometer stretch facing the sea, is at least P15,000 per square meter.

The 17-hectare Pond F can easily earn P2.5 billion for the City, but Yu said the amount can be more depending on the winning bid.

There will be no lease agreement involving any Pond F lot, as specified by the mayor.

For lots located within 80 meters from both sides of the South Coastal Road and the Mambaling Access Road, the minimum floor price is at P11,000 per square meter.

The lots, which are classified as prime properties, will also be open for lease agreements at a minimum price of P70 per square meter per month.

All other lots outside Pond F and the 80-meter area from the coastal and access roads are considered non-prime properties and will be sold for a minimum price of P8,000 per square meter or leased for P28 per square meter per month.

Floor price

“That’s only the minimum floor price, which means that if anyone bids lower than P15,000 for Pond F, among ilabay iyang proposal. The same goes for other lots… I expect in 2008, we will be able to sell at least 50 percent of the SRP, or about 100 hectares. We are still on track if we close even just one or all three deals,” Yu said.

He declined to name their buyers but some of the biggest commercial developers in the country earlier expressed their interest to buy—SM Prime Holdings Inc, Filinvest Land Inc. and Robinsons Land Corp.

The SRP, a pet project of Osmeña during his first term as mayor, was funded by a loan from the Japan Bank for International Cooperation (JBIC).

Of the 295-hectare facility, only 210 hectares have been titled under the City Government’s name.

Although covered by the Presidential Proclamation, the 60-hectare Pond A has no title yet because it is still underwater and has yet to be filled up.

The coastal road, approximately 21 hectares, is owned by the National Government and cannot be titled under the City’s name, while some 11 hectares are being contested by private individuals who showed approved surveys for the lots.