Filinvest may collect cost refund fees: Tomas (South Road Properties)

Saturday, October 04, 2008


CEBU City Mayor Tomas Osmeña will allow Filinvest Land Inc. (FLI) to collect a minimal project development cost refund if the contract for its unsolicited proposal is awarded to another developer.

But Osmeña is almost sure there will be no need for a project development cost refund because FLI is bent on matching any higher offer by a challenger when their proposal goes through a bidding, specifically the Swiss challenge.

Osmeña expects to close a deal within the year, but is non-committal on when the City will be paid, since this depends on bureaucratic procedures, he said.


In the bidding, the City Government’s 10-percent share in the joint venture (JV) is expected to be the most contentious provision of the proposal.

Other developers will have a chance to compete with FLI’s offer and propose to give the City a bigger share in the JV, which the developer can match.

As of yesterday, the City has not received any feelers from developers of their intent to join the bidding.

Development

“If there is any refund to be collected from the winning bidder, it will be very minimal. It will not be hundreds of millions. It’s only fair because if you accept the designs of a proposed development, I think there should be some compensation to the proponent,” he told reporters yesterday.

“It will be nothing if you compare it to the P80 billion they will be investing... If you want me to make a wild guess, it will be less than P5 million... but Filinvest is intent on matching any better challenge,” he said, when asked what amount will be acceptable.

In 2006, Osmeña opposed the Ayala consortium’s unsolicited proposal on the Carmen Bulk Water Supply because of the project development cost refund provision in the terms of reference for the Swiss challenge.

He had said that the project development cost refund cannot be justified in an unsolicited proposal because “they were not asked to make the proposal.”

In his news conference yesterday, Osmeña said he is expecting to close one or two more transactions before the year ends.

“We expect closing two additional transactions aside from Filinvest within the year. When we say within the year, it means we will make a deal, but when we will get paid depends on the bureaucratic red tape,” he said.

Developers who want to challenge FLI’s offer will be pre-qualified to make sure that only real estate developers of the same stature as FLI can challenge the proposal.

FLI has formally presented its offer to buy a 10-hectare portion of the SRP amounting to P2 billion, and develop 40 hectares under a JV agreement with the City.

The real estate giant offered the City a 10-percent share of their annual gross sales if the JV pushes through.

“The share of the City is essentially the point of the bidding. We’re also going to be looking at the track record of the bidders, and they must be able to demonstrate that they are capable of engaging in this project,” the mayor said.

If their pre-qualification standards will be followed, Osmeña said there will only be around 10 developers in the country that can participate in the bidding. (LCR)