Cebu City to earn P350M in February and P250M a year for 6 years from South Road Properties joint venture

Linette C. Ramos
Sun.Star Staff Reporter

FOUR years after it started paying for its loans, Cebu City Hall will start earning from the South Road Properties (SRP) next month, if the City Council authorizes Acting Mayor Michael Rama to sign the P25-billion joint venture contract with Filinvest Land Inc. (FLI).

Within 30 days from the signing of the contract, FLI is required to pay the City Government P350 million as down payment for the joint venture to develop a 50.6-hectare portion of the SRP.


It will also pay P250 million a year for six years as payment for the 10.6-hectare waterfront Pond F lot worth P1.5 billion, an outright sale that was integrated into the joint venture activity.

Under the City’s Joint Venture Ordinance, the proponent will have to pay a down payment 30 days after the signing of the contract, but FLI vice president for Visayas and Mindanao Tristan las Marias said they could pay the amount earlier.

Until it pays the P338 million, the City will hold on to FLI’s irrevocable bank guarantee of P250 million, which the City can seize if the firm backs out of the project.

At noon yesterday, the City’s Joint Venture Selection Committee (JVSC) convened and awarded the joint venture contract to FLI, which coincided with the City’s celebration of the Sto. Niño feast at the SRP.

The JVSC prepared to submit the notice of award and a copy of the contract to the mayor for his confirmation.

From the mayor, the contract will be transmitted to the City Council for the body to authorize the mayor to sign the contract and enter into a joint venture agreement with FLI.

Authority

City Administrator Francisco Fernandez, the JVSC chairman, said the contract does not have to be approved by the council, and will only have to pass a resolution authorizing the mayor to sign the document.

“The JVSC has already awarded it so we will now submit it to the mayor for him to sign the notice of award and to ask the council for authority to sign the contract. So, human na ang role sa JVSC in the process,” he told reporters yesterday.

After deliberating on the FLI proposal, the JVSC, whose members might be replaced, is set to tackle proposals for water supply at the 302-hectare reclaimed facility.

The JVSC also came up with a timetable on when the contract signing will be. But officials said the date will be up to the council, which might want to review the contract further before authorizing the mayor to sign.

Fernandez said the contract may be signed in the first week of February since Acting Vice Mayor Hilario Davide III said the council may tackle the matter during their session this Wednesday.

On Feb. 20, the City will be paying Land Bank P350 million for its SRP loan payment, that is why it will be advantageous to the City if it gets FLI’s down payment by then, he said.

Review

“But it really depends on the council. We have to consult the councilors and the vice mayor for the timetable. While we want to do it sooner, there also has to be a balance. On one hand, we want to settle this immediately because we are under time pressure to pay. But on the other hand, it has to be balanced in terms of transparency. The contract has to be reviewed not only by the council but also by the public,” Fernandez explained.

In an interview after the awarding, Las Marias said they are preparing for the “real work” for the firm, which will include a review of the initial concept of the project and coming up with a master plan for the entire 50.6-hectare area.

FLI committed to build 875,000 square meters of building space in a hotel, office buildings and high-rise condominium towers at the 10-hectare waterfront area, and medium-rise residential buildings on other areas of the property.

The City stands to have two revenue sources from the project: the payment for the 10-hectare lot that FLI is buying and revenues from the sale of the properties under the joint venture on a 40-hectare area.

Las Marias said the City’s share of their sales is 10 percent, plus an undisclosed minimum guaranteed amount.

‘Will gain’

“On the purchase price, the price of the City is much higher than what COA allowed, so I guess that speaks a lot about the kind of returns it will be getting. On the joint venture project, there’s a minimum guaranteed return and at the end of the day if you compute the total amount the City will receive with the minimum guarantee, it’s
equivalent more or less to the value per square meter, and that’s higher than what was set by COA,” he told reporters.

“In both transactions, I am pretty sure that the City stands to gain more than the current fair market value of the land,” Las Marias continued.

FLI, he said, intends to start construction six months after the City grants them building permits, which they will apply for immediately after the signing of the contract.

Fernandez also welcomed the Province’s statement that it will move on and respect the City’s decision disqualifying Capitol from challenging the FLI offer.

“The Province came out with a statement and they are very statesmanlike. Of course we are very happy with their statement that it is the end,” he added. (LCR)