FLI demands turnover of titles over 12 hectares of South Road Properties land

CEBU City Hall is preparing to pull out titles of certain portions of the South Road Properties (SRP) from the Land Bank of the Philippines, as the City Council starts reviewing the joint venture contract with Filinvest Land Inc. (FLI).

Among other provisions, the 28-page draft agreement requires the City Government to transfer absolute title, ownership and possession of a 12-hectare portion to FLI before it starts construction.

The City is also bound to give FLI a one-year business tax holiday as an incentive for being a pioneering investor in the SRP, and to impose real property taxes only on portions whose titles have been transferred in the name of FLI.



Once the contract is signed, the City will no longer have to worry about some of its SRP loan payments in the next six years, since the contract requires FLI to pay some P250 million a year to LBP, the conduit bank for the SRP loan.

The contract also provides that in the event of a suit, proceeding, investigation or other legal action questioning the City’s titles of SRP lots and its right to dispose of the sale and joint venture (JV) properties, “the City shall indemnify and hold FLI free from any and all claims, damages, expenses and liabilities arising therefrom or relating thereto.”

Any lawsuit related to the SRP titles or its disposal also gives FLI the right to suspend payments for the purchase of lots and the JV activities.

“Should any such pending or future suit, proceeding or action be decided adversely against Cebu City or result in a judgment affecting the City’s performance of its obligations, or which would prevent the transfer of the properties under the name of FLI…then FLI should have the option to cancel and terminate this agreement…,” the contract read.

Although the Talisay City Government and the Province had previously questioned the SRP titles and the bidding process, respectively, no formal complaint against the City has been filed in court so far.

City councilors were provided copies of the draft joint venture agreement between FLI and the City, which they tackled in yesterday’s council session.

Councilor Gerardo Carillo proposed to authorize Acting Mayor Michael Rama to enter into and sign the JV agreement, but his colleagues preferred to refer the contract to the committee on laws for further review.

And considering the “enormity” of the decision they will have to make, Councilor Augustus Pe Jr. moved to call for a special session on Monday so they can discuss the details of the contract.

In a phone interview last night, City Administrator Francisco Fernandez said the City will not have any problem complying with the contract, since the Land Bank of the Philippines (LBP) agreed to release some lot titles.

The SRP titles are mortgaged with the LBP for the City’s 12.315-billion yen loan from the Japan Bank for International
Cooperation (JBIC) when it undertook the reclamation project.

“We’re already working on the release of some titles. Even if we want to get the titles for 50 hectares, Land Bank will give it to us because anyway, we will be making additional payments when (FLI) gives a down payment. But we don’t need 50 hectares, we won’t need to get that much,” he told Sun.Star Cebu.

The draft agreement covers the JV to develop a 50.6-hectare portion of the SRP into a modern urban center consisting of residential, office, commercial, hotel and leisure buildings, which requires at least P25 billion in investment on the part of FLI.

According to the document, it involves FLI’s purchase of a 10.6-hectare area worth P1.592 billion, and the development by FLI of a 40-hectare area under a profit-sharing scheme with the City.

In the profit-sharing arrangement, the City is guaranteed a 10-percent share of the gross sales of built-up space, which will be remitted quarterly to the City.

For the sale of the 10.6 hectares, the City will get a down payment of P348 million within 30 days from the signing of the contract.

The balance will be paid in six years, or some P217 million to P269.5 million a year, with a five-percent interest per annum.

Titles for a two-hectare area will be turned over to FLI after each of the first four payments, which will be paid directly to LBP. (LCR)