Friday, September 26, 2008
By Linette C. Ramos
CEBU CITY -- Four years after it started paying for the loan, the Cebu City Government received the first offer to develop a 50-hectare portion of the South Road Properties (SRP), including an outright purchase of 10 hectares worth P2 billion.
Filinvest Land Inc. (FLI) submitted to Mayor Tomas Osmeña Thursday night its unsolicited proposal to undertake a joint venture agreement with the City, where the latter will get at least 10 percent of FLI’s gross sales every year.
FLI will invest at least P80 billion in the project, which will include “mid-level to ultra high-end” residential buildings, a medium-rise complex, a cluster of high-rise hotels, retirement and medical facility and commercial areas, said Tristan Las Marias, the firm’s vice president for Visayas and Mindanao.
It also pledged to bring several corporate headquarters to the SRP.
“Given the potentials of the SRP and the business-friendly environment in Cebu City, Filinvest is proud to make an unsolicited proposal for an integrated and master planned development of a 50-hectare portion of the SRP under a joint venture agreement,” Las Marias announced Thursday night.
With the P2 billion projected income from the outright purchase of 10 hectares, the City will have enough funds to pay for more than half of the balance of the loan principal.
The amount, though, will be paid in installment for a period of four to five years.
The City has a balance of some P3.3 billion for the principal of the loan made with the Japan Bank for International Cooperation (JBIC) for the SRP, excluding interests and guarantee fees.
FLI vice chairman Andrew Gotianun Jr. flew to Cebu Thursday to present their proposal to Osmeña, Vice Mayor Michael Rama and the city councilors at the Casino Español de Cebu.
The project will cover some 11.26 hectares of seafront property, prime lots along the South Coastal Road and some interior lots.
Timetable
Although the submission of the proposal is only the first step, the Cebu Investments and Promotion Center (CIPC), the marketing arm of the SRP, hopes to award the project before the year ends.
“This will entail a very detailed activity of evaluating the proposal. If everything goes well, by the end of the year, we will be able to award the project,” CIPC managing director Joel Mari Yu told a press conference Thursday night.
The procedures, however, could take longer than three months.
Yu explained that the proposal, which includes the project proposal and the contractual arrangement, will now be evaluated by the City Government.
Osmeña said the evaluation of the proposal will be “fairly fast” if it is found consistent with the City’s guidelines for joint venture agreements.
If it is acceptable to the City, the proposal will go to the City Council for further review and ratification.
Once approved, the proposal will be offered to the public for the unsolicited bid challenge using the Swiss challenge model.
Challenge
“This means that other developers can challenge FLI’s offer and if the challenger comes up with a proposal that is superior to the original proponent’s, we can ask FLI to match that offer. And if they are not willing to match it, then it goes to the highest bidder,” Yu said.
Interested developers will be given 90 days from the date of publication of the bid to submit their proposals.
Osmeña said, though, that the City will be selective with the challengers.
“While this is open for other developers to challenge, only qualified investors of the same stature and magnitude as (FLI) will be allowed to bid. We will not allow some developers from Samar who want to challenge it to come in. It has to have the same background and track record as (FLI),” he said during the press conference.
The SRP has so far cost the City some P2.76 billion in loan payments, interests and guarantee fees paid to the JBIC and the National Government.
Break
Since its construction began in 1997, the project hit some snags, including delays in the titling as a result of the adverse claims of a portion of the SRP by the Talisay City Government.
The proposed joint venture agreement allows profit-sharing, and a sharing of investment risks at the same time, the mayor said.
“A joint venture simply means partnership. There will be a sharing of profits and the sharing of risks… Under a joint venture, the profits are usually divided but in this case, we are just getting a percentage of the sales, basically 10 percent of the gross sales,” the mayor explained to the media and the City officials.
“Whether or not (FLI) gets profit, we get 10 percent of whatever sales they will get from building units, and we are guaranteed a minimum repayment of the sale price of the lots, plus, plus,” he continued.
Osmeña also guaranteed that the project will take off before his term ends in 2010.
No mad dogs
“And I guarantee you there will be no irong buang (mad dogs) at the SRP,” he said in jest, apparently referring to Capitol officials’ taunts that only rabid dogs are interested in the SRP.
Las Marias said they wanted to invest in the SRP four years ago yet, but the City still did not have the titles to the property, and it was still getting clearance from JBIC, the National Economic and Development Authority and the Commission on Audit.
When asked how long it will take FLI to complete the project, Las Marias said it may go on for many decades, depending on market demands.
If they win the bidding, FLI plans to start construction of the first phase immediately after the awarding of the contract and as soon as they get the permits from government agencies.
The seafront area will be the project’s main attraction and the selling point of the development.
“Everything will be market-driven. Even for the first phase, which will involve five to eight buildings, we don’t know how soon it will be completed. It will depend on what the market wants,” he said.(Sun.Star Cebu)
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