Water, electricity in South Road Properties in six months – exec

By Jully Venus Cuizon, Correspondent

THE Cebu City government is confident of accomplishing its part of the deal with Filinvest Land Inc. to develop the 50.6 hectare of South Road Properties (SRP).
Francisco Fernandez, chairman of the Joint Venture Selection Committee (JVSC) , said yesterday that the city will comply with the conditions of the joint venture contract worth P25 billion, not P250 million as reported yesterday.
This means that the water and electricity systems will be in place at the SRP within six months.


The joint venture contract was signed on Wednesday by Cebu City Mayor Michael Rama and Filinvest vice chairman Andrew Gotianon Jr.
The signing seals the JV deal between the city and Filinvest.
Under the contract, the Filinvest is given six months to get the necessary permits and start developing the 40 hectares at the SRP in August.
The signing of the contract also means that Filinvest will pay the city within 30 days the P348 million in downpayment for the outright sale of another 10.6 hectares, which was part of the JV deal.
On the part of the city, the JV contract stipulates that the city government should ensure that power and the water system has been installed before Filinvest will start to operate.
But there are such utilities yet in SRP yet.
Fernandez said there is existing wiring for power connection to the Visayan Electric Company but the city government is still negotiating with Veco to supply the electricity at the SRP.
The negotiations were done with Veco because the firm is the franchisee of power for the SRP and all parts of Cebu, said Joel Mari Yu, managing director of Cebu City Investment and Promotions Center (CIPC), which is the marketing arm of SRP.
Yu said Veco, however, will have to pay the city concession if the negotiations will prosper.
Veco will have to pay SRP a concession fee per kilowatt hour because the SRP is a special economic zone, he added.
Yu cited an amount between 20 centavos and 25 centavos per kilowatt hour as power concession fee.
But he said that this figures had yet to be approved by the Energy Regulatory Commission (ERC).
It's a different story for the water utility.
The city government is considering an unsolicited proposal for a joint venture deal for a total concession for water operations within the SRP.
“Total Concession means that they do everything themselves. They will operate, maintain, build, collect, repair and install the pipes at no cost for the city,” Yu said.
He said that the water concessioner will have to pay for everything because they are the ones selling the water in SRP.
They will also be required to pay the concession fee for every cubic meter of water sold at the SRP.
Yu, however, said that the water deal will have to be bidded out unlike the Veco negotiations.
Fernandez said that the city government is evaluating the unsolicited proposal of Mactan Rock Industries Inc. to provide the water operations in SRP.
Fernandez said another investor interested in supplying water at the SRP is Pilipinas water.
The proposals, however, had yet to be discussed and reviewed by the JVSC. If it accepts the proposal, then it will go to the City Council.
Meanwhile, the Cebu City Council said donating a 51,000-square meter lot in the SRP to the University of the Philippines will not be a disadvantage to the city.
City Councilors earlier questioned the UP's financial capability to build a school in the lot.
Councilor Rodrigo Abellanosa opposed the motion to authorize Rama to sign the deed of donation to UP on Jan. 28.
Abellanosa, who owns Asian College of Technology, cited a lot in Talisay City that was donated to UP but has remained unused.
But Yu said that UP is obliged to put up a school building in three years after the deed of the donation is signed or else the property will be taken back by the city government.
Yu said the arrangement which is within the contract between the city and the university is still pending at the City Council's committee on laws and education.
Abellanosa earlier suggested to donate the property to Ateneo University or De La Salle University, which has the capacity to develop the lot.
But Yu said that UP was the choice of Cebu City Mayor Tomas Osmeña because of the school's track record for Information Technology (IT) graduates.
Yu said UP is considered has the best IT training in the country.
Yu said the presence of the university in the SRP increases the marketability of the property.

With a report from Reporter Marian Z. Codilla

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Contract signed at last: Filinvest, city ink South Road Properties venture deal

 Cebu City acting mayor Michael Rama (left) shakes hands with Filinvest Land Incorporated president Andrew Gotianun Jr. after the signing of the joint venture agreement. ALDO NELBERT BANAYNAL

                                  

By Ferliza C. Contratista Updated February 04, 2009 12:00 AM

CEBU - Finally a sale!

The Cebu City Government and Filinvest Land Inc. (FLI) yesterday signed a joint venture agreement for the development of 50.6 hectares in the South Road Properties (SRP).

“Finally, the long route of wanting to seal this agreement has come, after all the hard work, we thank everybody and the Sto. Niño for protecting the SRP,” said Acting Cebu City Mayor Michael Rama.

Rama, after having been given authority by the City Council, signed the contract with Andrew Gotianun, president of FLI with the city councilors and members of the Joint Venture Selection Committee (JVSC) as witnesses.



Rama made special mention and requested a warm round of applause to Cebu City Mayor on Leave Tomas Osmeña for being responsible in building the dream and realizing the SRP project.

Osmeña expressed his thanks and happiness in a text message sent to Rama over yesterday’s momentous development.

JVSC Chairman and City Administrator Francisco Fernandez along with Cebu Investment Promotion Center head Joel Mari Yu were all smiles after going through a tough negotiation for the best interest of Cebu City in the said deal.

“All’s well that ends well,” Fernandez said.

Fernandez said he is thankful that everything turned out positive for Cebu City despite certain hitches along the way, which were considered as “sweet challenges” for the forging of the agreement with FLI.

JVSC proceeded with the awarding of the P25 billion project last week after no other qualified interested party submitted its intent to challenge FLI’s unsolicited proposal.

The Provincial Government attempted to qualify, but was not able to qualify to submit a competitive challenge.

In the next 30 days, FLI will already make a down payment of P348 million, from the first part of the contract, which is the outright purchase of 10.6 hectares amounting to P1.592 billion. The balance will be payable in the next three years.

The said amount is enough to cover the first semi annual payment of the P6 billion-loan of the city.

Yu, who acted as the main negotiator of the city government panel said there will be four payments in three years, first the down payment of P348 million, followed by another payment prior to the end of the 2009, the second will be on 2010 and finally in 2011.

On the other hand, the second part of the contract covers 40 hectares to be developed under a joint venture.

He said the city is assured of an income from 10 percent gross sales of built up units or a guaranteed premium, whichever amount is higher.

After the signing, Yu said, the next step is the finalization of the putting up of utilities such as water and electricity.

It has to be done, Yu said, since FLI is expected to start constructing in the next six months.

On the other hand, Yu said, they are entertaining the unsolicited proposal of Mactan Rock International, for the provision of water in the entire SRP area, under a joint venture.

Just like FLI, the same process will be observed with Mactan Rock as it will face competitive challenges from private entities.

Since the SRP was opened for sale, lease or joint venture in 2007, the city has only leased out a three-hectare portion to Bigfoot Global Solutions.

On behalf of Gotianun, Tristan Las Marias, FLI VP for Visayas and Mindanao, said that the hard work is not over as it is yet to start.

He said they will start developing as soon as their master development plan will be finalized.

Other than the FLI offer, Yu said they are also negotiating with SM Prime Holdings Inc., Ayala Land and Pueblo de Oro for the sale of other portions of the SRP. –/NLQ (THE FREEMAN)

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Cebu City soon to get P348-M for South Road Properties land

Cebu City will soon receive P348 million from the Filinvest Land Inc. as down payment for the outright purchase of a 10.6-hectare lot at the South Road Properties (SRP).

The City Council yesterday authorized the mayor to sign the contract after the Cebu City committee on laws determined that the Joint Venture (JV) contract between the Cebu City government and the Filinvest was legal.

But acting Cebu City Mayor Michael Rama said that he would have to study the contract first before signing.

Cebu City Administrator Francisco Fernandez, who is also the chairman of the Joint Venture Selection Committee (JVSC), said the Council only authorized the mayor to sign the contract and does not mandate Rama to sign it.



But he said he hoped that Rama would agree with the provisions in the contract.

Rama assured his review would not take long as he would be the last person to stop the project.

Tristan Las Marias, Filinvest vice president for the Visayas and Mindanao, asked the city to transfer the title of the two hectares of the 10.6-hectare property covered in the outright purchase to Filinvest once they hand over the down payment.

Upon the signing of the contract, FLI will pay the city P348 million as down payment for the 10.6 hectares which is an “integrated and indivisible” part of the JV contract.

Fernandez said the city will release the titles after receiving payment of Filinvest.

The real estate developer will directly give their installment to the Land Bank of the Philippines being the escrow agent. The LBP will release the titles to the company.

Aside from the outright purchase of the 10.6 hectares, FLI will also develop a 40- hectare property under a profit sharing agreement.

Las Marias said they wanted to lump the two components to make sure that they can give the city P1.5 billion in three years time because it is one of the conditions of the project.

Filinvest will compensate the 10.6-hectare property of the city by annual installment of about P250 million plus 10 percent of the revenues of the developed areas, according to Joel Mari Yu, Cebu Investment Promotions Center managing director and the negotiator of the development.

But Tinago barangay councilor and opposition leader Joel Garganera questioned the realization of this assurance.

“It is not clear if the city can get P1.5 billion in three years because how can there be a gross sale. Can they construct a building within three years,” Garganera asked in Cebuano.

Fernandez, however, said that the first deal for the SRP is the most integral part of the development of the entire SRP.

“The first deal is very important. It does not matter how much money we are going to make,” he said.

“Despite the international crisis, we are very happy that Filinvest is pursuing this. This is not just legally acceptable, it is also economically wise for the city of Cebu,” Fernandez said.

The first development will spur more developments in the 302-hectare reclamation property.

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LBP sets release of South Road Properties lot titles; CH to meet an obligation in JV

THE Land Bank of the Philippines (LBP) issued last week a certification for the release of the titles covering a 12-hectare area of the mortgaged South Road Properties (SRP) which they will turn over to the Cebu City Government anytime it asks for it.

Titles for another eight hectares could also be released after the City Government pays its P357-million amortization this month, a high-ranking official of the LBP said.
The release of the titles will allow the City to meet one of its obligations in the proposed joint venture contract with Filinvest Land Inc. (FLI) if Acting Mayor Michael Rama is authorized by the City Council to sign the agreement.

As conduit bank for the City’s 12.315-million yen loan with the Japan International Cooperation Agency (Jica), the LBP has the titles of some 240 hectares of reclaimed properties within the 302-hectare SRP.

12 hectares

According to records of the City Treasurer’s Office, as of August 2008 when the last loan payment was made, the City has paid P1.473 billion to Jica for the principal and interest, and is entitled to get titles of a land area equivalent to the payments made, the LBP source said.

“That is why we have already given them a certification that we will release the titles of 12 hectares anytime they need it. When they pay this month, we can give them titles for another eight hectares,” said the source who is privy to the SRP loan transaction and who requested anonymity.



As stated in the proposed Joint Venture contract between FLI and the City, the City is supposed to turn over titles for a 12-hectare portion before they start developing the property.

“Mr. Fernandez asked for the certification before they issued the notice of award to Filinvest but actually, the certification is no longer needed because it’s part of the loan agreement that the City will be entitled to get titles of properties that have been paid for,” the source said.

No turnover

In a phone interview yesterday, City Administrator Francisco Fernandez said he just came back from a leave of absence and has not received a copy of the certification.

He clarified that the City Government will not be turning over titles of any portion of the SRP to FLI unless it pays the City an amount equivalent to the value of the land.

“As a down payment, they will give us some P350 million and for that, we will release the titles of a two-hectare portion. When another payment is made, then we release other titles. We will have to review the contract and make sure that we will give them the titles only after payments are made,” said Fernandez.

The contract also requires FLI to remit payments for the outright purchase of a 10.6-hectare waterfront area directly to LBP. This would be considered as advance payment, the source from the bank said.

FLI is required to pay some P250 million a year for six years for the purchase of the land.

“This means the amount due for the City’s payment of the loan principal and the interest will decrease because the computation of the interest is based on the loan balance, it is diminishing,” said the source.

Since the JBIC and the National Government do not allow any pre-payment of loans by LBP, the latter will have to bear the interest payments to JBIC, as well as the risk of any change in the foreign exchange by the time the loan payments are due. (LCR)

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Special council session set for South Road Properties dev’t pact

By Jully Venus Cuizon, Correspondent


A special session will be held tomorrow by the Cebu City Council to deliberate on the fine print in the joint venture agreement between the city and Filinvest Land Inc. for development of the 50.6 hectares of the South Road Properties (SRP).

This was decided after yesterday’s teleconference between Cebu City Mayor Tomas Osmeña, who is in Houston, Texas for medical treatment, and some councilors concerning the details of the P25 billion joint venture contract with Filinvest.



It was an “informal conversation” with Osmeña who wanted to be updated on the negotiations with Filinvest said acting Mayor Michael Rama.

It was a back-and-forth exchange of “question and answer” as Osmeña sought clarifications on the contract said Councilor Gerardo Carilo.

The Joint Venture Selection Committee (JVSC) is seeking the council's approval to authorize Rama to sign the contract between Filinvest and the city government.

Acting Vice Mayor Hilario Davide said the committee on laws will submit its report and recommendations on the contract to the council.

After Rama signs the contract, the city will receive P338 million from Filinvest as initial payment for the outright purchase of 10.6 hectares of prime reclaimed property in SRP.

Filinvest was virtually guaranteed the contract after Rama denied with finality the motion of appeal filed by the Cebu provincial government challenging the developer's proposal to the city.

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