Cebu Capitol, City Hall in biz venture with Filinvest

CEBU CITY -- Filinvest Land Inc. (FLI) has a deal with the Cebu City and Provincial Governments.

Although Governor Gwen Garcia earlier filed a case against the City and FLI for their joint venture on a five-hectare property at the South Road Properties (SRP), calling the deal “prejudicial” to the City’s interest, the Province ventured into a business agreement with the same company years later.

Garcia and Rep. Tomas Osmeña, the mayor who worked out the contract with FLI, both claimed to have the better bargain and criticized the other local government unit’s joint venture.

The Capitol’s joint venture involves a 1.2-hectare property on Salinas Drive in Barangay Lahug, Cebu City. The Bagong Buhay Rehabilitation Center and the Center for the Ultimate Rehabilitation of Drug Dependents used to stand on the site.

Bigger property

The area will be developed into a business process outsourcing (BPO) complex worth P1.7 billion.

FLI’s joint venture with the City involves a much larger property at the SRP, including 10.6 hectares sold to FLI and 40 hectares for a profit-sharing scheme.

The property sold outright is on Pond F where FLI plans to put up a “modern urban center.” Last Monday, the company started advertising “Il Corso,” which will house the Dragon Boat Market, Sandbox, Festival Mall Cebu and Discovery Cove.

The profit-sharing development is composed of medium-rise condominiums and the company has started pre-selling units.

FLI won the Capitol project through a public bidding after it submitted the “highest and best bid.”

In the case of the City, FLI set an unsolicited proposal on the table.

The City, according to the agreement, did not receive a comparative bid.

The schedule of the Capitol venture started with the submission of preliminary plans and design last month. It will end with the transfer date and conveyance of right-to-operate in May 2013.

BOT
As for the build-transfer-operate scheme, the Capitol will continue to own the property but FLI will operate the business for 25 years, with the option to extend for another 25 years.

FLI will pay P50 per square meter every month as rent to the Capitol. On the sixth year, a five-percent escalation rate will be implemented and every year thereafter.

The Capitol will also have a monthly share of the business operation equivalent to two percent of the gross revenue, or P500,000, whichever is higher.

On its deal with the City, FLI will pay P1.592 billion to the local government unit for six years. FLI made a down payment of P348 million in March 2009.

It will pay the City an average of P250 million every year until 2015.

This year, though, FLI refused to pay its annual amortization after the title delivered to FLI had an encumbrance as a result of the legal claim of the heirs of Fr. Vicente Rallos that the City owes them over P133 million.

The heirs want part of the joint-venture property put up for auction.
The City, through Mayor Michael Rama, intends to fight the Ralloses in court after learning that the subject lot in Barangay Sambag II was donated to the City by its original owners.

For the joint venture, the City will also have a 10-percent share of revenues, or a guaranteed minimum share, whichever is higher. The guaranteed minimum share was not specified but it will be calculated by both parties.

SPA

Both Capitol and City Hall also granted a special power of attorney to FLI as the “sole and exclusive attorney-in-fact coupled with interest, vested with full power and authority to do and perform (specified) acts.”

As specified in the contract, the FLI is supposed to follow a master development plan for the SRP joint venture, while Capitol stipulated in its own joint venture that Cebu-based contractors be prioritized in the development of its BPO complex.

The contract in the Capitol joint venture was signed by Governor Garcia and FLI president and chief executive officer Joseph Yap; in the City, it was signed by then vice mayor Michael Rama representing the Cebu City Council and FLI vice chairman Andrew Gotianun. (Sun.Star Cebu)