Rama tells FLI to pay its SRP obligation-A A +A
Monday, March 17, 2014
THE Cebu City Government still has to pay P3.65 billion for the principal amount, P1.15 billion for the interest and P180 million for the guarantee fee of a loan with the Japanese Government to develop the 295-hectare South Road Properties.
This, as Cebu City Mayor Michael Rama told Filinvest Land Inc. (FLI) to pay up or he will take legal action.
Last May 10, Acting City Treasurer Diwa Cuevas sent FLI first vice president for Visayas and Mindanao Tristan Las Marias a letter setting a deadline for the P803 million due by March 15, which was last Saturday.
“Please be reminded that the sum of P803 million representing the balance of the City’s guaranteed minimum return/share in the profit sharing under the Joint Venture Agreement will be due on March 15,” the letter read.
The share from the joint venture was pegged at P1 billion.
In a press statement, las Marias said that FLI is ready to release a check for P967.68 million.
“In accordance with the joint venture agreement, the payment is due to be released to the City once the City has completed the review of the Filinvest records as well as completed the documentation requirements for the release,” the statement said.
Las Marias’s statement said the P967.68 million is the final installment for Pond F and the balance “to satisfy the guarantee amount for the City’s joint venture share for the first 10 hectares or Phase 1 of the 40-hectare portion of the joint venture development.”
Mayor Rama, for his part, said the matter is still at the level of the City Treasurer’s Office and the Office of the City Administrator. Failure to comply would compel the City Legal Office to take action.
FLI and the City Government entered into a joint venture for the development of 40 hectares of the South Road Properties (SRP) into residential units.
The statement from FLI further said that the company “has already remitted to the City its gross revenue share amounting to P309.71 million.”
Las Marias also said that the company will provide the City Government with a copy of a report that FLI has asked the SGV auditing firm to make, based on a review of the accounting records related to the joint venture.
Rama also announced yesterday that he approached a bank for the possibility of restructuring the loan for the SRP.
He was miffed that it seemed the City is only paying for the interest year after year and the principal balance remained the same for years.
When asked if he should approach the Land Bank of the Philippines (LBP), its conduit bank with Japan International Cooperation Agency (Jica) from where the loan was secured, he said: “LBP should have been generous to us. I’m not happy that we have to pay a guarantee fee. The lot is there.
We have not even recovered yet.”
But when asked what the process will be, considering the loan agreement is with Jica and LBP has been identified as the conduit bank, Rama said the bank he approached will know what to do.
Of the 295-hectare property, a 30-hectare lot has been sold to SM Prime Holdings Inc. while a 10.6-hectare lot fronting the sea was sold to the Filinvest Land Inc. (FLI).
FLI, though, is also developing a 40-hectare area at the SRP under a profit-sharing scheme with the City Government.
Treasury records show the City has paid more than P6 billion out of its more than P11-billion obligation. The amount is for the principal loan, the interest and the guarantee fee.
Based on City Treasurer’s Office (CTO) records, the City has paid more than P3.43 billion out of the P7.08-billion principal loan.
For the interest, the City has paid more than P2.24 billion out of the P3.39 billion, while it has paid P556.57 million out of the P736.57-million guarantee fee.
The paid amount covers payments made by the City through the Land Bank of the Philippines to Jica since 1996 until 2013.
The City started implementing the SRP through a loan from Jica in 1995. The loan is payable until 2025.
CTO records show that the City still owes P3.65 billion out of the principal amount, P1.15 billion in interest and P180 million guarantee fee.
Every year, the City sets aside P200 million to P300 million to pay the principal amount of the SRP loan, P150 million to more than P200 million for the interest, and P30 million to P40 million for the guarantee fee.
The exact amount that the City pays for the SRP loan depends on the exchange rates on the day the payment is made.
The City pays for the SRP loan every February and August. The City pays for the loan through the income it generates for the sale of the 295-hectare SRP.
Published in the Sun.Star Cebu newspaper on March 18, 2014.