CEBU City Hall earned its first billion from the South Road Properties (SRP) yesterday after it closed the sale of a 30-hectare lot to SM Prime Holdings Inc. worth P2.7 billion, three years after the negotiations started.
By 2012, the SRP will be home to the biggest shopping mall in the Visayas and Mindanao with a gross floor area of 25 hectares, SM Prime Holdings President Hans T. Sy said yesterday.
SM Prime will invest at least P20 billion for a mixed-use development project facing the sea, which will include a convention center, hotels, residential condominiums, a school and a hospital.
After they signed the deed of conditional sale yesterday afternoon, Sy turned over to Mayor Tomas Osmeña a P406-million check to complete its down payment of P677.4 million. This represents 25 percent of the contract price of P2,709,712,000.
The P270.9-million bid bond paid earlier will form part of the down payment.
This is Cebu City Hall’s second sale at the SRP, after its deal with Filinvest Land Inc. (FLI).
SM Prime will make four quarterly payments this year that will amount to P433 million so that by the end of 2010, SM Prime will have paid the City a total of P1.11 billion.
“This is the start for us. We will roll up our sleeves and we will definitely deliver a project that all Cebuanos will be proud of. This is really a project that we envisioned that will attract not only Cebuanos but also those from Visayas and Mindanao and even from Luzon,” Sy said.
With the P677-million down payment, the City has so far earned P1.04 billion from the SRP, which includes Filinvest’s P348-million down payment last year and Bigfoot Properties’ lease payment of P15.2 million for the past two years.
Osmeña said the City’s income from SM Prime and the City’s sale and joint venture contracts with FLI will be enough to cover the loan payments for the SRP until 2025, so the City does not need to sell any more properties after the SM deal.
“It is anticipated that the City will not have to sell additional property to meet our debt service because with the installments coming in from SM and Filinvest and the other revenues we will be generating from the joint venture, I think it will be more or less enough to meet the debt service for the entire SRP,” he said in a speech after the turnover of the check.
For this year alone, the City stands to earn P1.11 billion from SM Prime, P298 million from FLI and P7.7 million from Bigfoot, which will be more than enough to cover its loan obligation of P693.3 million to Land Bank of the Philippines for 2010.
Since 1996, the City has so far paid P3.32 billion for its SRP loan.
As specified in the contract, SM Prime will pay the balance of P2,032,284,000 over a period of six years in quarterly installments, with a five percent annual interest.
Vice Mayor Michael Rama, city councilors and department heads witnessed the signing of the deed of conditional sale at SM City Cebu conference hall yesterday afternoon.
During the event, Sy presented yesterday their plans for the property and said they will break ground later this year, with construction work continuing in the next eight years.
The first structure to rise will be the shopping mall with a gross floor area of 250,000 square meters, which he said would be similar to the Mall of Asia in Pasay City.
The construction of a hotel with a minimum floor area of 60,000 square meters and the convention center with a minimum floor area of 20,000 square meters will follow.
After five years, Sy said they may consider starting the residential condominiums, the school and hospital.
SM Prime vice president Ronald Tumao said that what attracted them to the SRP is its location, being the only property in the city with “a real sea view.”
The signing of the contract came after the City Council called for a special session yesterday morning so they can approve the resolution authorizing the mayor to sign the documents.
After making minor amendments in the contract, the council approved the resolution, saying the sale of the property went through “a transparent competitive selection process through a Swiss challenge.”
Since the components of SM Prime’s development were not included in the contract, the council agreed to make the documents of SM’s unsolicited proposal an integral part of the sale contract.
Of the 240-hectare area of reclaimed land in the SRP, only around 150 hectares are left, which includes the roads and other service areas.
The City sold a 10.6-hectare lot to FLI last year and entered into a joint venture agreement to develop another 40 hectares.
A three-hectare area is being leased to Bigfoot for 20 years.
Properties were also donated to the University of the Philippines (5.17 hectares), the Department of Public Works and Highways (4.8 hectares) and the Department of Health (2 hectares).