SUBIC FREEPORT -- Locators at the Subic Freeport are calling on officials of the Subic Bay Metropolitan Authority (SBMA) "to respect the sanctity of contracts and to ease the way business in the freeport zone is done."
The call came after the SBMA chairman and administrator Wilma Eisma in late September this year served a notice of pre-termination of contract to the Subic Bay Marine Exploratorium Inc. (SBMEI), which operates Ocean Adventure under a lease agreement signed in 2007.
The marine theme park and its facilities are set to be repossessed by the SBMA due to alleged multiple contract violations and failure to implement development commitments.
But Robert Gonzaga, current president and CEO of SBMEI that operates Ocean Adventure, Adventure Water Park and Camayan Beach Hotel, said in an interview that the SBMA gave them a notice of pre-termination because of the
park's alleged unsettled debts and "failure to develop."
"Development requires a partnership with SBMA. In our contract, we are required to pay a minimum guaranteed rent or gross revenue share, whichever is higher. Our former Chinese American CEO only paid the minimum guaranteed rent during the years he was in charge, and I was left to clean up that mess when I took over in 2017. SBMA only made us aware of this in late 2018, and I immediately tried to make amends by paying 20 percent of the total plus interest last year and have been religiously paying more than P1 million a month on top of their current monthly billings since then," Gonzaga said.
The move to pre-terminate the operations of Ocean Adventure, Gonzaga claimed, is allegedly a "negotiating tactic" by the SBMA to extract major concessions because they are currently in negotiations with the agency.
"We have been trying to get our lease amended since 2013 and the current SBMA administration saw this as an opportunity to extract major concessions from us, so now they have pushed us to the edge of the cliff to scare us about what's going to happen," he said.
To this day, Gonzaga said, the SBMA never approved the payment scheme, although Ocean Adventure had been paying the payment scheme religiously, since 2018. "And then they used it as one of their reasons to break up our contract," he said.
"As if that wasn't enough, SBMA immediately froze our ability to process permits as part of their stringent collection policy. They have a policy in place that if you have any arrears, they can freeze the processing of permits, any kind of permit. That puts us in jeopardy because even in our daily operations, we need permits," Gonzaga said.
"We operate a theme park. Our animals need to be fed. And the fish food is imported from abroad. There was a time when they were holding our fish food at the seaport department, while we were pleading with them. We are required to develop, but how can we develop if they're not processing our permits?" he added.
Gonzaga said that, in fact, any impartial observer would say that they have given SBMA tremendous benefit of the doubt before they spoke out to media with other locators.
"The SBMA also said we don't have the plans or the money to develop the rest of the property. They forgot that we just launched the Adventure Beach Waterpark last year, an investment worth more than a P100-million. We were about to launch a second one this year, Adventure Trails, when we were made aware of the gross revenue shortfall. Instead of doing that project, I elected to take care of the debt they told us about. Also, the truth is, our contract doesn't require proof of funds, and we have already submitted our masterplan to them way back in 2010, and yet they also said that was only a concept," he said.
Gonzaga explained that the lease amendment negotiations stood still at the Leisure Committee of the SBMA for more than 18 months. "They pretended to not know who was in charge of Ocean Adventure, while accepting checks signed by me, and issuing a CRTE upon my request. They asked for this or that document and then we were told that they will transfer us to another committee of the SBMA board."
"The Leisure Committee handed Ocean Adventure over to the Audit and Risk Committee of the SBMA and in the space of a few weeks after 18 months of no movement, they had already recommended pretermination proceedings against us after a single inspection of the property. We met with Admin Eisma after that, and that's when she said she wanted to take back our land for failure to develop," Gonzaga said.
"I have tried to establish good will with the SBMA and its officials. That has not been reciprocated, unfortunately," he said, adding that they have now been forced to contemplate legal action.
Edward Fernandez of the Coastal Development Corporation, which developed Subic's Central Business District including Moonbay Marina villas and Pier One, said part of the difficulty is that the purpose of the authority at SBMA has allegedly "gotten lost."
"Ultimately, the charter establishes the fact that they bring in investors, people bring in their money to make money, but at the same time provide jobs for the community. Ultimately, that's the purpose -- to leverage the land left here by the US to provide employment, revenue streams, to make it attractive for the investors to come in, to help the local people earn money. We're getting away from that," he said.
According to lawyer Josefina Bueno, legal counsel of All Hands Beach, in case of a perceived violation of any of the provisions of their lease, there is supposed to be a 60-day curing period.
"Unfortunately, in our case, we were not afforded that option. One thing we are arguing about is when the fiscal year would begin and end. It should have been just a matter of interpretation, but it was taken against us," she said.
"Assuming that there is no law, there is no agreement, it is their duty and obligation to help the locators, but instead of helping us out, they're putting us down," Bueno said.
"Everyone is asking the SBMA to respect the sanctity of contracts and to ease the way business in this freeport zone is done. Our founders poured their hearts and souls into Ocean Adventure for almost two decades, and the SBMA thinks nothing but to advance their own interests," Gonzaga said.
Open to renegotiation
Earlier, Eisma said the SBMA has already informed the Office of the President of its decision to foreclose the SBMEI but the agency has not yet closed the door to renegotiation and that the impending foreclosure is "sad news."
"This is actually sad news for us, because Ocean Adventure Park is the pioneer theme park in the Subic Freeport and is a hugely popular tourist destination. However, its multiple contract violations have been a long-festering problem that must be addressed now," Eisma said.
She added that the SBMA has notified SBMEI of its violations as early as July and assiduously provided guidance to cure the problems, but the company did not submit a satisfactory proposal to correct the violations.
"We wanted them to stay, of course, but there was not much concrete action from their side," Eisma said. "So after months of negotiation and attempts to help SBMEI keep its lease, there is no longer any other recourse but to apply the law and pre-terminate the company's lease agreement."
The SBMA official also stressed that SBMEI's failure to deliver its development commitments not only constituted violations of its contract, "but also prejudiced the SBMA's financial interest because it curtailed the agency's earning potential."
Aside from its failure to comply with its lease contract, the SBMEI also committed violations like illegal subleasing of property, constructing without permits, improper storing of waste, and closing public roads, according to Eisma. The company also has arrears of about P25 million on their payment scheme, as well as P7-million on its current billing, SBMA records showed.
She added that even as the SBMA was willing to reconsider SBMEI's decades old breach of contract, the park operator along with two other locators came out with a story accusing the Subic agency of not adhering to "ease of doing business" law.
Eisma said the news report only served as a further irritant between the parties, since the SBMA has already put in place various measures to further ease business in the Freeport, including putting up a one-stop shop for permits and extending the validity of the Certificate of Registration and Tax Exemption (CRTE) from one to three years.
"We're firm but fair," Eisma said. "We agree that the SBMA should adhere to the 'ease of doing business' law, but that doesn't mean we'd relax our rules to the detriment of the government."
Under the pre-termination order, the SBMA will repossess all of the SBMEI's 493.16 hectares of undeveloped property upon the lapse of the 30-day reckoning period. Then it will give the SBMEI 24 months to slow down its activities at the 11.6-hectare developed area that includes the Ocean Adventure Park, the Camayan Beach, and the newly-opened Adventure Water Park.
"We're giving them sufficient time to wind down their operations at the marine park, remove all their animals and movable property, and vacate the premises. We are also concerned about the disruption and stress this would cause to the animals, hence the two-year leeway," Eisma said.
The Ocean Adventure Park started operations in 2000 under a contract that covered only the marine park. In 2007 the SBMEI entered into a new agreement for the lease of a total of 436.89 hectares of land, and 67.87 hectares of bay area with a commitment to develop 101.71 hectares for more tourism. (RDF/With Ric Sapnu)