THE Cebu Provincial Government is obtaining a better deal out of its so-called Ciudad Property by revising its lease rates and sales percentage split in its joint venture initiative with Filinvest Land Inc. (FLI), the Capitol announced on social media Tuesday, Jan. 30, 2024.
In 2006, during Gov. Gwendolyn Garcia’s first term in office, the Capitol and Fifth Avenue Property Development Corp. inked a build-transfer-operate (BTO) agreement, which was updated by the agreement now signed by FLI president and chief executive officer Tristan Las Marias and Garcia.
The 2006 BTO, which was revised in 2015 under the governorship of Hilario Davide III, the current vice governor, covered the construction of two adjacent province-owned properties totaling 28,564 square meters along Banilad Road in Cebu City.
In the joint venture, FLI is Fifth Avenue’s successor-in-interest.
On Wednesday, Jan. 31, listed firm FLI disclosed to the Philippine Stock Exchange that at the meeting of its executive committee on Jan. 30, the committee had approved the execution of an agreement with the Provincial Government of Cebu to “effectively transfer to FLI the rights of Fifth Avenue Property Development Corp. under the Build-Transfer-Operate arrangement, as it relates to the development of parcel/s of land located in Banilad Road, Cebu City, into mixed-use development.”
The initial agreement had called for Fifth Avenue to develop the property.
After development is finished, ownership will pass to the Province of Cebu, which will then grant FLI the right to operate the property for a set amount of time so it can recover its investment.
This enables the Province to increase its assets without having to sell any land or pay development costs.
Moreover, the Province collects P35.55 per square meter in monthly rental and receives a 0.55 percent share of gross sales, or P200,000 each month, whichever is higher.
Following the revisions approved on Tuesday, Jan. 30, at the governor’s office, however, the Province will now receive from FLI rental of P65 per square meter per month, with an escalation rate of five percent per year.
The revised sales percentage share is now two percent of gross sales or P200,000, whichever is greater, the Capitol said.
Furthermore, the land area of the property was decreased from 28,564 square meters to 14,282 square meters under the new agreement to make room for FLI or another private proponent, following a competitive challenge, to undertake better land use of the joint venture territory.
FLI filed an unsolicited proposal for another joint venture with the Province in December 2023 with the goal of developing half of the Ciudad Property into upscale mixed-use condominium buildings.
The proposal was described as an upgrade to the 2006 BTO agreement by increasing the revenue potential for the Province and the Property, compared to the lease of office spaces envisioned under the BTO deal.
FLI has another existing BTO venture with the Capitol. The Capitol and FLI are joint venture partners in Filinvest Cyberzone Cebu, a four-tower business process outsourcing complex situated on 1.2 hectares of Capitol-owned land inside the Cebu IT Park’s commercial district.
Ciudad background
SunStar Cebu reported in 2006 that the Province-owned lot in Banilad was left idle after the Cebu International School vacated the property.
The Capitol then conducted a bidding for the lease of the Banilad property, and this was won by a consortium headed by Philippine Beijing Motors Corp., which was then incorporated as Fifth Avenue Property Development Corp.
Fifth Avenue is composed of foreign companies WLG Singapore, a leisure company; IPay Limited Hong Kong, a financing company; China Team, a construction company; and the Dino family of Cebu, SunStar Cebu reported amid the groundbreaking of the estimated P1.2 billion development in November 2006.
Garcia entered into an agreement through the authority granted by the Economic Enterprise Council on Sept. 1, 2006 with the consortium voicing plans to build a hotel and a commercial complex.
Stalled
However, when the relationship between the Capitol and Cebu City Hall administrations soured in 2006 amid a failed land swap deal, the City under then mayor Tomas Osmeña withheld certain permits for Ciudad, citing, among other reasons, the worsening of traffic that the project would cause in the Banilad-Talamban corridor.
Mayor Michael Rama’s administration gave the project a locational clearance to proceed in 2011.
But in 2012, the environment department denied Ciudad’s application for an environmental compliance certificate, reportedly because its proponents failed to get a tree-cutting permit. Another setback was the presence of informal settlers on the property.
Filinvest entry
FLI became a party to the Ciudad project in 2015.
On Sept. 28, 2015, the Provincial Board (PB) authorized then governor Davide to sign the amended BTO agreement with Fifth Avenue Development Corp. to continue the proposed Ciudad project in Barangay Apas, Cebu City, SunStar Cebu reported.
The PB also “gave express consent to the assignment of certain rights and benefits” to FLI as a third party.
Fifth Avenue entered into a memorandum of understanding with FLI, which would finance the development of the Ciudad property, as well as act as its “exclusive marketing, operation and management arm.”