Posted on 06:05 PM, January 15, 2010 [ BusinessWorld Online ]
BY MARITES S. VILLAMOR, Visayas Bureau Chief
CEBU CITY -- The Cebu City government has completed its second major transaction involving its pet project, South Road Properties, selling a 30-hectare lot for P2.7 billion to mall developer SM Prime Holdings, Inc. on Thursday.
SM Prime President Hans T. Sy said the company would pour in around P20 billion into the property, the development of which would be patterned after the Mall of Asia complex in Pasay. SM Prime will break ground "before the rainy season starts" for the construction of a shopping mall that will have a gross floor area of 26 hectares, twice the size of the SM City Cebu.
Other planned developments in the property are a convention/exhibition center, two hotels, a couple of condominium buildings and eventually, a school and a hospital.
The outright sale of the lot was allowed by the Commission on Audit (CoA) based on an en banc resolution passed in July 2009 that allows unsolicited proposals and Swiss challenge as a mode of disposing of government properties, said Joel Mari S. Yu, managing director of the city’s marketing arm, the Cebu Investment Promotions Center.
"This decision [by CoA] sets a precedent. [Any government agency] can now dispose of property through unsolicited proposals and a Swiss challenge," Mr. Yu said.
SM Prime submitted its unsolicited proposal for the property last year. A Swiss challenge was conducted last month through print advertisements in national and local newspapers. No company challenged the proposal, Mr. Yu said.
Cebu City Mayor Tomas R. Osmeña and Mr. Sy signed the deed of conditional sale for the 30-hectare property Thursday afternoon. Mr. Sy subsequently handed a P406-million check to Mr. Osmeña as SM Prime’s downpayment. The company earlier posted a P270-million bid bond, which was considered part of the downpayment.
SM Prime is the second property developer to acquire a huge chunk of land within the 300-hectare South Road Properties. Filinvest Land, Inc. last year entered into a joint venture with the city government for the development of 50 hectares.
Mr. Yu said Filinvest would break ground in March or April this year and simultaneously construct mid-priced five-storey condominium buildings and develop the boardwalk. Filinvest earlier announced it would invest P25 billion on its projects at the South Road Properties.
Mr. Yu said payments of SM Prime and Filinvest in the next five years would be enough to cover the city government’s amortization payments for a P5-billion loan from the Japan Bank for International Cooperation. The city used the loan to reclaim and develop the South Road Properties.
The SM mall at the South Road Properties is expected to be completed in at least two years. Aside from this, SM Prime plans to open a third mall in Cebu. Negotiations are ongoing for the acquisition of a property in Consolacion town that will be developed into a "pocket mall" for northern towns in Cebu province.
The South Road Properties, touted as the centerpiece of Cebu City’s economic development, is registered with the Philippine Economic Zone Authority as a special economic zone, allowing companies to get tax perks.
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