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John Hay developer rescinds BCDA deal

By Edu Punay (The Philippine Star) Updated January 11, 2012 12:00 AM

MANILA, Philippines - THE Developers of the Camp John Hay Special Economic Zone in Baguio City have moved for the withdrawal of their Restructuring Memorandum of Agreement (RMOA) signed in 2008 with the Bases Conversion Development Authority (BCDA).

This after Camp John Hay Development Corp. (CJH Devco) filed recently a formal rescission of the RMOA due to the BCDA’s failure to pay over P2.8 billion in contractual obligations and non-compliance of the developers’ latest demands to immediately set up the so-called “One-Stop Action Center” as mandated by the agreement.

“Simply put, CJH Devco could not raise the revenues to pay the rental payments due to BCDA’s inability to deliver what it committed to. Obviously the formula isn’t working…the ‘lessor-lessee’ relationship isn’t working …three restructurings have been done but BCDA was unable to comply. Perhaps the structure is wrong and no longer feasible,” CJH Devco said.

“To date, the OSAC was never set-up or fully-operational as envisioned in the agreement. This can be proven by the documentation between CJH Devco and BCDA over the years where CJH Devco has consistently been calling the attention of BCDA on its continued default in setting up a fully operational OSAC. In fact, there are currently over 15 existing projects requiring various permits such as the CJH Suites occupancy permit, etc., within Camp John Hay which have been pending now for over a year,” it added.

“Thus, the new restructuring agreement signed with BCDA in July 2008 after the SEZ status was restored by Congress has, once again, been violated by BCDA. Even the large amount CJH Devco conceded to, though not warranted, was conditioned simply on the full operation of the OSAC.”

Since 1996, CJH Devco has paid BCDA approximately P1.4 billion in cash and properties, and has pumped in more than P2.6 billion in investments and improvements.

In a statement, BCDA vice president for business development Dean Santiago said: “The delinquent lessee of Camp John Hay cannot go scot-free from paying its P3.024 billion arrears.” 

“This is an ill-disguised ploy,” Santiago said, adding “this is another attempt at evading payment by unilaterally rescinding their contractual obligations to the Philippine government after benefiting from the John Hay property.” He also pointed out that “the lessee reportedly has grossed double-digit figures in billions of pesos. It must be asked by the public where the money went.”

BCDA officials said the lessee cannot escape their obligation to pay their mounting debts.

The RMOA refers to the compromise settlement entered into by the BCDA and CJH DevCo on July 1, 2008, where the latter agreed to several substantial concessions, including the assumption of “prior rental obligations” amounting to more than P2.69 billion and current rental of P150 million.

In its letter last Jan. 9 to BCDA president and chief executive officer Arnel Casanova, CJH Devco through its president, Atty. Ferdinand Santos, demanded that BCDA fully comply with its obligations under the agreement, specifically to establish and maintain a ‘One Stop Action Center (OSAC)’ with the “full authority to process and issue all business, building and other developmental permits, certificates and licenses, local and national, from all government agencies necessary to facilitate the construction and commercial operation of Camp John Hay.”

Once established, the OSAC should “issue the necessary business, building and other developmental permits, certificates and licenses within thirty days from compliance with the provisions,” the letter stated.

Santos disputed BCDA’s opinion that their role is merely to ‘endorse’ the applications to the respective local and national government agencies, saying they have obviously misinterpreted this explicit provision in the RMOA. “In other words, BCDA has legally committed to something which they cannot fulfill to the detriment of the developer, CJH Devco,” Santos lamented.

Per the deal, CJH Devco also asserted that it is within its rights to suspend rental payments due to violations and continued failure by BCDA to comply with its contractual obligations to CJH Devco under the RMOA, including payment of rentals, whether current or restructured.

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