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Property giants gird for face-off

Posted on October 23, 2013 10:43:48 PM [ BusinessWorld Online ]

A MULTIBILLION-PESO project to reclaim land in Pasay City may turn out to be an arena where two of the country’s biggest property developers will compete.
  Listed Ayala Land, Inc. plans to challenge SM Group’s P54.5-billion bid to reclaim a 300-hectare (ha) area in Pasay City, pending resolution by the local government of some of the former’s concerns.

In a letter to Pasay City Mayor Antonio G. Calixto, dated yesterday and copy-furnished Socioeconomic Planning Secretary Arsenio M. Balisacan and Public-Private Partnership (PPP) Center Executive Director Cosette V. Canilao, Ayala Land Corporate Secretary Solomon M. Hermosura said his company was keen on submitting a counter-offer.

“This (letter) will confirm our interest to submit a counter-proposal,” Mr. Hermosura wrote in the letter, a copy of which was distributed by the company to reporters.

The Pasay City Administrator’s Office last month published a notice soliciting counter-offers for the unsolicited proposal of SM Land, Inc. which called for “a joint venture” with the city government “to undertake the raw land reclamation and horizontal development of 300 ha, more or less, of foreshore and offshore areas of Manila Bay located at the western part” of the city’s jurisdiction.

The notice summarized SM Land’s proposal as follows:

• reclamation and development of the area;

• financing of the project, including cost of all necessary permits and clearances from relevant government agencies;

• allocation of 153 ha or 51% of the area for the Pasay City government or the Philippine Reclamation Authority; and

• completion of the project seven years after issuance of the notice to proceed.

According to the notice, interested entities should have undertaken a similar reclamation project with an area not less than 120 ha “preferably within the Manila Bay area and should have a minimum capital of P50 billion.”

Counter-proposals should be submitted with the City Administrator’s Office by Nov. 4.

Mr. Hermosura, in the letter, asked for an additional 60-day extension of the deadline.

“Kindly note that Republic Act No. 6957 (Build-Operate-Transfer Law) provides a minimum period of 60 working days for the submission of competitive proposals,” the letter read. “Given the estimated P54.5-billion cost of the project, we need more time to study the issues and prepare a competitive counter-proposal.”

Pasay City legal officer Severino C. Madrona, Jr. said Ayala Land’s concerns will be studied. “Ayala Land’s letter was received by our office at around 11 a.m. today,” Mr. Madrona said in a text message. “The city will formally answer Ayala’s query in writing as soon as it’s been discussed by our PPP officials.”

Ayala Land also asked for the reason behind the requirement that a proponent should have undertaken a similar project of not less than 120 ha. “What is the purpose of this particular requirement?” the letter read. “Please bear with us on these questions and provide us information on your application of the requirement because the principle of ‘opportunity for public competition’ has to be observed in processing the unsolicited proposal ‘to protect the public interest by giving the public the best possible advantages through open competition.’”

Mr. Hermosura also asked if the P5-million non-refundable bid document fee could be reduced or waived “in the interest of the right to public information.”

Mr. Hermosura argued the fee was higher than those of other PPP projects.

“We believe the fee is significantly higher than what was required in other PPP projects,” the letter read.

“The government can only benefit from having as many interested parties as possible and setting a prohibitive fee can discourage capable bidders from participating,” it added.

“Moreover, public access and scrutiny of the unsolicited proposal cannot be barred through the imposition of a prohibitive fee.”

Neither PPP Center officials nor those of companies involved were immediately available for clarification.

SM Group owns Mall of Asia Complex, a 42-ha mixed-use development on a reclaimed area in Pasay City near Manila Bay.

Ayala Land ended the first half with a net income of P6.62 billion, up 23.28% from P5.37 billion a year ago.

This as revenues rose 35.67% to P36.63 billion from P27.0 billion, while cost and expenses increased by 39.00% to P27.51 billion from P19.79 billion.

SM Land, meanwhile, is a privately held company by the Sy family, which recently bagged an approval to merge with SM Prime Holdings, Inc. as part of a consolidation effort under the listed mall builder and developer.

Yesterday, shares of Ayala Land shed 20 centavos or 0.65% to close P30.40 apiece yesterday from P30.60 last Tuesday, while those of SM Prime gained 52 centavos or 3.09% to P17.36 each from P16.84. -- C. H. C. Venzon            

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