Friday, 15 January 2010

SM Prime to invest P20B in Cebu property

Willy Rodolfo III
Business Mirror
http://www.businessmirror.com.ph/home/regions/20931-sm-prime-to-invest-p20b-in-cebu-property.html

THE Cebu City government on Thursday signed an agreement with SM Prime Holdings Inc. for the outright sale of 30 hectares of the reclaimed South Road Properties (SRP), marking the official start of an estimated P20-billion investment by the company in the property for the next eight years.

SM Prime president Hans Sy said they will build a new mall that should be among the top 10 biggest malls in the world, a convention center and a chain of sky-rise hotels and condominium buildings. He said the whole development will be completed in eight years.

“When I heard that we got the deal, I said ‘this is it.’ This is the start of a whole new ballgame for Cebu. We will make a clear statement that will put us on the map of Cebu,” Sy said. “We will deliver a project that will make all Cebuanos proud.”

Sy turned over to Mayor Tomas Osmeña a check for P406.45 million, completing the total down payment for the whole property at P677 million in a ceremony at the SM City Cebu. The Cebu City council went on a special session Thursday morning to give the mayor the authority to enter into the contract. The councilors were present in the ceremony.

The total purchase price for the 30-hectare land is P3.027 billion payable until 2015.

Although the contract with the city stipulates SM to build within 18 months, Sy said construction work will commence by the middle of 2010 for the 250,000-square-meter mall and the 60,000 square-meter convention center.

“Prices of materials are going up, so it makes perfect sense for us to start building immediately,” he said.

Osmeña immediately ordered the city council to set the prices in the SRP at twice its present value as a show of support for the first two major investors in the project, SM Prime and Filinvest Land Inc. The two developers combine for some 30 percent of the 240-hectare property, with much land still uncommitted.

“SRP is not just another real-estate project. This is a mechanism that will drive Cebu into the future,” he said. “The other developers who did not come fast enough will have to pay double.”

Started in 1995 and completed in 2001, the SRP has been built through a loan obtained by the city government with the Japan Bank of International Cooperation. The pet project of Mayor Osmena since his first few years in office in the early 1990s, the project’s debt servicing caused great controversy, especially when it ballooned to almost a quarter of the city’s annual budget.

The loan amortizations run up to 2020.

Ron Tumao, vice president of SM Prime, said the long-term plan for the SRP includes building a university and a hospital.

“It is a beautiful property facing the sea. All these development projects will make Cebu a part of the destination for all local and foreign tourists,” Tumao said. “What is best for Cebu is you have the best salesman in the world in Mayor Osmena.”

City administrator Francisco Fernandez said that with payments from SRP and the continued installments from FLI on its joint venture with the city government, the city is set to earn more than P1 billion from SRP alone. And not even half of the property has been sold.

Cebu Investments and Promotions Center managing director Joel Mari Yu, who handled the marketing efforts on the SRP, said he hoped the new investments will silence detractors who warned that the property will cause the bankruptcy of the city.

“We could have just divided the SRP into lot plots and sold it,” he said. “But there was a vision behind the property.”

Yu said negotiations with SM lasted three years since it started in January 2007.

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