City dads doubt firm's capacity

CEBU, Philippines — Some opposition councilors have questioned the capability and capacity of a newly formed corporation associated with the Gokongwei-group to undertake the P18 billion integrated resort at the South Road Properties (SRP).

During the first committee hearing yesterday, Councilor Raymond Alvin Garcia said he is “wary” of Universal Hotels and Resorts, Inc. (UHRI) because the group was incorporated in 2017 with an authorized capital of P100 million but had a paid up capital of only P6.2 million.

“Now, I’m just curious. Here, you will embark on an P18 billion project and your paid up capital is only P6.2 million… On the side of corporation, there’s a question of the minds as to the capability and capacity of the joint venture partner,” Garcia said.

Joel Mari Yu, the mayor’s consultant for economic and business development, said he also raised the same concerns during negotiations for the project.

While he said that the executive department exercised absolute fidelity in accepting the project, Yu said he was told that UHRI was intentionally formed to undertake the integrated resort in Cebu City as business tycoon John Gokongwei wants to build a landmark project here.

Yu said it is an industry practice to form a corporation with the needed juridical personalities to start the application of permits to undertake the project.

“There’s no need to fully pay the paid up capital because there is no assurance the project will materialize as forecasted,” he said.

Assurance

Mybelle Gobio of UHRI said the company has raised the paid up capital to P490 million in February 2018.

“One of the requirements of PAGCOR is that we put on escrow a certain amount and that amount can only be used for the construction of the project so we complied with that - $30 million - so that is in addition to the increase in the capital stock,” she told members of the City Council and other officials of the city government.

Garcia asked Gobio to submit additional financial statements such as the income statements and balance sheets, among others, and suggested that UHRI form a consortium with Robinsons Land Corporation to undertake the project since the latter already has a proven track record.

Garcia said he wanted to make sure that the company can complete the P18 billion project at the nine-hectare Kawit Island property, which includes a shopping center, a theme park, a convention center, a casino gaming area, three hotels, and parking spaces.

Gobio explained to the City Council that the project will be constructed in phases, which means the company does not need P18 billion right away.

“Technically, when a project is constructed and, say, the value, in this particular case is P18 billion, construction is over time and you are expected to pay the whole P18 billion at time zero,” she said, adding that UHRI will provide the City Council the financial statements it is requesting.

She assured the city government that the company can complete the project and that construction will start 30 days after the Council approves the proposed joint venture agreement.

Gobio said UHRI will pay P1 million per month or P12 million per year as financial assistance to the city government while construction is ongoing. For its part, the city will provide basic services like assigning security guards and collecting garbage, among others.

UHRI will also post a P1.8 billion performance bond upon the execution of the joint venture agreement.

Councilor Jose Daluz III, meanwhile, expressed concern over UHRI’s handling of its operations.

“I did not see any obligation of either Robinsons (Land Corp) and JG summit that if there’s something goes wrong with UHRI, will Robinsons and JG summit lend its credit line and properties or rights and obligations to UHRI?” he asked.

Gobio said UHRI will take full responsibility in case it fails to meet its obligations to the city. 

She said UHRI has a credit line in BDO amounting to P19 billion as certified by its affiliates, JG Summit Inc. and Robinsons Land Corp.

Confident

Mayor Tomas Osmeña who was present at the committee hearing said he is confident UHRI will deliver, being an affiliate of the Gokongwei group of companies.

“I appreciate the concern of the committee. While it has no actual experience, UHRI has the technical support of Robinsons Land Corporation and JG Summit Holdings, which have more than enough experience in various commercial development projects,” he said.

He said the Gokongwei group is one of the most powerful conglomerates in the country, adding, that UHRI will not reduce its income purposely so that the city will get less.

Under the proposed agreement, UHRI will be leasing the city’s property by paying 10 percent of the gross real estate rental revenues from commercial/shopping center and the parking lots; 10 percent of gross real estate rental revenues from the integrated resort; 15 percent of gross real estate rental revenues from the casino facility; and 10 percent of the gross real estate rental revenues from hotel rooms.

Osmeña explained that the city is just leasing the P10 billion-worth of land to UHRI, which will give the city’s shares of its annual income.

The project is seen to increase the land value at SRP, generate more jobs, and improve local economy, among others.

Garcia said the investment commitment amounting to P18 billion should be stated in the obligations of the UHRI under the JVA to ensure that the proponent will undertake the project’s committed amount.

The hearing yesterday was conducted to look into the project’s financial aspect. The committee will look into the technical aspect on Friday and the legal aspect on April 4.

The ad hoc committee is composed of Councilor Renato Osmeña, Jr. as chairman and Councilors Jose Daluz III, Raymond Alvin Garcia, Sisinio Andales, and Margarita Osmeña as members. —/JMO (FREEMAN)