SM offers to buy 30-ha lot for P2.69B for Cebu?s biggest mall

Osmena said that SM Prime, in its unsolicited proposal, intends to build a 25-hectare shopping mall, which is ?twice? the size of SM City-Cebu Mall at the North Reclamation Area; a convention center with a minimum floor area of two hectares or 20,000 square meters; hotels; and later, a school, a hospital and high-rise condominiums.

SM Prime Holdings president Hans T. Sy signed the proposal, Osmena said.

According to the proposal, the minimum floor-to-area ratio would be subject to the joint determination and mutual agreement with Cebu City.

?To further complement the commercial development we intend to build more high-rise residential condominiums after five calendar years from the execution of this contract with Cebu City subject to market conditions,? Sy said.

Work will start within 18 months from the completion of SM Prime?s first payment to Cebu City, he said.

But the company has asked for a five-year real property tax holiday during the construction and start-up phases of development as ?investor?s incentive.?

The ?five-year tax moratorium? will start from the time the titles are ?completely? transferred to SM Prime.

Osmena said he would have to discuss with the company its request for a tax holiday.

Aside from SM, US-based film outfit Bigfoot Entertainment is also interested in buying 4.6 hectares, after signing a 25-year lease agreement for two hectares in 2007.

Another investor, a Korean company, wants to buy five hectares for the construction of a hotel and a casino.

Filinvest Land Inc. (FLI) recently concluded the purchase of 10.6 hectares of SRP land for over P1.5 billion and a joint venture agreement with the city to develop 40 hectares, which is expected to generate some P27 billion in investments.

Osmena said SM?s proposal will undergo a Swiss challenge, while Bigfoot and the Korean group will have to take part in an open bidding.

Cebu City Administrator Francisco ?Bimbo? Fernandez had said that if a sale is done by open bidding, City Hall will not know or have control over what the developer will do with the lot.

A Swiss challenge, on the other hand, will allow the city to negotiate with the buyer the terms of the sale and intended use of the property, which other parties can match through bidding.

The Cebu City Council last August authorized Osmena to sell 28 hectares of the South Road Properties (SRP) for at least P2.5 billion through open bidding or Swiss challenge. But the executive department did not identify the buyer.

According to SM Prime?s proposal, the company will buy six lots covering 30.41 hectares or 304,100 square meters for either P11,000/sq.m or P8,000/sq.m.

Sy said 25 percent of the payment or P672..75 million will be given to the city within 15 days from the receipt of the notice of award from the city.

The balance of the total bid price will be paid every quarter according to the schedule of payments to be set by City Hall. The quarterly payments will not exceed six years from the date of execution of the deed of sale with an interest of five percent per annum on unpaid principal balance.

Sy said the development cost, excluding the payment for the land, was estimated to reach P20 billion.

?Aside from the direct investment, our project will benefit Cebu City, particularly in terms of generating at least 3,000 employment, directly and indirectly,? he said.

Like in the Filinvest Land Inc. (FLI) deal, the city will shoulder the capital gains tax, documentary stamp tax, registration and transfer taxes on the sale of the property.

FLI has bought 10.6 hectares at SRP and entered into a joint venture agreement with City Hall to develop 40 hectares on a profit-sharing scheme.

Osmena said the SM Prime proposal is acceptable to him but he will leave it up to the Cebuanos to decide if he should ?take it or leave it.?

Osmena said he will consult the barangay officials about the proposal.

The Cebu City Hall will form a selection committee that will accept challenges to SM Prime?s offer.

Osmena said those interested must have a capitalization of at least P50 billion as SM Prime Holdings has an ?asset base exceeding P95 billion,? to qualify in the Swiss challenge.

For full details on (SPHXY) SPHXY. (SPHXY) has Short Term PowerRatings at TradingMarkets. Details on (SPHXY) Short Term PowerRatings is available at This Link.