The SM Group has proposed to acquire, develop and control the 300-hectare South Road Properties (SRP), a reclaimed special economic zone, through an incorporated joint venture with the Cebu city government. 

If a deal is reached with the Cebu city government, the joint venture with SM will assume the city government’s amortizations and interest payments for a 12-billion-yen loan from the Japan Bank for International Cooperation (JBIC). The city government had secured the loan to reclaim the property. 
 

Officials said Cebu City Mayor Tomas R. Osmeña is considering the proposal, but is ‘more inclined to having part of the property under the control of the city government.’ The mayor also wants to honor commitments made to some interested locators, said Joel Mari S. Yu, managing director of the Cebu Investment Promotions Center.
 

‘This proposal is a real winner in terms of benefits to the city. It’s very hard to beat. SM… is very liquid,’ Mr. Yu said.  He said a team from the SM Group presented nine points for discussion during a meeting held last Wednesday.

Mr. Yu said he hoped to discuss the proposal in detail with Mr. Osmeña.  He declined to identify points raised by the SM Group because these are still confidential.
 

The general proposal is for SM to acquire control over the entire property, except for the five hectares assigned to the Department of Public Works and Highways, another five hectares to be retained for the city’s use, and two hectares earlier leased to entertainment company Bigfoot. 

SM also wants to be given priority in the development of Pond F, a 17-hectare portion facing the sea that is considered the most valuable part of the SRP. Bigfoot earlier expressed interest in acquiring the same portion for its planned yacht club.
 

‘Originally, they [SM] only wanted 30 to 50 hectares. But now, they want the whole thing. They want the unfilled pond, too. But they will respect the lease agreement between the city and Bigfoot,’ Mr. Yu said.  The SRP, which is traversed by the Cebu South Coastal Road, has a net usable area of 205 hectares.

The unfilled pond is about 60 hectares. Mr. Yu said a public bidding would not be necessary for a joint venture with SM to push through.  He cited the Cebu Property Ventures and Development Corp. (CPVDC), which started as a joint venture of the Cebu provincial government and the Ayala Land, Inc. (ALI).

The Cebu province contributed properties, including the 24-hectare Asiatown IT Park, while ALI contributed cash. Cebu’s innovative Cebu Equity Bond Units (CEBU), totaling P300 million, called for repayments through CPVDC shares.

‘The Local Government Code allows a local government unit to enter into a joint venture with interested partners. There is a legal precedent. The CPVDC was an IJV and no bidding was held. SM’s legal group feels the same way,’ Mr. Yu said.  The SRP was completed in 2004 and is registered as a special economic zone with the Philippine Economic Zone Authority (PEZA).

It was designed for mixed-land use that can accommodate manufacturing, commercial, tourism, information technology, and other service enterprises.  Meanwhile, in Bacolod City, SM Prime Holdings, Inc. President Hans Sy said SM’s newest mall aims to boost Bacolod’s economy. 

SM City Bacolod, the group’s 28th mall, opened at the city’s reclamation area on Friday with 103 tenants and a work force of about 7,000. ‘Rather than eating up the pie, we’re making the pie bigger now,’ Mr. Sy said. Other malls here are the Robinson’s Plaza and the Gaisano Mall. Mayor Evelio R. Leonardia said the city government will generate P4 million in real property taxes and P7.5 million in gross sales tax annually.

‘This means that every year we will have additional taxes of P11 million from the operation of SM,’ he said. Mr. Leonardia added that the 4,000 people hired directly by SM means an income of P24 million a month or P288 million a year, based on a conservative salary estimate of P6,000 per employee. The 60,000-square-meter mall sits on a 16-hectare property at the Bacolod reclamation area. It is composed of two single-level buildings that are connected by a bridgeway.

The South Wing houses the supermarket, anchor stores, four cinemas and outdoor dining facilities while the North Wing includes the department store, food court, the Event Centre, and more outdoor dining facilities.