City to pocket millions from Kawit proposal

A John Gokongwei-led firm has committed P18 billion for a massive development in partnership with the Cebu City government on the nine-hectare Kawit Island at the South Road Properties. But what will the city government get from the bargain?

Aside from a share in the project revenues, Universal Hotels and Resorts Inc. also promises to pay P12 million annually to the city while construction is ongoing, according to its proposed joint venture agreement tackled by the City Council in a session yesterday.

The development involves construction of commercial or shopping center, integrated resort, casino facilities, hotels, and parking facilities on the nine-hectare Kawit Island at the South Road Properties.

Yesterday, council members did not discuss yet the merits of the proposal. However, a fiveman ad hoc committee has been formed to look deeper into it.

The 13-page proposed JVA specifies that the city will be entitled to receive 10 percent of the gross real estate rental revenues to be generated from the retail lease of spaces in the commercial/shopping center and the parking lots; 10 percent of gross real estate rental revenues from the wholesale lease of the gross bare-shell spaces in the integrated resort; 15 percent of gross real estate rental revenues from the wholesale lease in the casino facility; and 10 percent of the gross real estate rental revenues from the wholesale lease of spaces in hotels if they are leased to hotel operators.

Should UHRI operate the hotels, the city will get two percent from the hotels' gross rentals, as well as from the hotels' gross room, food, and beverage revenues.

The P12 million UHRI vows to pay the city yearly as construction is being undertaken will apply on the first year of construction period, or two to four years before operations.

UHRI is asking a grace period of five to eight years to construct all the components of the development.

If the parties sign the JVA, UHRI will also post a performance bond in a form of a guarantee equivalent to 10 percent of the total investment commitment or P1.8 billion.

The committee tasked to further study the proposal is composed of Councilors Renato Osmeña Jr. as chairman and Councilors Jose Daluz III, Raymond Alvin Garcia, Sisinio Andales, and Margarita Osmeña as members.

Daluz said it is not the first time the city government will enter into a joint venture deal with the private sector, citing an earlier agreement the city forged with Filinvest Land Inc.

Daluz recalled that before the agreement with Filinvest was reached, an ad hoc committee was also set up to study the matter. The committee was then headed by Vice Mayor Edgardo Labella, who was a councilor that time.

“The committee focused on three items: feasibility, technical, and legal dimensions of the contract,” Labella recalled.

Yesterday, Councilor Joy Augustus Young initially opposed the idea of having only five people scrutinize the proposal, proposing instead to transform the City Council into a committee as a whole and conduct executive session.

But Daluz said there's a need to create a smaller committee that will call for committee hearings, during which all members of the council can attend and help examine the project proposal to the best interest of the city.

He said the ad hoc committee will make recommendations after a careful study of the contract.

However, he could not determine the timeframe as to when the committee can complete the report since members have yet to meet Friday to lay down the procedures on how the study will be carried out.

It was Councilor Eugenio Gabuya Jr. who proposed the resolution authorizing Mayor Tomas Osmeña to sign, on behalf of the city government, the JVA with UHRI to be represented by its president, Frederick Go.

Last February 27, Mayor Osmeña issued the Notice of Award to UHRI after its unsolicited project was unchallenged by other proponents.

In its proposal, UHRI wants to engage the services of its affiliate, Robinsons Land Corporation, either as consultant, manager, or operator or a combination of those for its expertise and experience in development, operations, and management of the project's components.

The proposed term of the JVA is 50 years and automatically renewable for another 25 years.

A five-member project oversight committee shall be also created to oversee the projects. UHRI will appoint three persons while the city will appoint the other two.