APEC villas’ developer, SBMA urged to explore amicable settlement

"Big and small issues may divide us, but common goals bind us — to build and operate facilities, generate employment and promote tourism in the Subic Bay Freeport Zone."

This may well sum up the sentiments of both property developer Financial Building (Subic) Corporation (FBSC) and the Subic Bay Metropolitan Authority (SBMA) in solving their problems for their own good and for the public good by improving zone services for visitors and tourists.

FBSC and SBMA must be hoping that both will understand each other’s financial predicament. Both sorely needs funds. So both sides will do their best to amicably settle their differences to keep things going.

FBSC is a 100 percent Filipino-owned company. Way back in 1996, the firm had the guts to venture in the newly established Subic Bay Freeport Zone and to develop the AsianPacific Cooperation (APEC) Villas and Triboa Bay Country Club in record time for the AsianPafific Economic Cooperation conference that year. The company wasn’t paid by SBMA for these projects. It was allowed to lease out villas on a long-term basis to recover investments and pay off the loans.

In 1997, the Asean financial crisis hit the Philippines and FBC’s projects in Subic were not spared from the region’s economic downturn. The company defaulted in its loan obligations and the Home Guaranty Corporation called on its guarantees. The FBC and HGC entered into a compromise agreement which was reviewed and endorsed by the Office of the Government Corporate Counsel and approved by the courts of Makati RTC Branch 59 and Olongapo RTC Branch 72.

Since 1999, the company has been meeting and discussing with SBMA on how to restructure its obligations to the latter. In the latest meeting in December, both agreed on having the obligations settled on a per-project basis.

But the major issue: What really is the outstanding obligations? SBMA claims FBC’s outstanding obligations is P1.8 billion to P800 million representing the principal and P1 billion as interest. FBC says the obligations should exclude those not really the company’s burdens, thus reducing the figure to P157,246,472.82.

The disputed obligations:

1) SBMA’s billing for the Upper Cubi Condominium project for P588 million..FBSB says it has no existing debt for this project. It had already assigned the condominium project to another company before the rent started. Under contract with SBMA, the base rent for the property would start August 6, 1997. But FBC had assigned the condominium project to Subic Bay Resort Ltd. on April 26, 1997 or five months before the rent schedule started. The assignment of the project was even approved by SBMA on May 22, 1997.

2) The base rent of Times Square amounting to P795 million: P499 million in principal and P346 million in interest. The firm conveyed the Times Square properties on March 20, 1998 to Hongkong & Shanghai Banking Corp., as Trustee of the Tahanan Asset Pool. SBMA consented to his assignment on April 1, 1998. The bank’s official financial statements always show the Times Square properties as assets of the Tahanan Asset Pool. For legal and accounting purposes, FBSC maintains, all these base rents on the land and buildings in Times Square starting on April, 1998 should have been billed to the bank. While SBMA’s legal department recognized the conveyance of the property, its accounting department continued to bill FBC for the base rents on the property.

3) SBMA’s base rent of US{{MB:DR(ARTICLE:CONTENT):MB}}.50 per square meter yearly for the 14.6 square meter-land of the El Kabayo Riding Stable. The outstanding balance is P165 million. FBC is mandated to develop the property into an integrated residential, commercial, recreation and tourism center. But when the company submitted its proposed development plan to convert the riding stable into a residential retirement area, SBMA refused to approve the proposal. The resuilt: the area has remained undeveloped, the base rent arrearages have piled up and the fees collected by FBC from horse rides are not enough to pay the base rent of the entire 14.6 hectares of the riding stable.

4) Service charges being billed by SBMA for housekeeping, maintenance and security at the rate of US,242/square meter/month of the land leased. FBC contends that since it is employing its own housekeeping, ground and building maintenance, and security personnel on the premises, SBMA should not bill them anymore for services never rendered on the leased premises. SBMA had earlier waived the service fees from other locators in the Subic Freeport Zone. FBSC is just asking for an equal treatment. Manila Bulletin