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Delfin Lee says business started to go bad after Binay took over

/ 02:34 AM May 19, 2014

MANILA, Philippines—“I’d surely rot in jail,” detained real estate developer Delfin Lee said in jest at the prospect of Vice President Jejomar Binay winning the presidency in 2016.

“I’m really not sure what his (Binay’s) beef is with me. I think he was ill-advised to take a position against me and found it too late to back down,” Lee, president of the housing developer Globe Asiatique, told the Inquirer in a recent interview.

He asked to be allowed to air his side after the Senate refused to hear him.

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Lee, 58, said his business started to crumble the day Binay took over as chair of the Housing and Urban Development Coordinating Council (HUDCC).

He said Binay’s first act in office was to declare his Xevera projects in Pampanga “ghost towns” made up of “ghost buyers.”

“I was in the process of re-documentation and finding new buyers but Pag-Ibig cancelled my contract; it refused to accept my payments and it barred the release of the titles. My business was ruined,” said Lee.

Lee said he built 11,000 houses—4,500 in Bacolor and 6,500 in Mabalacat—anchored on a town center he created from the ground up, betting his own money.

“They called my business a racket. They called me a con man. But where have you seen a scam where the scam artist invests his own money and leaves a paper trail? Why build houses and a town center in the first place if I intended to sell to ghost buyers as (Pag-Ibig) claimed? Even before Pag-Ibig had come in, I would have thrown in P1 billion of my own into these projects not only for the houses but for amenities and infrastructure. So where is the racket?” said Lee.

On the agency website, Pag-Ibig Fund President Darlene Marie Berberabe said investigation “revealed massive fraud committed by Lee and his group which was corroborated by the results of the independent probes separately conducted by the Department of Justice and the Commission on Audit.”

According to Lee, the Xevera communities were only GA’s third incursion into the low-cost housing business, following the Sta. Barbara Villas subdivision in San Mateo, Rizal (3,800 units) in the 1990s and the GA Twin Towers in mid-2000.

No economic activity

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In 2007, Lee checked out a lahar-swept property six kilometers from San Fernando City, Pampanga, on a Saturday. “It was a desolate land with no economic activity. When I first went to the area, I saw just three goats. When I saw it, something clicked in my head and I decided to buy the property,” said Lee, who paid P120 million in cash for the 36-hectare property the following Monday.

In Xevera Bacolor, GA built 4,500 houses—two-story units with a lot area of 36 square meters and floor area of 45 square meters plus front space for parking—that were sold at P830,000 each.

“If I made roughly P150,000 per house, I would earn roughly P700 million net. With an investment of P1 billion and cost recovery of 1.5 years, it’s not a bad business model,” said Lee.

He said that as much as 20 percent of the project’s cost was funneled into advertising as GA splurged to buy prime time space on ABS-CBN’s top rating shows to reach overseas Filipinos who were tuned in to the Filipino cable channel.

Lee said he brought the same concept to another lahar-covered Pampanga town, Mabalacat. He said he paid P155 million for a 62-hectare property that used to be a quarry.

Xevera Mabalacat was bigger (6,000 houses) and its amenities were twice as grand, Lee said, as he reinvested the profits he had made from his first township project.

The dominoes started to fall for Lee under Binay: GA’s P3-billion initial public offering was scuttled; GA’s 35-story Skysuites on Quezon Avenue and Edsa was stopped in the middle of construction, and so was GA’s planned campus subdivision in Bacolod City.

Lee said Pag-Ibig was essential to GA’s low-cost foray because private banks avoided this segment like the plague. “Our buyers do not have the P225,000 downpayment (or 30 percent of loan amount) required by a private bank for a low-cost home. Pag-Ibig gives loans up to the full amount up to P750,000 with no collateral. This market can afford P5,400 in monthly loan payments for up to 30 years,” he said.

Buy-back provision

GA obtained loans through Pag-Ibig’s Window 1, wherein the agency agreed to release within seven days the check to a developer, who in turn committed to buy back discontinued accounts within two years from the turnover.

Lee said Pag-Ibig’s buy-back provision could be made through three modes: the developer himself pays for the delinquent account to keep it updated; the developer finds a new buyer to replace the original buyer who backed out; and Pag-Ibig offsets the bad account from the guarantee fund put up by the developer.

Lee said Pag-Ibig exploited the public’s lack of knowledge on these three modes to make him look bad.

Due to the buy-back provision, Lee said a “contract to sell” became the favored mode of exchange wherein the developer would hold on to the title until the buyer had fully paid the loan.

“It was just an engagement, the wedding had not yet been consummated. Pag-Ibig muddled the situation by claiming I sold a unit twice when in fact a buyer had backed out and I had to find another buyer to take over the project to make it current. It’s a replacement sale, not a double sale,” said Lee.

Lee said that in GA’s case, Pag-Ibig deducted 7.5 percent from the P6.7 billion it lent to Xevera buyers. Including a collection service fee, Pag-Ibig had nearly P600 million of GA’s money as additional buffer.

Of the 9,951 Xevera buyers who borrowed through Pag-Ibig, Lee claimed only 1,440 turned out as bad accounts for a back-out rate of only 14 percent.

“Developers can live with up to 20 percent back-out rate and my market is low-cost,” said Lee, who noted that his P600 million held by Pag-Ibig would cover the bulk of the bad accounts.

Lee also refuted Pag-Ibig’s claim that GA itself took charge of processing the loans which paved the way for the ghost buyers.

Lee said that contrary to Pag-Ibig’s claim, he did not receive any favors from the housing agency, which was then headed by Vice President Noli de Castro.

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TAGS: Delfin Lee, housing scam, Jejomar Binay, Philippines, syndicated estafa
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