Cebu City Hall threatens to scuttle joint venture deal if Filinvest fails to settle obligation
PAY up by Friday or we’ll see you in court.
This was the stern message addressed to the management of Filinvest Land Inc. as the Cebu City government yesterday ramped up efforts to collect its share of the revenue from their joint venture in the development of 10.6 hectares of the South Road Properties.
“We humbly appeal that hopefully they will pay what is due to the city. We don’t want to go to these legal options,” City Legal Officer Jerone Castillo said.
The city government is expecting to get P1 billion from the joint venture this year as stated in its budget for 2013.
In a news conference, Castillo yesterday said they will resort to legal measures if the Filinvest management fails to settle its obligations with City Hall within the week.
“We can issue a cease and desist order or file a case for recission of contract. As partners, it is the right of the city to enforce the contractual obligations of Filinvest,” Castillo told reporters.
“To date, we have already remitted P160 million to the city. In fact, P80 million of our remittances are in the form of advances for the city’s profit share on sales we have not yet collected,” said Tristan Las Marias, vice president for the Visayas and Mindanao of Filinvest Land Inc.
The City Legal Office has earlier sent a demand letter to Filinvest through its Vice Chairman Andrew Gotianun Jr. last September 13.
“Accordingly, formal demand is hereby made for the unconditional remittance by Filinvest to the City Government of Cebu City the latter’s share in the gross sales proceeds of the developed units of the Joint Venture Properties in the South Road Properties (SRP),” Castillo said in the two-page demand letter to Filinvest which was noted by City Administrator Jose Marie Poblete.
Filinvest was given seven days from receipt of the demand letter to act on the demand letter.
According to Castillo, Section 8 of the Joint Venture Agreement (JVA) between the city government and Filinvest which was signed February 3, 2009, states that the city shall receive a share of the profits from the sale of developed units in the Joint Venture Properties or ten percent of gross sales proceeds on a quarterly basis.
He said Filinvest even guaranteed a minimum return of each development phase to be paid as a share of profit plus percentage premium to Cebu City.
“Despite the clear and unequivocal terms of the foregoing provisions of the JVA, Filinvest still failed to remit to Cebu City the latter’s share of the profits from the sale of developed units in the Joint Venture Properties. We are made aware Filinvest has been actively marketing its projects in the SRP as early as 2009 when the JVA took effect,” Castillo said in the demand letter.
City Hall said Filinvest has only paid a total of P159 million to the city government starting last year and in three tranches: P9 million, P50 million and P100 million respectively. Moreover, these were not paid on a quarterly basis as provided in the agreement.
Castillo said since the start of the first phase of the Joint Venture Properties in 2009 until its completion on March 2014, a total of P1,000,053,000 was declared as minimum guaranteed amount for the project’s first phase.
He said this might still increase upon reconciliation of the book of records of the sale of the Joint Venture Properties.
Castillo said under section 3 of their agreement, the joint venture was forged on the following objectives:
(1) to enable the City of Cebu to generate the maximum revenues from the Joint Venture Properties with the least outlay of public funds;
(2) the development of the Joint Venture Properties must be responsive and coherent with the development goals of the Cebu City government; and
(3) the development of the Joint Venture Properties must promote the social goals and objectives of the City of Cebu.
“We wish to emphasize that we are still pursuing such objectives and we believe that failure of any party to honor its respective commitment in the contract is a step away from the fulfillment of such objectives,” Castillo’s letter stated.
Proof of remittance
Filinvest said they have started remitting to the city government last December 2012 and have consistently remitted to the city.
Las Marias said they have official receipts and receiving copies of the checks to prove their claim.
The over P1 billion minimum guarantee, he said, is not yet due and that based on the Joint Venture Agreement, it will only be due upon completion of the first phase of the development, which they estimated to be on March 2014.
Las Marias acknowledged that they received the request from City Hall to advance the minimum guarantee payment and that they are considering the request.
He said they met with city officials last Friday wherein they presented their proposals on how they can accommodate the city’s request for advance settlement of the minimum guarantee. He said City Legal Officer Castillo was invited but did not join the meeting.
“We are therefore surprised by the pronouncements of the City Legal Officer. We believe that as partners, we need to exercise prudence and maturity before we issue public comments and statements since such statements that might scare the private sector and investors from doing business with the city,” Las Marias said.
He added that as of yesterday, they are still waiting for the official reply of the City based on their proposals.
“We look forward to continue our dialogue with the City to see how we can address the City’s financial needs at this time,” he said. /Jose Santino S. Bunachita, Correspondent