Biz Buzz: Underpayment?
IS PROPERTY giant Ayala Land Inc. paying the University of the Philippines less than what’s due for two commercial developments—UP Town Center (UP Diliman East Campus) and Science and Technology Park (Technohub)—hosted by the country’s premier state university?
The Commission on Audit (COA) seems to think so, alleging “laxity” in the enforcement of the terms and conditions in the lease agreement such as of UP Town Center—an issue that has been recently raised by the student publication, UP Collegian.
In its audit report on the UP system for the year 2014, COA issued a “qualified opinion” on the property deals with ALI alleging that for UP Town Center, there was P129 million or 21 percent “underpayment” compared to the projected/secured rental revenues.
Likewise alleged was the non-imposition of the interest of 24 percent a year for the late rental payments of at least P4.24 million for the “delays” ranging from 22 to 235 days covering the rental period from October 2013 to July 2014, plus the additional interest for the “underpayment” of P129 million.
For the Technohub, COA claimed there was an understatement of the rent income by at least P76 million “plus the undetermined amount from the hotel and building leases.” It also estimated unbilled/uncollected interest at 24 percent a year of at least P3.06 million for delayed payments ranging from eight to 113 days for the period January 2013 to November 2014, plus interest on the “underpayment.”
COA wants UP to submit more documents to facilitate the complete review/validation of the conditions contained in the lease agreement with ALI and to require the property developer to remit the alleged rental payment deficit.
On the part of ALI, the property developer said it had made regular rental payments for UP-Ayala Land Technohub and UP Town Center “based on the terms agreed upon by Ayala Land and the University of the Philippines.” The developer added: “We are working with UP to review if there are variances we need to address.”
The variance could be a result of difference in interpretation of the basis of rental payments from which UP was to draw its share of economic interest. For its part, COA has cited projected/secured rental revenues instead of actual rental revenues as the basis for alleged underpayment. Who’s right and who’s wrong? Hopefully, that will be for the bookkeepers to settle and clear up, and not the courts. Doris Dumlao-Abadilla
While we were sleeping…
NOW THAT President Aquino has signed an executive order mandating the merger of Land Bank of the Philippines and the scandal-weary Development Bank of the Philippines, the local financial community is wondering what will happen to the banking license of DBP once it is gobbled up by the bigger government financial institution.
In all cases in the past, the merger of two banks resulted in the license of the acquisition target being dissolved by regulators. Banking licenses are not like congressional franchises that can be held as assets by the surviving entity and sold to a buyer later on.
But if people in the know are to be believed, there is a plan by some people of influence for the disposition of DBP’s banking license. A source told Biz Buzz that one foreign bank—Japanese, we hear—is already waiting to acquire DBP’s banking license, which was promised to it when the whole merger plan was hatched.
Incidentally, those who were surprised by the merger being effected by a presidential order (as opposed to an act of Congress) should know that there is a little-known provision in the law that created the Governance Commission on GOCCs authorizing the President to merge or abolish state-run firms—an astute and wily maneuver, given Congress’ long-standing hesitation to support the Landbank-DBP merger.
So the question now is, will the Monetary Board of the Bangko Sentral ng Pilipinas follow past practice and dissolve DBP’s banking license after the merger? Or will it make an exception this time? Watch this space, folks. Daxim L. Lucas
Olympic excuse
THE TOKYO Olympics in 2020 is pitting more than the world’s best athletes against one another. Apparently, Tokyo’s massive rail expansion projects being planned ahead and after the Olympics are placing an unexpected squeeze on the supply of new trains—trains the Department of Transportation and Communications is seeking for the Light Rail Transit Line 1.
The DOTC wants 120 new coaches for the LRT-1 following the successful auction of the LRT-1 public-private partnership (PPP) expansion project to Cavite province. That train coach component, valued at about P30 billion, is being funded by the Japan International Cooperation Agency, meaning the supply of new cars will only be open to Japanese train makers. That’s not a bad deal since the Japanese have built somewhat of a legendary reputation in the railway business. The catch, of course, is will there be enough supply available?
Transportation Secretary Joseph Abaya said the bidding could be “challenging” because of the surge in demand for rolling stock in Japan “in view of the Olympics.” It seems the DOTC already held roadshows for bidders and the reception for the project was not as warm as expected. Abaya did note that it was a big enough issue that they were now in talks with Jica to resolve the problem “quickly.”
The next date to watch here is Feb. 22. “We are hoping bidders will show up,” Abaya said. Miguel R. Camus
‘The Boss’
AS WITH any media, content is the name of the game and cable TV-only ABS-CBN News Channel (ANC) is beefing up its own line-up with a new show giving viewers a better look at the powerful folks running businesses in the country and abroad. Dubbed ‘The Boss”, the once-a-week show makes its debut tonight and will be hosted by journalist Cathy Yang.
For a program seeking to shake things up, it’s appropriate that its first guest is Lance Gokongwei, someone familiar with that very concept as proven by the group’s ventures into telecommunications (Sun Cellular) and airlines (Cebu Pacific). Gokongwei is the president and CEO of JG Summit Holdings, which is also involved in property development as well as food and beverage. Miguel R. Camus
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