Laguna Lakeshore project turns unattractive to investors

Even the corporate giant perceived by rivals as the most inclined to bid for the $2.7-billion Laguna Lakeshore expressway and dike project—the biggest project auctioned off by the Aquino administration under the public private partnership (PPP) framework—doubts the viability of the project.

San Miguel Corp. president Ramon S. Ang yesterday said the conglomerate did not participate in the recent bidding for the Laguna Lakeshore project due to the “mind-boggling” demand for equity and the structure of the project as a real estate rather an infrastructure play.

It was earlier thought that SMC would be the party most capable of bidding aggressively for the Laguna Lakeshore project because of its natural connectivity to the conglomerate’s existing tollroad project, the Southeast Metro Manila Expressway (C6),  a possible alternate route from the Calabarzon (Cavite-Laguna-Batangas-Rizal-Quezon) area to the metropolis.

The bidding was declared a failure as not a single offer was submitted.

In a briefing during yesterday’s listing of SMC’s P30 billion worth of preferred shares, Ang said project proponent Department of Public Works and Highways (DPWH) had wanted the prospective private sector partner to cough out two-thirds of the total equity requirement.

“I think no company in the Philippines or maybe in Asia or in the world will come and invest that  kind of money in a real estate project,” Ang said.

Ang said Laguna Lakeshore was originally pitched as a tollroad project.  But upon closer scrutiny, he said, it would end up as a real estate play as 95 percent of the revenue would come from property development while only a small share would come from the tollroad component. At the same time, Ang said there was a limit to the number of lanes that could be put up.

The project seeks to develop a 47-kilometer (km) six-lane expressway with a 45-km control dike and reclaim 700 hectares of land. The proposed highway will run from Taguig, Metro Manila through the towns of Calamba to the Los Baños-Bay boundary in Laguna. It will also include the construction of interchanges, bridges, floodgates, and pumps, from Taguig to Los Baños and the reclamation of land abutting the expressway-dike.

Other potential bidders were also concerned about the government’s inability to guarantee linkage to major road networks like C5 and C6 which are undertaken by private concessionaires.   Being the C6 proponent, SMC is seen to have an advantage as far as connectivity is concerned.

But even SMC is wary of the “uncertain investment” under the structure proposed by the DPWH.

“I think if it’s just a pure real estate play we will not be interested,” Ang said, adding that at the current framework, the winning bidder would be compelled to sell lots at the price of P60,000 per square meter. “Why would you reclaim land to sell at this price when it will be cheaper to buy existing land in Laguna?”

Given such stringent provisions in the term of reference for Laguna Lakeshore, Ang said it would be very difficult for the private sector to recover costs. “It’s mind boggling! Why will anybody invest that kind of money in a project in Laguna where you will sell the product at P60,000 per square meter?”

During the bidding for the project a few days ago, Ang said SMC had sent a team to observe but did not deem it prudent to submit any bid.

Meanwhile, SMC expects to break ground for another major infrastructure project – the Metro Railway Transit -7 project that will connect commuters from North Edsa to Bulacan – by April or before Pres. Aquino steps down from office.

A “super consortium” consisting of the Ayala, Aboitiz, SM and Megaworld groups was likewise prequalified but did not bid for the project, which is envisioned to ease traffic flow and mitigate flooding in the western coastal communities along the Laguna Lake.