FTI auction hobbled by ‘encumbrances’

Investors reportedly interested in a 74-hectare portion of the government-owned Food Terminal Inc. are wary of pushing ahead with their bids after it was revealed that some sections of the property might not be immediately available to the winning bidder after the auction.

Investors reportedly interested in a 74-hectare portion of the government-owned Food Terminal Inc. are wary of pushing ahead with their bids after it was revealed that some sections of the property might not be immediately available to the winning bidder after the auction.

According to a source privy to the matter, some parts of the property are under various lease contracts for 15 to 18 years, contrary to the prospective bidders’ expectations that these would be clean of such encumbrances.

Submission for bids was supposed to have been closed last August 8, but the Privatization Management Office (PMO) announced a rescheduling to August 14 upon the request of the bidders.

The PMO explained that the postponement was meant “to accommodate investor requests for an extension of the due diligence period.”

Also, the agency said rescheduling would “give bidders more time to study additional information on the property.”

The PMO said additional documents were made available to bidders in response to questions raised during a pre-bid conference held last July 20.

Companies that are considering to acquire the property include Robinson’s Land Corp., Empire East Land, Ayala Land Inc., Rockwell Land Corp., Century Properties Group Inc., SM Land Inc. and Filinvest Land Inc.

According to the source, investors were surprised—upon examination of the documents—to find out that a substantial portion of the lots up for bidding were under lease contracts of varying lengths of time.

This means that the leased premises would remain unusable to the winning bidder for a long time, the source said.

On the contrary, investors were originally under the impression that most, if not all, lots would be turned over to the winning bidder free of leases, liens or encumbrances immediately after the bid.

“There are substantial opportunity costs involved in acquiring the property since much of it cannot be immediately used,” the source added.

Further, investors belatedly found out that access to the property may be “severely limited” and that the lots have yet to be resurveyed and separated from the rest of the FTI complex.

This, the source said, also means that the actual area of the property being auctioned off is possibly less than 74 hectares.

Because of these discoveries, investors have asked for an extension of the deadline for submission of bids to give them more time to assess their bid prices, “assuming that they would opt to continue” to bid, the source said.

Accordingly, the PMO gave them four more business days to comply—August 14 instead of August 8.

It is unclear, however, if such an extension would be sufficient for the investors to decide to push ahead.