It seems that SM Prime Holdings has been taken for a ride by the provincial government of Negros Occidental—not just once but twice.
The company belongs to the SM group of taipan Henry Sy, the country’s richest individual, according to Forbes magazine. SM Prime is the developer of those huge commercial malls in Metro Manila and other parts of the country.
And so the story goes that in March 2011, SM Prime offered the provincial government a development project for a seven-hectare vacant land behind the capitol.
It offered to pay the provincial government P45 per sqm for the lease of the property. The price, my contacts in real estate said, was much higher than the going rate for any raw land in any area in any province in this country.
Besides, the presence of an SM mall could immediately ignite a real estate boom in the city, which means the province would realize benefits other than just the lease income from SM Prime.
Negros Occidental Gov. Alfredo Marañon even announced to media, in the presence of Rep. Albee Benitez and SM Prime president Hans T. Sy, the beauty of the company’s “unsolicited proposal.”
Nobody could as yet say for what ungodly reason, but only three months later, the governor changed his mind: The provincial government announced it wanted to “sell” part of the property instead, and only about four hectares would be under a lease arrangement.
The bidding would be done—surprise—in just a few days. It was as if real estate companies could come up with plans and dreams, and wonderful schemes, on such a huge project with just the flick of their fingers.
Apparently as a way to justify the “twist” in the provincial government mind, Marañon reportedly said he had increased the area by about a hectare. There—because of one hectare, all bets were off! What good the one-hectare increase would do to the people of Negros Occidental, the provincial government forgot to explain in its announcements.
One thing was clear: the whimsical decision was enough for the governor to justify his decision to turn his back to the “unsolicited proposal” of SM Prime.
And so SM Prime reportedly begged the governor to grant the company at least the “Swiss challenge,” for it to match the winning bid to retain the project. No way.
With such a short notice for the bidding, only a few days between the announcement and the actual bidding, it was a big surprise that one company could even come up with a bid: Ayala Land, or ALI. It must be that good!
The bidding committee had to declare the bidding a failure, and it set another bidding about two weeks after. The period, according to my contacts in the real estate sector, was still too short for any other developer. Except perhaps ALI.
As if he was trying to point a canon to SM Prime or something, Marañon said that if indeed only ALI would show up in the next bidding, the provincial government would directly negotiate with ALI.
And so SM Prime finally showed up in the second bidding, together with ALI, and the bidding committee declared them both eligible. SM offered P18,888 per sqm for the “sale” component and P65 per sqm for the lease part, while ALI submitted P50 per sqm for the lease and P23,626 per sqm for the “sale” part, but only for a much smaller portion of the land.
It other words, ALI did not want the whole project, minus about one hectare, which was the additional area that the governor used to justify all the twists and turns in the project.
Thus, SM Prime felt confident that it submitted the higher financial bid, particularly since the bidding committee even declared the proceedings to be in order.
Before the committee could announce the “winner,” which should have been done in four days, the provincial government decided to turn down all the bids—again. Reason: the bids were all below the “floor price,” as provided by the Commission on Audit, or CoA.
In the bidding rules, there was never a mention of the CoA floor price. The bidding was another failure.
But the question begs to be asked: whose fault was it that the bidding failed? Here is another one: How did CoA arrive at the floor price?
It is possible of course that, in matters of real estate pricing, the CoA is better than the likes of SM Prime and ALI that have been eating, sleeping and burping real estate all their business lives?
And so reports said that Marañon, for the nth time, went to media to announce the government move, which was a “negotiated” deal, as a result of the failure of bidding. All this happened in less than a month, from the time the government decided to hold the bidding, instead of “unsolicited proposal” (i.e. the same negotiated deal), to the time the bidding had to be abandoned altogether, because of the “failure” that the government itself caused.
Probably out of the goodness of his heart, the governor said he would allow SM Prime to take part in the negotiations, even though SM Prime has been taken for a ride by the same government—not just once but twice already.
Provided that SM Prime would behave by not filing any court case against the government or the governor. What an appealing deal! It was an offer that anybody should readily refuse.
In another press conference, Marañon tried to compare the projects of SM Prime and ALI, noting that while ALI promised to spend P6 billion for the development, SM Prime was going to spend only P2 billion. In short, which was better?
To the guys down here in my barangay, cheaper is always better. Look, if you invest P6 billion in a mall, as against an investment of P2 billion, you will have to make three times more profits to recover your higher investments, right? Where will you get all the profit? Let me guess—from the pockets of the customers. In this case, they should be the people of Negros Occidental.