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THE government is willing to take over the real-estate development
component of the Metro Rail Transit Line 7 project following the
refusal of Universal LRT Corp. Ltd. to post the proposed performance
bond, an official of the National Economic and Development Authority
said.
The company’s business plan is to develop as a
component of the MRT 7 project 300 residential units, 900 office
units and a 90,000-square-meter gross mall area in a 195-hectare
estate in Bulacan. The tax revenues from the developed areas will be
used partly to fund railway operations.
But Socioeconomic Planning Secretary Augusto B.
Santos said the government has requested that it be given the
authority to develop the real-estate component of the project
because ULC is not amenable to posting a performance bond, which is
equivalent to $1.899 billion in tax benefits from the project and
real-estate development, to be paid annually over 25 years.
The ULC’s counter proposal was a performance
bond of $340 million, or 10 percent of both the construction and
real-estate development components of the project, to be paid on a
three-year basis, instead of annually. ULC’s proposed bond
consists of $220 million to cover real-estate development cost and
the remaining amount for construction cost.
Eli Levin, ULC managing director and chief
executive, earlier expressed concern that the proposed linkage
between amortization payments due after completion of MRT system and
performance undertaking on real-estate development may unduly
curtail, if not jeopardize, the firm’s ability to raise the loans
and realize the pledges of equity for the rail project.
“We wish to reiterate that all lenders and
some investors for the rail project are separate and distinct from
the real-estate component . . . some investors would have no
[interest] over the development of real-estate component,” Levin
said in a letter to NEDA.
ULC investors in the MRT 7 project include SM
group’s Sy family, Siemens Group, Yuchengco Group, George Go
group, China Railway and a Japanese firm.
The counter proposal of ULC was to have two
performance undertakings, one for the debt and minimal equity return
corresponding to the portion for international and institutional
investors equity and another for the balance pertaining to the
return on equity of strategic investors.
“The latter financial performance undertaking
may impose limited conditions referring to the implementation of the
undertaking of real-estate companies. Wording of an acceptable
comfort level from real-estate companies may be negotiated,” Levin
said in the same letter.
The $1.235-billion MRT 7 project will run from
San Jose del Monte station in Bulacan to North Avenue, SM City
station, which will link the line to LRT Line 1 and MRT 3.
--Darwin G. Amojelar
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