PMO Questions Planned Below-Market Lease For PNCC Lot In Financial Center
The Privatization and Management Office (PMO) has sought a review of the legal standing of the state-run Philippine National Construction Corp. (PNCC) to manage and develop the government’s 9.9 (ha) property in Pasay City as it raised concerns over the PNCC’s plan to lease the prime real estate at prices way below the lot’s fair market value, which “may be considered disadvantageous to the government.”
Photo Insert: The property in question is a financial center in Pasay City.
The PMO, an attached agency of the Department of Finance (DOF), said the review was necessary in view not only of PNCC’s plan to lease the real estate property in the Financial Center Area (FCA) along Macapagal Avenue, Pasay City at below fair market value prices but also because such plan was without apparent consideration towards the repayment of its existing obligations to the national government and various other government entities already amounting to billions of pesos.
PNCC requested PMO, through its President/CEO Miguel Umali’s letter dated July 21, 2021, to comment on its proposal to lease out the FCA property for just P300.00 per square meter, inclusive of value-added tax. The PNCC’s proposal was for a term of 25 years which may be renewed for another 25 years, with an escalation rate of only 3 percent every two years.
The same proposal was also referred by the Office of the President (OP), whose approval is necessary for such plans to move forward, to the DOF and PMO for comment.
PMO, through its Chief Privatization Officer Gerard Chan’s letter dated 26 July 2021, pointed out that as noted by the Commission on Audit (COA) in its 2018 Audit Report, the PNCC has existing and unpaid obligations to the national government and government financial institutions such as the Development Bank of the Philippines (DBP), Philippine Guarantee Corp. (PhilGuarantee), and National Development Corporation (NDC) now amounting to at least P66 billion, while it also owes the Toll Regulatory Board (TRB) about P8.345 billion.
Chan observed that “the settlement of PNCC’s outstanding obligations to various national government (NG) agencies is not reflected in this proposed lease of the FCA property.”
The COA, in its 2020 PNCC Annual Report, also made an observation that PNCC left the FCA property idle for three years, which deprived the government of an estimated P1.5 billion in possible income.
During a recent DOF executive committee (Execom) meeting, Chan also reported on PMO’s position on PNCC’s lease proposal to Finance Secretary Carlos Dominguez III.
Chan said, “The PMO is unable to give its concurrence (to the PNCC proposal) because, number one, that asset is a government asset and they (the PNCC) haven’t taken any steps regarding the settlement of their obligations to the national government; and, number two, their proposed rent is below market value.”
PNCC’s proposed rental fee of P300.00 per square meter “does not reflect Fair Market Values and may be disadvantageous to the government.” Chan also observed that even the current rental rate of P500.00 per sq. m. that PNCC is charging Pacific Concrete Products, Inc. (PCPI), an existing occupant of a 3-hectare portion of the FCA lot, “does not appear to be updated for current market values.”