THE Privatization and Management Office (PMO) raised concerns over the plan of debt-saddled state-run Philippine National Construction Corp. (PNCC) to lease a government real estate property way below the lot’s fair market value.
The PMO, an attached agency of the Department of Finance (DOF), said the PNCC’s proposed rental fee of P300 per square meter (sqm) for the 9.9-hectare real estate property in the Financial Center Area (FCA) along Macapagal Avenue, Pasay City “does not reflect fair market values and may be disadvantageous to the government.”
It also did not sit well with PMO that the PNCC made the plan without apparently considering the repayment of its existing obligations to the national government and various other government entities already amounting to billions of pesos.
During a recent DOF executive committee meeting, Chan reported that 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.”
Chan added that even the current rental rate of P500 per square meter 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.”
Thus, the PMO is also seeking a review of the legal standing of the PNCC to manage and develop the government’s property.
Last month, PNCC President and Chief Executive Officer Miguel E. Umali wrote a letter seeking PMO’s comment on its proposal to lease out the FCA property for just P300 per sqm., 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, whose approval is necessary for such plans to move forward, to the DOF and PMO for comment.
in a letter dated July 26, 2021, PMO Chief Privatization Officer Gerard Chan pointed out that that the Commission on Audit (COA) noted in its 2018 Audit Report that the PNCC has existing and unpaid obligations to the national government and government financial institutions. Chan said the COA report noted the PNCC owes the Development Bank of the Philippines, Philippine Guarantee Corp., and National Development Corp. at least P66 billion. The PNCC also owes the Toll Regulatory Board about P8.345 billion.
In its 2020 PNCC Annual Report, the COA also observed that the PNCC left the FCA property idle for three years, which deprived the government of an estimated P1.5 billion in possible income.
Chan said “the settlement of PNCC’s outstanding obligations to various national government agencies is not reflected in this proposed lease of the FCA property.”