October 08, 2014

BCDA appeals high court ruling on SM land deal

The Bases Conversion Development Authority has reportedly filed a motion for reconsideration of the Supreme Court ruling that compelled the agency to proceed with a Swiss challenge on a land deal involving SM Land Inc (now folded under SM Prime Holdings Inc -SMPH). SM Land has earlier entered into a joint-venture agreement with the BCDA on the development of a 33.1-hectare property billed as Bonifacio South Pointe.

However, the BCDA has decided to terminate the agreement and subject the deal to a competitive bidding. In its appeal to the court, the BCDA argued that the deal will cause the government to lose up to P12b in foregone revenues given that SM Land’s unsolicited offer effectively valued the property at P38,500/sqm vs. the zonal valuation of P100,000/sqm and a market value that is conservatively appraised at P78,000/sqm. A recent auction also fetched an offer of up to P500,00/sqm for a 1,600sqm lot.

Our take: The BCDA appeal is largely expected. However, we note that SM secured the deal with the BCDA in 2010 when land prices in the area were not as expensive as recent valuations. Given the prevailing circumstances when the deal was crafted, the Supreme Court has deemed the negotiations between the BCDA and SM Land as successful and it took note of BCDA’s commitment to put the proposal to a competitive challenge. – WealthSec