| Friends of the University of the Philippines Foundation in America |
UP ALUM REPORTS
Vol 03 no 05
E-mail - [email protected]
URL - http://www.upd.edu.ph/oar
May 1997
Special issue on
THE COMMONWEALTH
PROPERTY
DEVELOPMENT
PROJECT
QUESTIONS AND ANSWERS
Published by
UP System Information Office
May 16, 1997
The Commonwealth Property is a 101-hectare property located along Commonwealth Avenue, across the U.P. Diliman Campus. The property is connected to the Circumferential Road 5 (C-5) via C. P. Garcia Avenue which transverses the UP Diliman campus in the east-west direction and via Commonwealth Avenue within half a kilometer in the northwest direction.
This area was acquired by the University of he Philippine Government on March 1, 1949 by virtue of a deed of sale. The Commonwealth area targeted for a commercial development is 98.5 hectares.
The University of the Philippines (U.P.), as a single juridical entity, is the absolute, true and lawful owner of the Commonwealth Property.
The validity of UP�s title over its Diliman campus has been upheld with finality by the Supreme Court in seven cases since 1959.
It will be a business and financial center in Quezon City. The developer will be required to include the following in its development plans:
The UP Charter gives the Board of Regents the power to exercise corporate functions. The Commonwealth Property, sold to UP by the Philippine government, is registered as titled property of U.P., subject to the condition that the disposition of such property by the Board of Regents requires the approval of the President of the Republic of the Philippines.
The planning for the UP Diliman Land Use started in 1949 when a design competition was conducted by the University. The chronology of events is as follows:
UP System Administration
At present, various land leases negotiated by earlier administrations cover a total of 70.49 hectares with an annual rental of only P5.4M; their lease periods range from 4 years to perpetual lease.
The following have been consulted:
In Malacanang
The Arboretum is included in the Commonwealth Property Development Plan not as an area to be developed commercially, but as a forest park to be safeguarded and enhanced.
The General Site Development Guidelines states that:
A proposed Traffic Management Plan has been proposed by the School of Urban Planning and the UP National Center for Transportation Studies (NCTS) to the Quezon City Government for consideration (see plan, annex). But the bidders are expected to submit their own traffic management plans as indicated in the Terms of Reference.
To minimize traffic congestion, the following adjustments have been conceptualized:
The lease period is still subject to consultation, although there are already some options being considered. These are the following:
UP expects a minimum bid of at least 12.5 billion pesos. (See annex)
A UP Systemwide Faculty Committee has been organized to recommend to the BOR the intra-University and inter-AU sharing and allocation of monies generated from the Commonwealth Property Development and other UP real properties. The committee is composed of three representatives of each autonomous unit (two elected by the respective AU University Councils; the third AU member is the Chancellor.) The Chair of this Systemwide Committee shall be elected by the members.
The revenue generated from the Commonwealth Property will:
The Capital outlay requirements for major components of UP Plan 2008 are:
| Component/Program | Requirement | |
|---|---|---|
| 1. | Additional Classrooms and Teaching Laboratories (for 13,500 additional students | 1,080 |
| 2. | Additional Student Dormitories (for 6,000 additional student spaces) | 480 |
| 3. | National Graduate School of Engineering | 4,500 |
| 4. | National Institutes of Health | 500 |
| 5. | UP Mindanao | 600 |
| 6. | UP Open University | 250 |
| 7. | Systemwide Information and Communication System | 300 |
| ---------- | ||
| P6,630 |
| The options: | Implications: |
|---|---|
| Don't develop. | UP acquired this property in 1949 but we have not developed it after 48 years. Meanwhile, we now have more than 1,700 squatter households in the area and many individuals are contesting UP�s title to the property. |
| Turn the Commonwealth Property into a park. | UP has no financial resources to relocate the squatters and to develop and maintain a park. |
| Turn it into a University Town. | This will be an expansion of the present campus core. No significant financial resources will be generated to finance such an expansion or even to improve the current campus core. |
| Let other government institutions use it. | Some government officials have requested permission to use the property for various purposes (e.g., shoe expo, low-cost housing, veg- etable gardens, depot for dumptrucks, book city, office buildings). U.P.will get little or no income from this. |
| UP will develop and manage it. | UP has no resources to implement and manage a large-scale property development project. |
ANNEX
Capital Structure Model Per Terms of Reference
CAPITAL STRUCTURE MODEL
PER TERMS OF REFERENCE
----------------------
| 45% of these winning |
---------------- | bidder's subscribed |
| 55% of total | | shares are paid up |
| initial equity | | within 60 days |
| subscribed by |------| from award |
| winning bidder | |----------------------|
/ | -All in | | 55% of these winning |
/ | common stocks | | bidder's subscribed |
/ ---------------- | shares are to be paid|
/ | up within 5 years |
--------------- / ----------------------
| JOINT VENTURE | /
| DEVELOPMENT |/
| CORPORATION |\
--------------- \
\
\ ------------------
\ | 45% of total |
\ | initial equity |
\ | subscribed by | -------------------
\| UP | | The whole of these |
| -Half in |_____| UP's subscribed |
| common stocks, | | shares are paid up |
| half in non- | | upon incorporation |
| voting preferred | --------------------
| stock at 12% p.a.|
| mandatory |
| dividends |
-------------------
Illustration: Capital Structure Model on a Bid Equivalent of
Pesos 13.75 Billion
45% of the
/ subscribed
/ shares
55% of this / (P6.1875B)
is subscribed / is paid up
------------------------- by winning (13.75B)
| Initial Capitalization | bidder all in \
| (Equity) of Development | the form of \
| Corporation | common stocks \
| | / \ 55% of the
| BID PRICE | / subscribed
| = ----------- | / shares
| 0.55 | / (P7.5625)
| | / to be paid
| | / within 5
| | / years from
| Example: | / incorporation
| If winning bid is |/
| P13.75 Billion /
| /|
| then, / | P5.625 B
| ---------------- / | in common
| | Initial | / | shares
| | Capitalization |/ | / corresponding
| | = P25 Billion |-------- 45% of / to 50% of UP
| ---------------- | this is This / equity
| | sub- (P11.25B) -- is 100%/
----------------------- - scribed | paid up\
by UP | \ P5.625 B
| \ corresponding
| \ to 50% of UP
This is the value equity in
attached to the convertible
leasehold rights preferred
shares
Illustration: Capital Structure on a bid equivalent of P13.75 Billion and a
UP required initial holding to insure 26% (blocking minority) after 30%
dilution (sale to UP Community of 5% and IPO of 25%)
Equity structure
after 30%
9.625 B remaining
55% of this / equity of
is subscribed / Joint
------------------------- by winning (13.75B)/ Venture
| Initial Capitalization | bidder all in \ Partner
| (Equity) of Development | the form of \
| Corporation | common stocks \
| | / 4.125 B 30%
| BID PRICE | / secondary
| = ----------- | / offering
| 0.55 | / to public
| | /
| | / /-------------------\
| | / | 6.0165 B remaining |
| Example: | / ___ | equity |
| If winning bid is |/ P8.595 B / | of UP |
| P13.75 Billion / in common/ \-------------------/
| /| shares \
| then, / | (76.4%) \____ 2.5785 B 30%
| ---------------- / | / secondary
| | Initial | / | / offering
| | Capitalization |/ | / to public
| | = P25 Billion |-------- 45% of /
| ---------------- | this is/ P2.655 B
| | subs- \ equity in ----- 0.7965 B 30%
----------------------- - cribed \ convertible secondary
by UP \ preferred offering of
(P11.25 B) shares preferred
(23.6%) shares to
public and
converted
to common
/-----------------\
T O T A L | 23.1415 B Total |
| common |
| equity |
\-----------------/
Degree of UP ownership 6.0165 B
after 30% dilution ---------- = 26%
23.1415 B
Other Illustrative Figures
If the winning bid is P13.75, 10% of this, or P1.375 B, is to be deposited in a sinking fund by the Development Corporation for the possible redemption of the preferred shares;
P2.655 B will be UP's preferred shares @ 12% p.a. or P318.6 M/year
The 5% of initial equity to be made available for purchase by UP faculty and staff, UP-based foundations and UP-based student organizations is valued at P1.25B.
Impact of the 26% (blocking minority) after dilution:
| 1. | Preferred dividends on old structure | |
| 2. | Preferred dividends on revised structure to ensure blocking minority after 30% dilution | |
| Decline in preferred dividends |
| Last updated June 3, 1997 | Bong Tumanut |
