2009 R - 114 - ADOPTING THE TERMS OF REFERENCE TO ENTER A LONG TERM LEASE AGREEMENT REGARDING THE OLONGAPO CITY MALL

EXCERPTS FROM THE MINUTES OF THE REGULAR SESSION OF THE SANGGUNIANG PANLUNGSOD OF OLONGAPO, HELD ON AUGUST 19, 2009 AT THE CITY HALL.

PRESENT:

Hon. Cynthia G. Cajudo - - City Vice-Mayor & Presiding Officer
Hon. Gina Gulanes-Perez - - - City Councilor
Hon. Rodel S. Cerezo - - - - “ “
Hon. Sarah Lugerna Lipumano-Garcia- - “ “
Hon. Edwin J. Piano - - - - “ “
Hon. Angelito W. Baloy - “ “
Hon. Aquilino Y. Cortez, Jr.- - - “ “
Hon. Anselmo A. Aquino- - “ “
Hon. Elena C. Dabu- - - - - - “ “
Hon. Jonathan G. Manalo- - - - “ “
Hon. Cheenee F. Hoya- - - - SK Federation President


ABSENT:

Hon. John Carlos G. Delos Reyes- - City Councilor
Hon. Carlito A. Baloy - - - President, Liga ng mga Barangay

RESOLUTION NO. 114
(Series of 2009)

A RESOLUTION ADOPTING THE TERMS OF REFERENCE TO ENTER A LONG TERM LEASE AGREEMENT REGARDING THE OLONGAPO CITY MALL BY AND BETWEEN THE OLONGAPO GOVERNMENT REPRESENTED BY THE HONORABLE CITY MAYOR JAMES GORDON, JR. AND THE WINNING BIDDER

WHEREAS, with majority decision of the members of the Sangguniang Panlungsod, a Resolution No. 54 (Series of 2008) was approved on April 23, 2008, entitled: “A Resolution Authorizing Hon. City Mayor James Gordon, Jr. To Prepare The Terms Of Reference To Bid Out For Long Term Lease, The Olongapo City Mall;”

WHEREAS, to streamline the requisites for the bidding of the long term lease of Olongapo City Mall (OCM), members of the Sangguniang Panlungsod approved Resolution No. 79 Series of 2009 on June 24, 2009, entitled: “A Resolution Superseding Resolution No. 54, Series Of 2008 And Such Other Previous Resolutions Inconsistent Thereto, Primarily Authorizing The Honorable City Mayor James Gordon, Jr. To Negotiate, Enter Into And Sign A Long Term Lease Agreement With The Winning Bidder, And To Prepare The Terms Of Reference Regarding Such Bidding, Consistent With This Resolution, Regarding The Olongapo City Mall;”

WHEREAS, the adoption of terms of reference is deemed necessary in entering a long term lease agreement regarding the Olongapo City Mall by and between the Olongapo Government represented by the Honorable City Mayor James “Bong” Gordon, Jr. between the winning bidder;

NOW, THEREFORE, on motion of Councilor Gina G. Perez co-sponsored by Councilors Rodel S. Cerezo, Edwin J. Piano, Angelito W. Baloy, Aquilino Y. Cortez, Jr., Anselmo a. Aquino, Elena C. Dabu, Jonathan G. Manalo and Cheenee F. Hoya, with unanimous accord of Sangguniang Panlungsod, the following conditions in the Terms of Reference resolved to be satisfied:


TERMS OF REFERENCE

1. The term of the lease shall be forty-eight (48) years to commence December 1, 2009.

2. The Annual Lease Rate shall be based on a fixed annual lease amount which shall be assessed and approved by the City and contained in the agreement to be entered into with the winning bidder/lessee. In choosing the fixed annual lease amount, the City will be guided but not limited to an amount within the range of 5% - 10% of the prevailing gross rentals inclusive of the rental income of OCM for existing retail space at the time of bidding and the appropriate market-determined property value benchmarks, whichever provides the best long term value for the City. The following to be excluded in the determination of the Fixed Annual Lease Rate:

a. To encourage expansion and development by lessee, the City will not consider future income that the lessee may generate from additional structures or trade space erected by the lessee during the term of the lease contract.

b. Likewise, considering that the lessee will manage and operate the OCM for the duration of the lease at its exclusive cost and expense, CUSA charges, parking fees, exhibit fees and all other sources of mall revenues will not form part of gross rentals as mentioned in par. 2 above.

3. The lease and the agreed rental amount will cover and include the following area/s, rights and assets:

a. Areas:

 All existing property inclusive of but not limited to the mall structures, improvements, the parking area/s, the creek side improvements.

The above notwithstanding, it is understood that the winning bidder, as the lessee will not own any of the above assets. Further, all existing liabilities of OCM will be for the account of and paid by the City.

b. Rights:

 The lessee will have absolute control of the management and operation of the OCM subject to the provisions elsewhere in this document.

 The right to all rental income from all the OCM’s existing and future lessees/stall occupants within the entire 48-year lease.

 The entire amount corresponding to the security deposits of the existing tenants will be credited to the account of the lessee. Thus, the winning bidder will be exclusively responsible to and liable for the security deposits of all tenants.

c. Equipment:

The lessee will have full use of all equipment which are or may be found on the properties subject of the lease.

4. OCM has been a profitable venture for the City. To ensure continued earnings and stability, management of the mall must be awarded only to a reputable business entity or group with an established track record in retail operations and strong financial capacity. Pursuant to the latter, all bidders must meet the following minimum criteria:

 A publicly or privately held corporation or group of companies with common majority shareholders which has been directly engaged in the management of a retail and/or store leasing operations for a period of at least twenty (20) years;

 The bidder must have a minimum of Php 1.0 Billion annual sales revenues and an aggregate bank credit line facility of Php 1.0 Billion either through group shared lines or individual corporate lines;

 The bidder must be operating profitably based on the last five (5) years as per audited financial statements;

 The bidder must have no record of loan delinquency with creditors. For this purpose, “delinquency” is defined as any record of delayed or defaulted loan payments; and,

 The net worth of the bidder must be at least Php 150 Million as per its 2008 Audited Financial Statements.

5. All bid proposals for the lease of the above described property, rights and assets must contain all of the following:

a. A provision for funding the service and retirement of all existing obligations of the OCM with the Development Bank of the Philippines (DBP) and the Land Bank of the Philippines (LBP). These obligations, as per the original terms of credit with said banks, amount to One Hundred Fifty One Million Pesos (Php 151,000.000) amortized on varying dates over the next ten (10) years.

b. An unequivocal declaration by the bidder to comply with the payment schedule set by DBP and LBP and contained in the loan agreements with the City. If the amounts to service and retire the bank obligations of the OCM/City be in excess of the agreed final amount of the annual lease, said excess will be considered as advances on and applied as payment/s for future lease obligations.

6. As part of City’s effort to implement genuine and full privatization of business-related government assets and entice credible bidders, barring any legal restrictions, the winning bidder shall be given the option to “offer to purchase” the OCM property & Calvary Property at any time during the lease period. Lease payments made prior to the exercise of said option and actual purchase will form part of and be applied as payment of the agreed purchase price. Further:

a. All realty taxes for the subject property/ies including any additional structures, improvements and/or renovations shall be for the account of and paid by the City.

b. However, should the winning bidder/lessee opt to exercise the option given in par. 6 above, realty taxes will be for the account of and paid by the winning bidder/lessee starting the date that titles thereto is/are transferred to it by the City.

7. On the other hand, in the event a third party offers to purchase the OCM and/or Calvary properties, the lessee is given and has the “right of first refusal.” In the event the lessee opts not to exercise its right of first refusal, the City may sell the same to the third party. However, it is understood that the City will ensure in an appropriate agreement prior to the sale that the third party/buyer will respect and honor the 48-year lease between the winning bidder/lessee and the City.

8. The winning bidder will have the option to pre-terminate the lease at any time and for whatever reason provided that written notice of pre-termination must be given at least Three Hundred Sixty (360) days prior to intended date thereof. Pre-termination as per these guidelines will be subject to any penalties.

9. The winning bidder shall be required to put up a performance bond equivalent to an amount to be determined within the range of 5%-10% of the present value of the overall value of the lease contract for its 48-year term. The performance bond shall apply to the period the loans of the bank remain outstanding. Once all outstanding loans, as of the bid date, are fully paid, the winning bidder will no longer be compelled to put up a performance bond.

10. The winning bidder shall assume and exercise full management discretion and authority over the OCM for the entire term of the lease contract subject to par. 8 above. Accordingly, the winning bidder/lessee will have the exclusive control and management of OCM and the Calvary properties such as but not limited to the following:

 Autonomy in decision-making vis-à-vis management and/or operations.

 Review, evaluate, amend, change or modify all existing operational practices which the lessee may deem necessary including but not limited to the contracts with the tenants of the OCM.

 Exclusive right to all revenues and liability for all expenses of OCM and use of all OCM funds.

11. To ensure the success of the transfer of the management and operations of the OCM, the City shall respect the autonomy and financial authority of the winning bidder over the leased properties. Hence,

b. For the duration of the lease, the City will not mortgage or collateralize the property and buildings of the OCM for the purpose of securing debt of any kind the term of the lease contract.

c. To encourage winning bidder to invest in mall improvements, equipments and machinery to the existing structure of the OCM, the winning bidder/lessee will be allowed, enjoy and/or granted the following rights and/or privileges:

 It can build additional structures and facilities within the leased premises and/or enhance existing structures and facilities.

 It can remove said improvements, equipments and machinery upon pre-termination or conclusion of the lease without any penalties or fees. However, in this instance, the lessee will have to undertake all repairs of the mall facilities made necessary by the pull out of improvements or machineries.

 On the other hand, the City may request that said improvements, machinery and/or equipment be left behind. In this instance, the lessee will be compensated by the City for the depreciated value thereof base on a 10-year life.

 The winning bidder/lessee will be granted tax exemption and a tax holiday from locally mandated taxes for the first five (5) years of the lease contract.

 The existing jeepney terminal will be retained by the City at its current location for the entire term of the lease. In the event that there are serious concerns and need to relocate the said terminal, the lessee will be given the option to provide a space for the terminal within the OCM area.

12. In fairness to and consideration of the winning bidder, effective immediately, the City will desist from renewing any tenant contract and will only extend these existing contracts until December 31, 2009, at which time a winning bidder will have been determined.

RESOLVED, AS IT IS HEREBY RESOLVED, by Sangguniang Panlungsod in session assembled, to adopt, as it hereby adopts the terms of reference to enter a long term lease agreement regarding the Olongapo City Mall by and between the Olongapo City Government represented by the Honorable City Mayor James Gordon, Jr. and the winning bidder.

APPROVED UNANIMOUSLY, August 19, 2009.


CYNTHIA G. CAJUDO
City Vice-Mayor & Presiding Officer


GINA GULANES-PEREZ JOHN CARLOS G. DELOS REYES
City Councilor City Councilor
(Absent)


RODEL S. CEREZO SARAH LUGERNA LIPUMANO-GARCIA
City Councilor City Councilor

EDWIN J. PIANO ANGELITO W. BALOY
City Councilor City Councilor

AQUILINO Y. CORTEZ, JR ANSELMO A. AQUINO
City Councilor City Councilor

ELENA C. DABU JONATHAN G. MANALO
City Councilor City Councilor


CARLITO A. BALOY CHEENEE F. HOYA
President, Liga ng mga Barangay SK Federation President
(Absent)

ATTEST:

ELFLIDA S. SALMON
Council Secretary

APPROVED BY HIS HONOR, THE CITY MAYOR ON______________________.


JAMES GORDON, JR.
City Mayor

ATTEST:

DELFIN A. JUICO, JR.
Secretary to the City Mayor