It is a potential deal that will position the state-run pension fund Government Service Insurance System (GSIS) as a key enabler of President Marcos’ “Build Better More” infrastructure program while freeing up funds for the multibillion-peso modernization of the iconic but aging luxury hotel Sofitel Philippine Plaza Manila along Manila Bay.
The GSIS has proposed to swap its future income as landlord of Sofitel Philippine Plaza Manila for shares in the offshore development arm of the hotel’s Japanese owner, construction firm Kajima Corp. and its Hong Kong-based partner, Allied Properties.
“Discussion is ongoing about further developing the hotel, which was done in the late 1970s. If ever we agree on a common goal forward, GSIS envisions that the present value of the long-term lease, should it be extended, form part of our equity in their foreign partners,” GSIS president Wick Veloso said in an interview with Inquirer.
In a separate interview, Philippine Plaza Holdings Inc. (PPHI) president Esteban Pena Sy said that as the hotel was now almost 50 years old, it would need a major renovation to remain competitive, especially after the Manila Bay reclamation, to which the hotel has already lost its beachfront.
PPHI had asked the GSIS to extend the lease period for the entire estate—now good for only 18 years or until 2041—to allow it to recover its investment of about P3 billion to P4 billion to refurbish the hotel, Sy said in a phone interview.
“The hotel is almost 50 years old. A lot of retouching needs to be done. We are planning to change even the pipes, cooling system, boiler; change all the windows in the building because the aircon is leaking out and wasting a lot of energy; beautify the hotel to keep the hotel competitive after the reclamation; replace elevators, recondition escalators,” Sy said.
Under Veloso’s leadership, Sy said the GSIS was “very reasonable” and “receptive” to the proposed extension.
“They’re suggesting maybe we can capitalize the income for so many years and use the income to invest in our foreign mother company. I think that’s a good idea,” he added.
Back in 2018, the past GSIS leadership tried to evict PPHI from two lots used as parking area that the hotel was accused of occupying illegally. But just last week, the GSIS and PPHI amended their contract of lease to clarify that the deal includes the original building, landsite and previously disputed complementary lots, ensuring the hotel’s ongoing operations in the Pasay City area, where it occupies more than five hectares.
The amendment had clarified the “vague” provisions of the old contract, Sy said.
High-performing asset
Sy noted that the Softel hotel, which has more than 500 guest rooms (total number is 606 but some are used for residence of foreign employees), has been “one of the high-performing assets” of GSIS.
“We have been paying GSIS based on a percentage of gross revenue and for the past few months, we paid historical high amount of rental. That is good news..and that is also because we’re getting historical [high] support from GSIS,” Sy said.
On a monthly basis, Sy said PPHI was always paying more than P10 million, hitting as high as P18 to P19 million during the peak season like in December.
Explaining his proposal, Veloso said future rentals, depending on how long the lease extension would be agreed upon, would be computed in net present value and converted into equity not in PPHI but in an offshore unit of Kajima and Allied Properties.
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The article was originally published in Inquirer.NET and written by Doris Dumlao-Abadilla
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