The state owned Bases Conversion and Development Authority (BCDA) lauded the Securities and Exchange Commission (SEC) for recognizing BCDA’s contribution of its development and usufructuary rights (DUR) over the land covering phase 1 (288 hectares) of Clark Green City as its equity or capital share in its joint venture corporation (JVC) with strategic private sector partner, Filinvest Land, Inc. (FLI).
Describing this as a “breakthrough in unlocking the economic value of lands,” BCDA President and CEO Arnel Paciano Casanova, a faculty of the University of the Philippines College of Law teaching Real Estate Law, said that the SEC opinion creates the legal basis for the economic utilization of the land, without having to resort to constitutional amendments.
“This historic development shows BCDA’s innovativeness in the legal management and governance of property rights—without requiring changes to the Philippine Constitution. As such, we did not only set the precedent in the efficient titling of lands but we have effectively freed the economic value of hundreds of thousands of hectares of idle government lands—enabling them to become catalysts of development in the countryside,” Casanova said.
The DUR refers to the “development rights” or the right to use and possess the land. The recent SEC opinion recognizes the contribution of property rights as capital, allowing for BCDA’s contribution of the said DURs, in exchange for the issuance of stocks in the JVC. This development makes the said rights “bankable” without the need to sell the land itself.
SEC’s approval follows BCDA’s submission to the Commission of the valuation of the 288-hectare area (Phase 1) of Clark Green City. The appraisal exercise, which was implemented for equity determination purposes was prepared by global real estate services agency Colliers International Philippines, Inc. Among conditions set by the SEC in recognizing property as capital is the submission of fair valuation equal to the par value of stock to be issued.
To recall, early this year, BCDA offered for public tender the privatization and development of phase 1 of Clark Green City through the formulation of a JVC between BCDA and a private sector proponent (PSP), which has the expertise in land development and management. BCDA selected, through public bidding, FLI as its partner in the planning, development and management of mixed-use and industrial components of phase 1. The selection and award entitled FLI to 55 percent of the outstanding capital stock of the JVC. For its part, BCDA shall assign the DURs to the JVC upon completion of the valuation by a third party independent appraiser. The JVC’s initial Authorized Capital Stock of Php1 million will then be increased in a manner that will reflect BCDA’s subscription as 45 percent and FLI’s 55-percent subscription of the capital stock of the JVC.
Last 8 July 2016, BCDA sought the opinion of the SEC on its proposition to offer DURs in exchange for stock issuance. BCDA asserted: “the DUR clearly satisfies the attributes of an intangible asset” as defined in SEC Memorandum Circular No. 2 (s. 2014). The said circular states that “an intangible asset is an identifiable non-monetary asset without physical substance which may include patents, trademarks, scientific or technical knowledge, or brand names.” The DURs also fulfills the attributes of “identifiability, control, and future economic benefits” as associated to “intangible assets” in the Philippine Accounting Standards.
“This SEC ruling not only facilitates BCDA’s immediate implementation of the 9,450-hectare Clark Green City—the country’s first smart, green and disaster-resilient metropolis—but also sets the precedent for unlocking the value of idle government land for national development projects,” Casanova added.
Clark Green City is envisioned to be a catalyst for economic development given its environmentally sustainable, socially inclusive and technologically integrated features, and strategic location in Capas, Tarlac. At full development, Clark Green City will have some 1.12 million residents, 800,000 workers and contribute a gross output of approximately P1.57 trillion per year to the national economy or roughly four percent share in the county’s Gross Domestic Product (GDP).