MANILA, Philippines – The Department of Finance (DOF) said it uncovered an onerous lease contract between Chevron Philippines (formerly Caltex Philippines) and a subsidiary of state-owned National Development Company (NDC), which allowed the former to rent out a 1.2-million-square-meter (sqm) property in Batangas for a meager 74 centavos per sqm.
In a statement on Tuesday, January 21, the DOF said the current fair market rental value in the area should be around P17.90/sqm per month.
Batangas Land Company Incorporated, a subsidiary of NDC, rented out land in San Pascual, Batangas, for Chevron to use as an oil import terminal.
With just 74 centavos per sqm, Chevron allegedly only shells out P10.66 million a year for rent.
The DOF said the rental rate should be more than P20 million a month or P257.76 million annually.
"At P10.66 million per year since 2010, the rent Chevron has been shelling out is only around 4% of the P257.76 million per year that current fair market rental rates in the area would suggest," the DOF said.
Based on documents submitted to the NDC Board, the DOF said rentals paid by Chevron over the 44-year period covering 1975 to 2019 totaled only P146.51 million or about P3 million a year, in addition to real property taxes paid by Chevron under the lease agreement.
According to the DOF, the property's current market value is estimated at about P4.9 billion to P5.3 billion, translating into a rental yield of only about 0.2% of the property's value.
"Based on current standards that the state imposes on similar contracts, to have a rental yield of less than 1% is surely grossly disadvantageous to the government and the Filipino people," Finance Secretary Carlos Dominguez III said.
The DOF's latest statement comes as the government goes all out in reviewing deals made with the private sector.