GSIS forms P30-B real estate arm

The Government Service Insurance System (GSIS) has formed a P30-billion real estate holding arm – GSIS Properties Inc. – primarily to manage, develop and sell its land and building assets.

The spin-off of GSIS property holdings, however, has raised the eyebrows of Securities and Exchange Commission (SEC) lawyers because the state-run pension fund used P8 billion of its Treasury Bill holdings currently deposited at the Land Bank of the Philippines as paid-up capital of the new corporation instead of transferring its properties in keeping with its primary goal of liquidating its assets.

On March 31, Deputy Treasurer Eduardo S. Mendiola acknowledged the letter of GSIS senior vice president Richard M. Martinez informing the Bureau of Treasury that the GSIS was assigning P8.08 billion worth of T-bills to GSIS Properties. Mendiola said: "This does not in any way constitute an admission by the bureau of the legality of the assignment made by GSIS.

In a letter to SEC Chairman Lilia R. Bautista last February, GSIS senior vice president Manuel S. Crudo Jr. said GSIS was "forming a wholly-owned subsidiary with the primary purpose of managing and disposing acquired assets obtained in the ordinary course of business.

But in its articles of incorporation, submitted on May 5, 2003, GSIS Properties listed down a number of activities as its secondary purpose such as acquisition of new properties and the issuance of IOUs. GSIS Properties can also forge deals with both public and private corporations or individuals "without limit as to amount and conditions," involving assets of the corporation.

The GSIS Properties board of directors has also been empowered to purchase properties, securities and bonds of other corporations; invest in corporations or businesses outside real estate; and to establish "pension, retirement, bonus, profit-sharing or other types of incentives or compensation plans for employees, including officers and directors.

The GSIS board of trustees stood as nominal stock- GSIS forms holders of the corporation – Winston F. Garcia (president), Hermogenes D. Concepcion Jr. (chairman), and trustees Leonora V. de Jesus , Fulgencio S. Factoran, Ellenita T. Martinez, Reynado P. Palmiery, Aida C. Noceta, Elmer T. Bautista, and Florino O. Ibanez.

Aside from raising doubts on the real purpose of GSIS Properties, SEC lawyers also questioned the timing of such a move, considering that the system is said to be facing financial problems amid growing disenchantment among government employees after the pension stopped processing loans and retirement funds since May this year. The GSIS has loaned out P86 billion to its members.

The state-owned pension fund has long been planning to venture into real estate to recover about P10 billion in losses from investments in the stockmarket.

The GSIS was particularly keen on buying idle state-owned pieces of property at one-third of its value to create more value for its more than 1.5 million members.

It was earlier looking at a 20-hectare property of the Public Estates Authority along Manila Bay that the pension fund wanted to buy for P12,000-P15,000 per sq.m. when its market value is still at around P40,000 per sq.m.

Other properties the GSIS is eyeing include a four-hectare government property in Makati, the Food Terminal Inc. compound and the former International School campus.

The GSIS earlier agreed in principle to acquire the 8.5-hectare Tutuban Center property owned by Philippine National Railways (PNR) at a discounted price of P15,000 per square meter.

Downplaying reports it had liquidity problems, the GSIS had assured its 1.5 million members that it is in the pink of financial health with P181 billion in available funds for investment.

The GSIS said it stopped processing loans and retirement claims to allow it to upgrade its computer hardware, reconcile its manual and computer data, and update premium contributions. The move was in line with efforts to provide better and faster services to its members.

GSIS vice president for public affairs Mernito Razimo earlier said the agency was, in fact, allocating some P20 billion for a new loan window called the retirement loan program.

The window gives GSIS members three payment options. They can pay monthly, chose a specified term, or they can pay monthly interest and postpone the payment of the principal amount at the time of separation or retirement, whichever is applicable. A borrower can also forego monthly payments, deferring all interest and principal payments until the maturity of the loan.

Employees who have completed at least 180 months of contributions are qualified to avail of the loan program. This, he said, is apart from the P6 billion allocated for housing loans. Razimo said the GSIS has scrapped the P500,000 maximum limit for housing loans which means GSIS members can now avail of any amount depending on their capacity to pay.

Apart from the P181-billion investments fund, Razimo said the GSIS also has about P13 billion raised from the insurance programs covering government properties.

GSIS reported a 57-percent growth in its net income last year to P32.25 billion from P20.51 billion the previous year, largely due to the growth in investment income, loans and improved collections.

Total assets of the fund expanded 24 percent to P245.9 billion compared with only P228 billion a year earlier.

Total revenues from loans and investments rose 35 percent to P18.06 billion from P13.37 billion. Thus, the system was able to increase the funding of its pension, housing and other portfolios.

To boost earnings, GSIS is hoping it could generate dollar income from possible lease and purchase agreements with the Department of Foreign Affairs (DFA).

The GSIS said it is in the final stages of discussions with the DFA for the possible acquisition of properties abroad to allow the DFA to own the land where it pays rent for embassies and ambassadors’ residences.

The GSIS plans to set aside P5 billion for such acquisitions. It is currently looking at possible land purchases in 20 to 25 countries across Europe, America and Asia.