SEC clears Guoco unit’s entry into retail trade

The Securities and Exchange Commission (SEC) has ruled that Prime Orion Properties Inc. and its real estate subsidiary Tutuban Properties Inc. (TPI) can engage in the retail trade business.

In its opinion dated June 14, the SEC said POPI, which is 26.72-percent owned by foreign nationals, can engage in retailing while TPI would have to amend its articles of incorporation to include the intended retail business in its purpose clause.

The SEC opinion was issued in response to POPI’s query on whether they can engage in retail trade and whether they can be considered as a foreign investor and exempt from the pre-qualification requirements under the Retail Trade Liberalization Law.

This was raised by POPI as it disclosed TPI’s plan to explore the retail trade business via the establishment of a department store or supermarket as part of efforts to augment its income. TPI is engaged in the business of leasing commercial stalls and is the developer of the Tutuban Mall in Manila.

In coming up with its opinion, the SEC noted that POPI and TPI are domestic companies partially owned by foreigners and that their paid-up capital are way beyond the required capital under the Retail Trade Law. TPI has a paid-up capital of P200 million or $3.57 million while POPI’s paid-up capital amounts to P2.9 billion.

Under the law, foreign-owned partnerships, associations and corporations formed under Philippine laws, upon registration with the SEC and Department of Trade and Industry, can engage in the retail trade business. The law sets a minimum paid-up capital of $2.5 million (P140 million) to $7.5 million (P420.5 million).

The SEC said POPI and TPI are not considered as foreign retailers, but are "domestic corporations partially owned by foreigners." The law does not require foreign investors, who are not foreign retailers, to meet the pre-qualification requirements.

POPI (formerly known as Guoco Holdings Phils. Inc.) is engaged in real estate and property development, manufacturing and distribution of ceramic tiles, construction-related materials, provision of financial services and hotel project and infrastructure development. The company also owns the local bottling operations of Pepsi Cola.

Prior to the Asian financial crisis in 1997, POPI was among the leading holding companies in the country boasting a proven track record of profitability due to its investment portfolio in the property, manufacturing and financial services sector and its strategic alliance with the Guoco Group, one of the largest and most respected business conglomerates in Asia.

But the group was seriously weakened by heavy debt service and cost increases resulting from the lingering effects of the regional crisis. It continues to be affected by high debt service and limited working capital at both parent and subsidiary levels.

POPI bounced back to profitability last fiscal year after successive years of losses, posting a net profit of P508 million from losses of P38 million. This was primarily due to strong sales volume growth and effective pricing strategies.