There seems to be a disconnect between Philippine Plaza Holdings Inc.’s (PPHI) decision to close Sofitel Manila and the firm’s decision to negotiate for an extension of an existing lease contract with Government Service Insurance System (GSIS).
Yes, Virginia, it feels a bit of an oxymoron when, on one hand, PPHI closed the operation of the historic luxury hotel and, on the other hand, is trying to convince the state pension fund, which owns the real estate property where Sofitel stands, to extend to another 25 years its lease agreement.
As explained, the closure is necessary to renovate, spruce up, and, most importantly, upgrade the deteriorated facilities over the years to bring them up to international standards befitting a five-star luxury hotel.
Despite the stoppage in operation, my lion's ear heard that the lessee must continue to uphold the terms of reference in the lease contract agreement. Simply put, PPHI must continue to meet its monthly rental obligations, which are worth millions of pesos. The contract agreement between GSIS and PPHI is still binding and valid with 17 years remaining. It was extended for another 25 years in 2016.
From what I gathered along the business alley, PPHI has yet to provide GSIS its renovation program, the amount of expenditures needed, and, if required, plans to “infuse fresh capital.”
This information is relevant for GSIS to conduct its due diligence relative to the extension sought. Once provided, it is then and only then that the state pension fund will be facing PPHI at the negotiating table.
It, too, paves the way for GSIS to seek the legal opinion of the Office of the Government Corporate Counsel (OGCC) to extend the PPHI lease contract for another 25 years, considering that it still has 17 years to go.
The OGCC safeguards the legal interests of government-owned and controlled corporations, their subsidiaries, other corporate offsprings, and government-acquired asset corporations.
Under the civil code, the lease term is no longer than 25 years but renewable for another 25 years. A number of legal minds tell me that there is nothing wrong with renegotiating a contract lease agreement even before its expiry date.
As a student of history and a chronicler of business events and developments, I am a bit saddened by the closure of Sofitel. Not only was it designed by Leandro V. Locsin, the 1990 National Artist for Architecture, but also because its service is laden with history.
In 1976, the hotel, then known as the Philippine Plaza, hosted the delegates to the International Monetary Fund- World Bank annual meeting held at the nearby Philippine International Convention Center.
Because of its proximity to Manila Bay, it’s actually the hotel of choice for international dignitaries/politicians. Most notable of them were US President Barack Obama, US Secretary of State Madeleine Albright, and most recently, Japanese Emperor Akihito and Empress Michiko.
Other international personalities who stayed in the hotel include Madonna, the Queen of Pop in 2016, and neo-soul/hip-hop Queen Erykah Badu in 2017. And who would ever forget the opera icon Luciano Pavarotti, whose performance in March 1994 was delayed by two days due to a cold, which some believed got worse allegedly because the operatic singer gorged on local mangoes.
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