Business and General Information
Item 1. Business
(1) BUSINESS DEVELOPMENT
On 18 January 1956, the Company, then known as Ramie Textiles, Inc. was incorporated to engage in the business of manufacture and sale of all types of ramie products. On 11 February 1959 the Company was listed in The Philippine Stock Exchange, Inc.
On 10 June 1994, the SEC approved the Amendment to the Articles of Incorporation of the Company changing the name from Ramie Textiles Inc. to Gaming Interest and Franchise Technologies, Inc. and its secondary purpose, and including a provision denying pre-emptive rights to existing stockholders for any future issue of shares. Upon its conversion to a holding company, the Company sought to identify investment opportunities which will yield attractive returns.
On 10 April 1995, the Company’s name was changed from Gaming Interest and Franchise Technologies, Inc. to Greater Asia Resources Corporation. Subsequently, the Company acquired two (2) parcels of land situated in Tagaytay City with an approximate total area of 510,479 square meters in exchange for 250,000 shares out of its unissued capital stock.
On 11 August 1998, the SEC approved the Amended AOI of the Company changing the name from Greater Asia Resources Corporation to BW Resource Corporation (BWRC). The primary purpose of BWRC is to acquire interests in tourism or leisure-related enterprises, projects, or ventures.
On 17 August 1999, the SEC approved an increase in authorized capital stock of the Company from Php450,000,000.00 divided into 450,000,000 shares to Php2,000,000,000.00 divided into 2,000,000,000 shares with a par value of One Peso (1.00) per share. Out of the increase in authorized capital stock, One Billion Two Hundred Million Pesos (Php1,200,000,000.00) worth of shares were issued to Megaworld Corporation (Megaworld) in exchange for a parcel of land with improvements with a total area of 7,255.30 square meters located at M.H. del Pilar corner Pedro Gil St., Malate Manila and with a fair market value of One Billion Two Hundred Million Pesos (Php1,200,000,000.00). With the entry of Megaworld, the SEC, on October 3, 2000, approved the change in name from BWRC to Fairmont Holdings, Inc.
On 29 June 2002, the Board of Directors of the Company approved the change of the Company’s name from Fairmont Holdings, Inc. to Suntrust Home Developers, Inc. The change of the Company’s name was ratified by the stockholders on November 11, 2005 and was approved by the SEC, on 10 May 2006. The change in name came hand in hand with a change in the Company’s primary purpose or nature of business, from a holding company to a real estate company authorized to engage in real estate development, mass community housing, townhouses and rowhouses development, residential subdivision and other massive horizontal land development. The change in the nature of business of the Company was prompted by the perception that being a holding company no longer appeared to be viable, at least in the next few years. On the same date, the Board likewise approved a Php1,000,000,000 increase in the Company’s authorized capital stock from Php2,000,000,000 to Php3,000,000,000 for the purpose of enabling the Company to finance any acquisitions or projects that it may undertake in the future in line with its new corporate purpose. Out of the Php1 Billion, increase, Php250,000,000 has been actually subscribed while Php62,500,000 has been actually paid-up in cash by Megaworld Corporation, an existing stockholder of the Company.
Sometime in July 2002, the Company acquired from an affiliate, Empire East Land Holdings, Inc. (EELHI), all of the latter’s shareholdings in Empire East Properties, Inc. (“EEPI”). As a result, consolidated financial statements were presented in the third quarter of 2002 and onwards. Prior to such acquisition, EEPI was a wholly-owned subsidiary of EELHI engaged in the development of socialized or low-cost housing projects. In March 2004, the Company’s percentage of ownership in EEPI was reduced from 100% to 60% upon the subscription by EELHI to additional shares of stock of EEPI. On 8 July 2008, EEPI changed its name to Suntrust Properties, Inc. (“SPI”) and increased its authorized capital stock, with EELHI subscribing to such increase. As a result, the Company’s ownership interest in SPI decreased from 60% to 20% and the Company’s control over SPI ceased and, as such, SPI was no longer a subsidiary but was considered an associate of the Company. InJune2013,theCompanyhassold all its remainingsharesinSPI.
On 30 August 2005, the Board of Directors of the Company approved the decrease in the number of members of the Board of Directors from eleven to seven directors and the extension of its corporate term for another fifty (50) years from 18 January 2006. These changes to the Articles of Incorporation were ratified by the stockholders of the Company on 11 November 2005 and were approved by the SEC on 10 May 2006.
In September 2011, the Company acquired 100% of the outstanding shares of stock of First Oceanic Property Management, Inc. (FOPMI). Consequently, FOPMI became the Company’s wholly owned subsidiary and its financial statements were consolidated with the Company’s financial statements starting 2011.
FOPMI was incorporated and registered with the Philippine Securities and Exchange Commission on January 31, 1990. FOPMI is engaged primarily in the management of real estate properties consisting of residential and office condominiums and private estates. FOPMI’s services are covered by management contracts covering the different properties it manages and these contracts assure it of relatively fixed monthly revenues in the form of administrative/management fees. The acquisition of FOPMI was intended to create a new revenue stream for the Company which would complement its existing investments in real estate. FOPMI also holds 100% of the outstanding shares of stock of CityLink Coach Services, Inc. (CityLink), which was incorporated and registered with the Philippine Securities and Exchange Commission on November 7, 2006. CityLink is a domestic company engaged in overland transport, carriage, moving or haulage of passengers, fares, customers and commuters as well as freight, cargo, articles, items, parcels, commodities, goods or merchandise by means of coaches, buses, coasters, jeeps, cars and other similar means of transport.
(2) BUSINESS OF ISSUER
The Company, currently, does not have any business operations and is not offering any product or service. However, its subsidiary FOPMI is engaged in property management of residential and office buildings and private estates.
Thus, the Company is not prepared at this time to identify and describe what business it proposes to do and what products, goods or services will be produced or rendered; its principal products or services and their markets with the relative contribution to sales or revenues of each product or services or group of related products or services; percentage of sales or revenue and net income contributed by foreign sales; distribution methods of products or services; competition; sources and availability of raw materials and the names of principal suppliers; and the Company’s dependency on its customers. Since the Company has not identified the industry in which it will engage in, it is likewise not in the position to discuss any government approval required for its principal products or services or the effect of existing or probable governmental regulations on its business.
FOPMI is engaged in property management and provides vital real estate management services for several residential and office condominium buildings and private estates in Metro Manila. These include basic administrative, housekeeping and security services and special services such as facilities and equipment management, audit and technical support services, finance and account management, and procurement services. FOPMI’s revenue is primarily generated from management fees it charges in connection with its property management services.
FOPMI is very competitive and is determined to perform as the best by assigning dedicated teams to manage over property/building. On-site Property Administrator, Property Engineer and Administrative Assistant/s are assigned to look after each individual property. A pool of experienced professionals – architects, engineers, accountants and other personnel with varying expertise – provides back-up support and services for its individual clients and customer.
CityLink is engaged in overland transport, carriage, moving or haulage of passengers, fares, customers and commuters as well as freight, cargo, articles, items, parcels, commodities, goods or merchandise by means of coaches, buses, coasters, jeeps, cars and other similar means of transport.
The Company or FOPMI is not dependent upon a single or a few customers. No single customer accounts for 20% or more of FOPMI’s sales.
In normal course of business, the Company entered into transactions with related parties, consisting mainly of advances from related parties for working capital purposes and for the settlement of certain liabilities. For more information, please see Note 17 to the Audited Financial Statements.
The Company does not hold any patent, trademark, copyright, license, franchise, concession or royalty agreement upon which their operations are dependent.
Government Approval of Principal Products; Effect of Government Regulations on the Business
The following is a brief description of the principal laws and regulations affecting the real estate business.
Land Title Registration
The Philippines uses the Torrens System of land registration, which provides for a certification of title to real property which is binding on all persons. An owner of real property may register title under the Torrens System if, after proper surveying, application, publication, service of notice and hearing, the Regional Trial Court (“RTC”) or, in certain cases, the Municipal Trial Court, the Metropolitan Trial Court or the Municipal Circuit Trial Court (collectively, “MTCs”) within whose jurisdiction the land is situated confirms the owner’s title to the land in a judgment and issues a decree to register the property in the owner’s name. Persons opposing the registration of title may appeal against the judgment of the RTC or MTCs to the Court of Appeals or Supreme Court within 15 days from notice of the RTC’s or MTC’s judgment. After the period for appeal has lapsed and within 15 days from entry of judgment, the appropriate court will order the Administrator of National Land Titles and Deeds Registration Administration (formerly the Land Registration Authority) to issue the corresponding decree of registration and Original Certificate of Title (“OCT”). Notwithstanding the issuance of an OCT, the decree of registration may still be contested within one year from entry of judgment on the grounds of actual fraud.
Claims Against Registered Land
Once real property has been registered, it may no longer be acquired by prescription. A Certificate of Title is conclusive evidence of ownership binding against all persons, including the government. The title is not subject to collateral attack and it cannot be altered, modified or cancelled, except in a direct proceeding in accordance with law. If registered land is transferred to another person, the Register of Deeds may cancel the OCT and issue a Transfer Certificate of Title (“TCT”) in the name of the new owner, provided that certain required documents are submitted to him and all the necessary taxes are paid. Subsequent transfers are also registered by the cancellation of the latest TCT and the issuance of a new TCT in the name of the latest transferee.
“Quieting” of Title
Claims which cast doubt over title to real property are relatively common in the Philippines. In particular, the boundaries to a registered title may be disputed, and where there is outstanding litigation against an owner of real property it may be possible for the claim to be annotated on the title to the property. Where a claim against title is unfounded, an action may be brought to remove this claim. Transferees of real property will usually require that all outstanding claims be removed from property before they will accept a transfer of title.
Land Title Transfers
An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing Philippine laws and may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. However, a deed, mortgage, lease or other voluntary instrument (except a will purporting to convey or affect a registered land) will not take effect as a conveyance or bind the land, but will operate only as contract between the parties and as evidence of authority to the Register of Deeds to effect registration.
The act of registration is the operative act to convey or affect the land insofar as third persons are concerned. Accordingly, as between two transactions over the same parcel of land, a transaction that is registered in good faith prevails over an earlier unregistered right.
A sale of property that has been registered under the Torrens system typically requires the registered owner of the land to execute a deed of absolute sale in favor of the purchaser. Within ten (10) days after the close of the month when such deed was executed, a documentary stamp tax shall be paid to the Bureau of Internal Revenue (“BIR”), computed at a rate of 1.5% of the purchase price or zonal value of the land as determined by the BIR, whichever is higher. A final tax of 6% based on the gross selling price or current fair market value of the property, whichever is higher, is imposed upon capital gains presumed to have been realized from the sale of such real property and such tax must be paid to the BIR within thirty (30) days after the execution of the deed of absolute sale.
No voluntary instrument can be registered by the Register of Deeds unless the owner’s duplicate certificate is presented with such instrument, except in cases expressly provided for in the Property Registration Decree upon lawful order of a court. The production of the owner’s duplicate certificate, whenever any voluntary instrument is presented for registration, is conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum is binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith.
Under the Philippine nuisance laws, property owners may be liable for acts, omissions or the condition of property when it endangers the health or safety of others, injures or offends the senses, interferes with free passage of any public highway, street or body of water, or hinders the use of property. If a nuisance has been created by a previous landowner, the current landowner will be liable for such nuisance if such landowner knowingly continues the nuisance.
Real property taxes are payable annually on the property’s assessed value. The assessed value of property and improvements depends on the nature of the property. Land is ordinarily assessed at 20% to 50% of its fair market value; buildings may be assessed at 0% to 80% of their fair market value; and machinery may be assessed at 40% to 80% of its fair market value. Currently, real property taxes vary by location but do not exceed 2% of the assessed value in the province and 3% of the assessed value in municipalities within Metro Manila and in cities. An additional Special Education Fund Tax of 1% of the assessed value of the property is also levied annually by provinces and by the cities and municipalities within Metro Manila.
Idle lands are taxed at 5% of the assessed value of the property. Idle lands include any land, other than agricultural land, that is more than 1,000 square meters in area and one-half of which remains unutilized or unimproved by the owner.
Number of employees
As of 31 December 2014, the Group has a total of four hundred ninety two (492)employees. None of the Group’s employees are represented by a labor union or are subject to collective bargaining agreements. The Group intends to hire additional employees if the present workforce becomes inadequate to handle operations but the exact number of additional employees will depend on the needs of the business.
Below is the breakdown of the Group’s employees as of December 31, 2014:
Operations - 352
Administrative - 140
FOPMI maintains a non-contributory post-employment benefit plan that is being administered by a trustee covering substantially all regular full-time employees. Actuarial valuations are made on a regular basis to update the retirement benefit costs and the amount of contributions.