Legislature approves two 15-year lease extensions on public lands

The Legislature approved yesterday two separate requests for 15-year public land lease extensions after a lengthy discussion mostly on some lawmakers’ concern about the lack of a provision requiring property value appraisal for lessee L&T Group of Companies Ltd.-REM International Inc., and breaches of lease agreements both by L&T and V&C Enterprises.

But Public Lands Secretary Oscar M. Babauta, during a joint session of the Senate and House of Representatives, clarified that the breaches have since been addressed and “were not material breaches [that] would merit lease termination.”

In the end, the Legislature approved the two lease extensions.

Rep. Ray Yumul (R-Saipan) and Rep. Ray Basa (Cov-Saipan), among other lawmakers, asked Babauta why there’s no required fair market value assessment for L&T.

Babauta said the original lease did not require such. He said if he were at the helm of DPL’s predecessor, Marianas Public Land Corp., he would have made sure it’s required.

But Babauta, a former House speaker, said DPL cannot afford to go into court battle for the next five years should L&T file a complaint against DPL for making material changes to the original lease agreement.

“I’d rather spend those money for…homesteads than to pay counsels,” he told lawmakers.

Babauta said the L&T rate, even without appraisal, is “fair.”

Of the 29 members of the Legislature, only two were absent—Rep. Froilan Tenorio (Cov-Saipan) and Rep. Sylvester Iguel (Cov-Saipan). House Speaker Eli Cabrera (R-Saipan) said the two were “excused.”

By a vote of 27-0, the Legislature adopted Joint Session Resolution 17-6 approving V&C Enterprises’ request to extend its lease by 15 years.

The Legislature also adopted by a vote of 26-1 Joint Senate Resolution 17-6 granting extension to L&T’s lease.

Sen. Luis Crisostimo (Ind-Saipan) was the only one who voted “no.”

In a later interview, Crisostimo said L&T’s extension proposal should have been rejected to force property value appraisal and for the government to be able to demand a higher rate.

DPL’s Babauta said if the Legislature decides to reject L&T’s proposed lease extension, DPL will be forced to issue a request for proposal for the property.

But he said the chance of having anybody else interested in the same property during these tough times is slim.

Babauta, in separate letters to the Legislature, said V&C and L&T have maintained good relationships with DPL.

He said although both breached the leases, these were resolved in a timely manner and did not entail lease termination.

Among the breaches were late payment of rentals and charges; failure to submit gross receipt reports, certified financial statements and insurance documents; failure to secure DPL’s prior written consent for subleases/renewals of subleases, the execution of mortgages, conveyance, construction, construction/demolition/improvements whose value exceed a specified amount in the lease and for activities not indicated in the lease’s purpose.

Babauta, in responding to lawmakers’ questions about the breaches, reiterated that these breaches have since been corrected.

Babauta also made it clear that it’s common among DPL’s clients to breach the leases but they would immediately correct those once they were brought to their attention.

DPL touted the economic benefits to the CNMI of approving 15-year lease extensions for L&T and V&C.

L&T, for example, has paid $152,989.20 since the lease execution in 1986. It currently pays DPL $8,851.99 annually for the lease in Lower Base.

L&T’s original lease was signed on Feb. 13, 1986. The leased area is some 12,225 square meters in Lower Base, where the company conducts the business of grocery warehousing, moving, loading, unloading and storage of property, and related activities.

DPL also said V&C has paid $199,635 since the lease was executed in 1986. This total includes the percentage of the fees that DPL receives from V&C’s subleases. V&C currently pays DPL $3,370 annually for the lease.

“Should the 15-year extension [of V&C] be approved, the subsequent annual lease rentals will be based on a percentage of the appraised market value of the property, which will be reappraised every five years,” DPL’s Babauta said.

V&C’s original 25-year lease was signed on March 11, 1986, involving two parcels of land. One was approximately 909 square meters and the other, 1,072 square meters, both in San Roque. DPL said there were three amendments to the lease between 1996 and 2004.

V&C’s lease expired on April 10, 2011. DPL said the lease extension request was received just prior to the expiration. The department said Victoria B. Camacho, now the president of V&C Enterprises, was not aware of the impending lease expiration because her late husband, Francisco DLG. Camacho, conducted all the business aspects of the lease. Mrs. Camacho, during the session, asked lawmakers to approve the lease extension.

Any lease and extension of lease of public land consisting of more than 5 hectares requires legislative approval.