47-year-old GOCC faces capital depletion in 2 more years: COA

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PINAGKAISA Realty Corp. (PRC), a government-owned property development firm created in 1977, is in danger of running out of funds by mid-2026, according to state auditors, after its only income source — collecting rent on its 1.732-hectare property in Makati City — ended on December 31, 2022.

In a report released last February 28, the Commission on Audit said the PRC is facing “working capital depletion” in two years and eight months without any revenue coming in and continuing average operating expenses of over a million per year.

The firm, an attached agency of the National Development Company (NDC), was supposed to “acquire, buy, sell, exchange, manage, improve, lease, or otherwise deal in real property” but has only collected leases on its four lots with a total area of 17,320 square meters from November 1977 to December 2022.

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In its comment on the audit observations, the PRC management said it is looking for ways to generate income from its properties after the turnover.

The said properties located on P. Domingo St. in Makati City were leased by GE Lighting Philippines (GELP) initially for 25 years ending in September 2002 but extended three more times until it was terminated at the end of 2022.

The lease termination agreement between PRC and GELP was signed on August 30, 2023 and the government firm took possession of the property the following day.

“The absence of a foreseeable source of income after the termination of the lease agreement …and the poor financial condition of the PRC, cast significant doubt on its ability to continue as a going concern,” the audit team said.

On December 6, 2023, the NDC engaged a consulting services firm to conduct a “highest and best use (HABU)” study and valuation of the PRC properties.

“Pending the result of the study, the PRC has been operating without a source of income since August 31, 2023. Impending cash flow and financial difficulties pose significant risks to its capability and sustainability for its continued operation,” the COA noted.

Likewise, the PRC management requested the Department of Finance in a letter dated May 15, 2023 for exemption from paying dividends to the national government starting 2022, citing the need to set aside funds for its operating expenses.

The audit team, however, noted that the government firm still has arrears due to other shareholders on net earnings from 2020 and 2021 totaling P1.288 million.

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