Halina Mountain Resort - a

HALINA MOUNTAIN RESORT – A JULY 1977 SUMMARY OF THE CASE Victor Herrera, chairman of the board of Blue Heights Realty and Development Corporation, was anxious to launch his first big project, a mineral hot spring resort at Bucal, Calamba, Laguna. Herrera was confident that the resort, dubbed Halina Mountain Resort, would compete favorably against the established ones in the area. However, he wondered whether Far East Bank & Trust Company, the bank which he applied for a P1. 3 million loan for the project, would recognized the merits of his proposal. Background

Blue Heights Realty and Development Corporation was organized in October 1976, to own, add, improve, and manage any real estate so acquired. The company had an authorized capital stock of P1 million and paid-up capital of P900,000. The corporate board is composed of the following: ?Mr. Victor E. Herrera, Sr-Chairman ?Mrs. Patricia F. Herrera-Vice Chairman ?Mr. Victor F. Herrera, Jr-Director ?Mr. Venancio F. Herrera-Director ?Mr. Vicente F. Herrera-Director Herrera was on semi-retirement form a respectable commodities trading firm in Makati and he desired to “leave something for the family”.

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Hectare Land The major piece of asset which the company owned was a 2. 2 hectare land in Bucal, Calamba, Laguna. Herrera inherited 1. 5 hectares of the land from his father in 1974. A few years later, after reaping substantial commissions from commodities trading, he purchased the idle land (700,000 hectares) adjoining his inherited property. Wild grass grew on most of the 2. 2 hectare land but there were small patches planted to sugar and corn. The land was on high ground and overlooked some of the well-known resorts in Calamba.

Herrera had a small rest house built atop the land for his family to hideaway during weekends and summer. During their visits, it was not an uncommon sight for Herrera and his family to see resorts below teeming with people and the shoulders of the highway lined up with parked cars, jeeps, and mini-buses. The resort trade is not a bad business for us, Herrera would muse. Informal Survey In March 1977, Victor Herrera asked his son Victor, Jr. , a business economics graduate of the University of the Philippines, to personally “take a look” at the resorts nearby and gather data and information about them.

Jun reported that most of the resorts offered more or less the same facilities and charged the same prices. He also learned that customers were very particular about cleanliness. Moreover, he found out that neither of the resorts in Calamba nor in San Pedro had a restaurant. Resort customers in Calamba would have to go to Cafe Valenzuela and those in San Pedro, to Naty’s Restaurant. Application with the Ministry of Tourism In May 1977, Victor Herrera, Sr. wrote the Ministry of Tourism (MOT) a formal letter requesting approval for the establishment of a resort at his 2. hectare land. Herrera stated five reasons for going into the resort trade. In due time, after complying with all the “paper requirements”, the MOT granted Blue Heights authority to open a resort. Among the conditions, the MOT, in consultation with Herrera, provided that the resort should only have the following facilities: ?Three (3) one-room bamboo cottages ?Three (3) rest houses ?Adult and children swimming pools ?Tennis court ?Horseback riding facilities ?Restaurant Loan Application In July 1977, Victor Herrera applied for a P1. million loan with Far East Bank and Trust Company. His estimates for the use if the proceeds of the loan are as follows: Construction of a restaurant and 3 one-bedroom cottagesP700,000 Swimming pools (for adults and for children) 350,000 Purchase of furniture and equipment 250,000 TOTAL P1,300,000 The loan application was accompanied by a project study which was prepared by a research outfit in Makati. Herrera believed that a good location and first class facilities are strong factors of Halina Mountain Resort’s projected profitable performance.

He also believed that his son, Jun, could ably act as general manager of the resort and that some of their relatives, who were residing in Calamba, could be relied upon for other key positions. Conclusion Thus, as far as Herrera was concerned, the project is viable and attractive. However, he wondered whether the bank would share his opinion. “If the bank would not, THE they see something I don’t I’ve chosen my son and I’ve chosen a Makati-based research group to evaluate my project proposal. Their reports are unbiased. Can they be wrong? Can I be wrong? ” Herrera pondered.

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