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SM Prime to raise funds through REIT in May

Thursday, 04 February 2010 00:00 [ ]

The country’s biggest mall developer and operator said it plans to raise additional capital through the establishment of a retail investment trust (REIT) to finance its capital expenditure this year. Jeffrey Lim, SM Prime Holdings chief financial officer, said the SM group plans to raise an estimated $300 million through a REIT the company would establish in the second quarter.

“It [fund raising] should be done by May,” Lim told reporters on the sidelines of the launching of SM City Fairview Annex.

“We are looking for a size that is good for international investors,” he added.

A REIT is a company that owns and operates income-producing real estate assets. Shares of REITs would to be listed and traded at the Philippine Stock Exchange.

The implementing rules and regulations for the REIT law, which was passed last year, would be out in 90 days, Lim said.

“We believe this will enhance share value of SM prime because we will be able to unlock value of properties by putting into REIT,” Lim said.

Part of the REIT proceeds would help SM Prime fund its P12-billion capital expenditure program this year as it plans to spend around P8 billion to build new malls in Calamba and San Pablo, Laguna, Tarlac, Novaliches and Masinag, Antipolo. The remaining P4 billion will be spent for building one SM mall in Suzhou, China.

This would bring the total number of SM malls from 39 to 44 by yearend.

An excess of $30 million from the REIT proceeds could also be used to pay some maturing debts in March 2011, the SM executive said.

Besides capital raising through REIT, SM Prime is also looking at other funding options such as bank borrowing and sale of retail bonds.

Next year, SM plans to put up four to five additional malls in General Santos, Commonwealth, Lanang in Davao, La Consolacion in Cebu and one in Chongquing, China.

“2009 is a very challenging year because of financial crisis, which economy grew in a minimal. For 2010, the overall economy could grow 2.5 percent to 4 percent. We continue to be confident that we can deliver good growth for SM Prime,” Lim said.

SM Prime expects its net income would have risen by 8 percent to 10 percent in 2009.



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