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SM Prime plans to raise $600 million thru REIT

Posted on 10:34 PM, May 06, 2010 [ BusinessWorld Online ]

SM PRIME Holdings, Inc., the country’s largest mall operator, may tap as much as $600 million of funds through real estate investment trust (REIT) from local and foreign investors, an executive said yesterday.
Jose T. Sio, SM Investments Corp.’s chief financial officer, said the fresh funds will be used to expand mall operations and pay debts.
The latest figure, higher than the initial $300-million target set in February, is the biggest amount so far disclosed by a local firm for a foray into the REIT.
“Our target is about $500 million...it could be more [at] $600 million,” Mr. Sio told reporters at the sidelines of the holding firm’s fifth listing anniversary celebration in Makati. “This depends on the demand,” he added.
SM Investments is the parent firm of the Sy family, which is into retail (SM Retail, Inc.), malls (SM Prime), banking (Banco de Oro Unibank, Inc. and China Banking Corp.), property (SM Development Corp.) and hotel and entertainment businesses.
Mr. Sio said that once the final implementing rules for the REIT are out, SM Prime will be ready to tap funds.
He added that the company has already conducted road shows to encourage investors in Hong Kong, Singapore, the United States and Europe.
In December, the REIT bill, which will allow companies to use pooled capital of investors to buy and manage income-earning property and mortgages, lapsed into law. Last month, the Securities and Exchange Commission released a draft of the implementing rules for the REIT law.
“[Additional funds] could accelerate expansion of SM Prime, and at the same time retire some debt,” Mr. Sio said.
Last year, SM Prime has committed to build at least one mall per year in China, where it has three malls to date.
This year, SM Prime has allotted P12 billion-P8 billion for the Philippines and P4 billion in China for capital expenditures. Furthermore, faster growth will prompt the company to revise the expansion plans after the elections, Mr. Sio added.
SM malls will rise in Calamba and San Pablo in Laguna, Novaliches in Quezon City, Masinag in Antipolo, and Suzhou in China this year.
By the end of 2010, SM Prime will have 40 malls covering 4.7 million square meters of gross floor space in the Philippines.
In mid-April, property giant Ayala Land, Inc. also signified its intent to secure a minimum $300 million from the REIT for additional capital.
Shares in SM Prime, whose profits went up by a tenth to P1.9 billion in the first three months of the year on the back of a 15% revenue increase to P5.4 billion, were unchanged yesterday at P9.90 each. -- Neil Jerome C. Morales
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