Posted on 10:51 PM, May 03, 2010 [ BusinessWorld Online ]
SM Development Corp., the listed property arm of the Henry Sy-led SM mall and banking group, is looking at expanding operations to the provinces in the medium term, an executive said last week.
The move will allow the real estate firm to take advantage of the following created by SM shopping malls outside the “Mega Manila” area.
“There are many requests already from the provinces,” Rogelio R. Cabuñag, president and chief operating officer of SM Development, said in an interview.
“We should be more aggressive so we are building [in the provinces],” he added.
SM Development already has high-rise residential condominium projects in Muntinlupa, Quezon City, Pasay, Parañaque, Makati, and Cavite.
The firm may start its first residential project outside Luzon in the next three to five years, in Cebu.
In January, SM Prime Holdings, Inc. disclosed it had bought a 30-hectare lot from the Cebu City government for P2.7 billion.
The country’s largest mall developer committed to invest around P20 billion to construct a shopping mall, a convention and exhibition center, two hotels, a couple of condominium buildings and eventually, a school and a hospital.
“We are following the malls because that means we will already have the network [in that province],” Mr. Cabuñag said in Filipino.
“[But] they will have to start their projects first.”
By the end of 2010, SM Prime will have 40 malls with 4.7 million square meters of gross floor space in the Philippines, 15 of them in Metro Manila.
Mr. Cabuñag said that as of end-2009, SM Development has about 150 hectares of “land bank,” including in Batangas and Cavite.
For this year, SM Development will spend at least P2.5 billion-P5 billion for land banking. Metro Manila is already saturated with major property companies, Mr. Cabuñag pointed out.
The benchmark capital spending for every high-rise residential condominium unit is about P1 billion-P2 billion, he added.
Profits of SM Development are expected to rise by 30%-50% this year given the continued demand for economic housing units. SM Development’s net income ballooned to P1.8 billion last year from P56.8 million the previous year.
Profits in the first quarter rose by more than half to P632 million due to revenue streams from new projects.
SM Development will prioritize provincial expansion before putting up a residential condominium project in China, which the SM Group has identified as a “growth center,” Mr. Cabuñag said.
Shares in SM Development, which was incorporated as Ayala Fund, Inc. in 1974 before the SM Group of Companies took majority ownership of the company in 1986, closed higher at P6.60 apiece on Friday from P6.50 on Thursday. -- Neil Jerome C. Morales