Posted on April 14, 2015 11:01:00 PM [ BusinessWorld Online ]
By Krista A. M. Montealegre, Senior
Reporter
SM Prime Holdings, Inc. is spending
P20 billion annually to beef up its business in China, with focus on building
homes for the first time near its malls there ahead of a possible real estate
investment trust (REIT) issuance, company officials said yesterday.
SM Prime Holdings, Inc. announced on
Tuesday that it has began building a residential tower beside its mall in
Chengdu. The property conglomerate is spending P20 billion every year to grow
its business in China. -- WWW.SMCITY.CN
In a briefing following the company’s
stockholders’ meeting, SM Prime Executive Vice-President Jeffrey C. Lim said
the yearly budget will be for expansion of the property conglomerate’s mall
business, as well as to support its foray into residential development and grow
its land bank in China.
That budget forms part of SM Prime’s
up to P200-billion capital spending program in the next two to three years in a
bid to double earnings by 2018 from the 2013 level, Hans T. Sy, the company’s
president, said in a speech delivered to stockholders.
Up to 40% of the P200-billion capital
expenditure (capex) budget will be sourced via external sources, mostly debt,
Mr. Lim said.
The property firm may raise P20
billion to P30 billion in five- to 10-year loans in the third quarter to
finance its 2016 capital spending program, he added.
MAIDEN RESIDENTIAL PROJECT
Company Chairman Henry Sy, Jr. said SM
Prime, the Philippines’ second most valuable and the biggest mall operator, has
started the first phase of its maiden residential project in China beside its
mall in Chengdu. The development, which will initially have 300-400 units, will
offer a total 1,500 units that will cater to the middle market.
“Right now, it’s the best time to go
in because land prices are still up within our mall areas and a lot of
competition are not that aggressive because of some circumstances in China,”
Mr. Sy said.
“Overall, it’s the best time for SMDC
to build condominium projects [in China],” he added, referring to SM
Development Corp., the residential arm of SM Prime.
More residential projects will follow
in Xiamen and Jinjiang -- where SM Prime also has existing malls, Mr. Sy’s
brother Hans said. The company also has malls in Chengdu, Suzhou and Chongqing.
SM Prime has opened a mall in Zibo
within the Shandong province last year with a grand launch set later this year.
It is also opening a portion of its biggest China mall in Tianjin -- its
seventh in the mainland -- with a gross floor area of 540,000 square meters
towards the end of the year.
“The price point is a little lower [in
China] -- about P900,000 compared to the same size of P2 million here. It’s
half the price,” he said.
By 2018, or the end of SM Prime’s
five-year plan, the property conglomerate will have nine malls in China, but
China’s share in the listed firm’s business will likely remain at 10% because
its Philippine operations are growing at a much faster pace, Hans Sy said.
REIT
SM Prime is still keen on bringing its
China business public, Hans Sy said. The firm earlier said it may spin off its
overseas projects into a REIT or through listing on the Hong Kong or Singapore
bourses.
“It’s still the direction. Of course,
it depends on what’s going on in China. What I’m looking at in China is a REIT
because of its size,” he said.
REITs are traded in equities markets
like stocks, only that they are invested in real estate directly either through
properties or mortgages.
Shares of SM Prime rose 0.24% or five
centavos to close at P20.50 apiece yesterday.