SM Prime grows land bank in key thoroughfare

Posted on June 28, 2015 09:13:00 PM [ BusinessWorld Online ]
By Krista A. M. Montealegre, Senior Reporter

SM Prime Holdings, Inc., the property holding firm of tycoon Henry Sy, Sr., has beefed up its land bank along the Philippines’ busiest highway.

FILE photo shows SM Prime Holdings Executive Vice President Jeffrey C. Lim at the company's analyst and media briefing.

SM Prime Executive Vice-President Jeffrey C. Lim told reporters last week the company recently purchased about two hectares of land from DMCI Property Developers, Inc. located near the Guadalupe station of the Metro Rail Transit (MRT) Line 3.

“It’s a big block owned by DMCI. Siguro nalakihan sila (Maybe DMCI thought it was too big) so they sold to us a portion of the property,” Mr. Lim said, but declined to provide the value of the land.

The acquisition of the Guadalupe property brings SM Prime’s land bank along Epifanio de los Santos Avenue (EDSA) to 12-14 hectares, consisting of roughly six chunks of land located in Makati, Ortigas, Mandaluyong and Quezon City.

“Who can argue about EDSA?” Mr. Lim said when asked why the developer was increasing its land bank on the country’s major highway.

SM Prime may launch residential projects with a retail component on the ground floor within these lots in the next two years, he said.

STRATEGIC

SM Prime’s strategic move to grow its land bank along EDSA is a manifestation of the confidence of developers in the role of the transport system in drawing its target market to its developments.

“Commuter-based residential and retail developments attract the target market due to convenience and ease of transport to and from their place of work. Foremost of this target market are those Metro Manila workers -- who live within Metro Manila during weekdays, but reside in the fringe provincial areas during the weekend,” Claro dG. Cordero Jr., head of research and valuation at real estate advisory firm Jones Lang LaSalle, said in a mobile phone message.

Commercial land values along EDSA have increased at an annual cumulative average growth rate of approximately 15% over the last 10 years, Mr. Cordero said.

“Developers are banking on the efficiency of existing and future developments, where it is possible for seamless commute from Metro Manila to other provincial areas -- through the planned MRT lines and the ongoing Skyway projects,” he added.

At end-March, SM Prime had a land bank of 177.5 hectares for its condominium developments, some of which could be converted into mixed-use developments, according to a presentation to investors uploaded on its Web site.

The SM Group has also won three reclamation deals over the last two years, the latest of which is a P138-billion 1,500-hectare project in Cordova, Cebu.

The cities of Pasay and Parañaque, in 2013 and last year respectively, both awarded to the SM Group separate contracts to reclaim and develop around 300 hectares each in Manila Bay under their jurisdiction for P54.5 billion and P50.19 billion, respectively.

SM Prime, however, must hurdle several government approvals before it can proceed with the reclamation projects.

SM Prime reported a consolidated net income of P12.6 billion in the first quarter, up 176% year on year, due to a one-time gain from the sale of securities and sustained growth in its shopping mall and residential businesses.

Even without that one-off gain, SM Prime’s profit was still up 14% -- picking up from the 11% growth seen a year earlier.

SM Prime is part of Sy-led SM Investments Corp., which has core businesses in retail, banking and real estate.

The Sy family also has interests in gaming, geothermal energy and infrastructure.
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