Posted on August 08, 2016
SM PRIME Holdings, Inc. can raise
between $500 million and $1 billion should it launch a real estate investment
trust (REIT) on the stock exchange, an option the company continues to explore
amid plans to undertake more reclamation and other projects.
Listing a REIT on the Philippine Stock
Exchange (PSE) remains an option for the property arm of SM Investments Corp.
to finance future projects, its Executive Vice-President and Corporate
Information Officer Jeffrey C. Lim told reporters and analysts in an Aug. 4
briefing in Pasay City.
Asked on the sidelines how much SM Prime
expects to raise from listing such a trust, Mr. Lim said: “[It’s] dependent on
the market but given the size of SM Prime now and the number of malls, I think
it can easily be $500 million to $1 billion.”
Mr. Lim cited the potential of launching
a REIT in raising capital particularly for the reclamation of 1,500 hectares in
Cordova, Cebu. The local government awarded the P138-billion contract to SM
Prime last year.
Venturing into the REIT market may allow
SM Prime to undertake the Cebu project simultaneously with the reclamation of
another 660 hectares of the Manila Bay under a plan awaiting approval from the
Office of the President.
SM Prime won separate contracts worth
P54.5 billion and P50.19 billion to reclaim and develop around 300 hectares
within the jurisdiction of Pasay City and Parañaque City in 2013 and 2014,
respectively.
“As you may have known, we have a P60
billion actually in shelf registration for a retail bond and I think the
liquidity also in the local market is there that if we are given the go signal,
we can immediately start,” Mr. Lim said.
“I think pronouncements from the
government seem to indicate that they’re willing to review the REIT
implementing rules and regulation so that’s another avenue for us to actually
raise the funds for these reclamations,” he added.
Republic Act. No. 9856, which lapsed
into law in December 2009, allows for the establishment of REITs or stock
corporations using a pool of investor fund to purchase and manage
income-generating real estate assets.
SM Prime had intended to launch a REIT sometime
in the second half of 2010 to raise $500 million. It would later shelve the
plan because of stringent rules on the public float requirement and tax
structure.
The Aquino government had applied a 12%
value-added tax on initial transfers of assets to a REIT and required 67% of
outstanding shares in the trust be passed onto public investors in three years.
“REIT will be good for the Philippine
economy as a whole because there will be more investors coming in, there will
be more foreign investors also investing in REIT,” SM Executive Vice-President,
Chief Financial Officer and Corporate Information Officer Jose T. Sio noted.
“In the case of SMIC, I think the
property group, being one of the largest, if not the largest in Southeast Asia,
it’s very advantageous for SM Prime, especially the mall and commercial
business and the hotel business to be implemented under the REIT listing,” he
added.
Aside from expanding its mall and other
operations generating recurring revenues, SM Prime is diversifying its residential
business with a foray into affordable housing development.
SM Prime intends to build 2,000 to 5,000
affordable housing units within properties spanning at least 20 hectares. The
company is investing P1 billion to launch such a development initially in
Cabanatuan within the year, Mr. Lim said.
“It’s more of testing the market.
Depending on the take up and reception, we’re buying more properties for
economic housing -- we call it affordable -- mostly [in] North Luzon and South
Luzon,” added Mr. Lim, who will assume SM Prime’s presidency starting Oct. 1.
Shares in SM Prime closed 65 centavos or
2.22% higher at P29.9 apiece on Friday. -- Keith Richard D. Mariano
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