SM Prime ditches $500M REIT plan

RETREAT SM Prime Holdings, citing the government’s stringent public float requirement, has backed off from plans to raise $500 million from real estate trust funds.

The country’s largest shopping mall developer SM Prime Holdings has shelved plans to raise as much as $500 million from real estate
trust funds (REITs), citing the government’s stringent public float requirement.

“We don’t think we’ll avail of the structure given the minimum public ownership,” SM Prime chief finance officer Jeffrey Lim said in a briefing Thursday.

Anyway, Lim added, SM Prime had completed all its funding requirements for the year.

Under the country’s REIT law, property developers may raise fresh funds by selling assets with recurring revenues, specifically by transferring these assets in a special purpose vehicle that should be listed on the Philippine Stock Exchange.

The new instrument effectively gives investors the option to invest directly in the finished product and not just in the property developer. The law also requires the distribution of 90 percent of income annually, which means that investors can look forward to earning much more from dividends on top of potential stock price appreciation.

Last week, the government’s main tax agency issued rules on the creation of REITs, including a requirement of a 40-percent minimum public ownership for the first two years of the REIT’s listing, before increasing it to 67 percent in the third year.

But REIT proponents like SM Prime had wanted only to sell a 30-percent stake in the special purpose vehicle.

The Securities and Exchange Commission, however, stood by the 40-percent minimum public ownership requirement.

For the second half of the year, SM Prime can meet a profit growth of at least 10 percent “given strong indications,” Lim said.

It was earlier reported that SM Prime had increased its first semester net profit by 14 percent to P4.27 billion from a year ago as rental revenue maintained a double-digit growth.—With a report from Reuters