SM Prime readies $3.4-B major expansion program

SM Prime Holdings Inc., recently reorganized as the main property arm of Henry Sy’s SM Group, is investing $3.4 billion over the next two years in line with an aggressive expansion program, briefing materials disclosed by the company showed.

SM Prime, already the country’s biggest mall operator with 47 shopping centers in the country and five in China, said capital spending “will be accelerated to pursue highly attractive opportunities in the market.”

Broken down, SM Prime said it would spend $1.5 billion next year and another $1.9 billion in 2015 for the expansion of its land bank, building more malls, roll-out of office space to tap the business process outsourcing market and to “optimize” existing properties.

These plans follow a merger which combined what used to be the mall operating arm with the Sys other businesses involved in residential condominiums, commercial operations, hotels and leisure.

The company is expected to spend $1.4 billion this year—much higher than the $800 million it spent in 2012, the briefing materials showed.

SM Prime said in its presentation that it would finance capital spending over the next two years through a combination of internal cash, debt and equity.

The combined property group now has about 825 hectares of total land bank and posted revenues of about $1.3 billion as of end-2012.

About 53 percent of revenues still came from shopping malls, with 37 percent coming from residential sales.

Commercial developments contributed 5 percent to revenues, following hotel/ conventions and leisure and resort, which accounted for 3 percent and 2 percent, respectively.

Jose Sio, chief financial officer of SM Prime’s parent company, SM Investments Corp., said investments next year would be higher, mainly due to the property group.

“All subsidiaries are in growth and expansion mode, especially property, now that they are under one roof,” Sio told reporters.

He added that the restructuring, which would be completed by early 2014, will also make it more efficient for the group, in terms of planning.

SM Investments, which owns the Philippines’ biggest bank, is also a major player in consumer retail. Outside its core businesses, it owns stakes in gaming firm Belle Corp., which is building a casino in Entertainment City along Manila Bay, as well as energy, mining and toll roads.

For the rest of the year, SM Prime will launch SM City BF in Parañaque. SM Megamall will also be expanded with the opening of Building D. It will have 48 shopping malls in the Philippines by the end of 2013 with a combined floor area of 7 million square meters.