Sy’s SM group to proceed with China realty projects

SY FAMILY-LED SM Prime Holdings Inc. is unfazed by the current asset market volatility in China, resolving to proceed with its mall expansion and foray in the residential property business on the mainland.

So far, the stock market downturn has not affected the main business or at least the group’s businesses in China, SMPH chief finance officer Jeffrey Lim told reporters at the sidelines of the Philippine Property Awards 2015 last week.

“If you talk about retail on the ground, it’s still growing,” Lim said. “I think we should be able to withstand whatever headwinds these recent development may have on our investments.”

Lim said the SM group would continue its one-new-mall-a-year pace of expansion, noting that this strategy was not aggressive from the start.

SM Prime’s residential property arm SM Development Corp. (SMDC) is likewise on track to develop residential condominiums in China, beginning with the project in Chengdu, one of the locations where SM already had a mature shopping mall operation.

SMDC was set to build four residential towers in Chengdu at an estimated cost of 150 to 200 million RMB or equivalent to P1.4 to P1.5 billion per tower, Lim said.

“SMDC is already working on the design [for Chengdu],” he said.

SM has existing shopping malls in five locations in China—Xiamen, Jinjiang, Chengdu, Suzhou and Chongqing but not all of them had adjacent space for a residential complex.

“Usually in this development, we start with the mall first so we have an anchor,” Lim said.

SMDC will soon break ground for the first of four residential towers, which will have combined residential units of less than 2,000. “We’re in the process of getting all the permits,” Lim said.

But unlike SMDC’s residential developments in the Philippines, the units to be offered in mainland China would have a bigger footprint of at least 40 to 50 square meters compared to the minimum of 24 sq m locally. “I think that’s what the market wants,” he said.

Unlike in the Philippines where developers raise part of their building cost from pre-selling of inventory, in most jurisdictions in China, they are required to top off the building before they are allowed to sell. Nevertheless, Lim said SMDC could work with such tighter regulation.