Thursday, 4 February 2010

SM Prime to sell $300-million worth of REITs

P12B earmarked for 11 new malls in RP, China
Manila Bulletin

SM Prime Holdings Inc., the country’s biggest mall developer, is planning to raise $300 million from both domestic and international investors by being among the first to issue real estate investment trusts (REITs) in the Philippines.

In an interview yesterday during the opening of the new P500 million annex in SM City Fairview, SM Prime executive vice president Jeffrey Lim said they are currently shopping for a financial adviser that will help them package the fund raiser.

He said they have yet to decide how many and which malls will be included in the asset pool but noted that these will have to be ones that are already providing a regular stream of profits.

Lim said they can be expected to issue the REITs as early as May when the implementing rules and regulations for the REIT law have already been issued. He noted that the law has already been published and the IRR should come out 90 days after the law becomes effective.

“REITs will help develop the capital market by bringing in new investors while allowing us to unlock the value of our properties,” said Lim noting that the size will have to be big enough to attract foreign investors who will provide the issue with liquidity.

Lim said proceeds from the REIT offer will help fund the firm’s capital expenditures program this year amounting to P12 billion of which P8 billion will be used to start construction of five new malls in the country while P4 billion will be spent for its expansion in China.

SM Prime is starting construction this year of malls in Calamba (Laguna), Tarlac, Novaliches, Masinag (Antipolo), and San Pablo (Laguna) which are targeted for opening in 2011. In China, construction will start in Chong Qing.

For next year, SM Prime will start building malls in General Santos City, Commonwealth Avenue in Quezon City, Lanang (second mall in Davao City) and its second mall in Cebu to be located in La Consolacion, South Reclamation project.

Lim said they expects [sic] to add 300,000 square meters to their current gross leasable area of 4.5 million square meters this year and another 300,000 to 350,000 square meters next year.

According to Lim, SM Prime is expected to post a net income growth of 8 to 10 percent in 2009 on the back of revenue growth of 12 to 15 percent, boosted by earnings of new malls as well as rising sales from existing malls.

He added that the firm also expects 2010 to be a better year financially based on the forecast economic growth of as much as 4 percent combined with the opening of five more malls this year.


Neil Jerome C. Morales

LISTED SM Prime Holdings, Inc., the country’s largest mall operator, will invest P12 billion this year to put up 11 new malls until 2011, an official said yesterday.

The Henry Sy-led firm is looking to tap the new Real Estate Investment Trust or REIT Law and secure about $300 million of funds to help finance the expansion.

The new malls will ensure profit growth of the firm, which likely rose by 8%-10% last year, Jeffrey C. Lim, chief finance officer of SM Prime, told reporters at the sidelines of the formal opening of SM Fairview’s second annex.

“[Capital expenditure] for this year will be about P12 billion. We are spending P8 billion for the Philippines and P4 billion in China,” Mr. Lim said.

This will be the second straight year that SM Prime will spend P12 billion, after almost doubling investments from P6.5 billion in 2008 -- P6.5 billion for the Philippines and P5.5 billion for China -- to open three new malls.

This year, SM malls will rise in Calamba and San Pablo in Laguna, Tarlac City, Novaliches in Quezon City, Masinag in Antipolo, and in Suzhou in China, Mr. Lim said.

“There are several options for us, but the major fund-raising vehicle we will look at is the REIT,” Mr. Lim said.

But SM Prime has yet to decide the number of malls to be included in the REIT pending the law’s implementing rules.

In December, the REIT bill, which will allow companies to use the pooled capital of investors to buy and manage property and mortgages, lapsed into law.

A surplus in the REIT proceeds might be used to pay debts, Mr. Lim said. Next year, SM Prime has maturing debts of $30 million.

At the end of the year, SM will have 41 local malls totaling 4.5 million square meters, and four malls in China. “We will also start to construct malls that will open in 2011,” Mr. Lim said.

Next year, SM malls will rise in General Santos, Commonwealth in Quezon City, Lanang in Davao City, La Consolacion in the town of Liloan in Cebu, and in the town of Chongqing in China.

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