SM Prime raising P33.5-B for PH, China expansion

By VG Cabuag, BusinessMirror

Posted at Apr 22 2014 07:37 AM | Updated as of Apr 22 2014 03:37 PM

MANILA - Property giant SM Prime Holdings Inc. is set to raise total of P33.5 billion from the debt market both here and abroad during the first half of the year, the proceeds of which would finance its expansion in the Philippines and in China.

Jeffrey Lim, the company’s chief finance officer, said SM Prime is still in the midst of documentation for the planned sale of its P20-billion debt, which would be in the form of retail bonds.

The bonds would be sold domestically and be later registered with the Philippine Dealing and Exchange Corp.

“We will float it either toward the end of the second quarter or early second half [of the year],” Lim said, adding that the company would launch all the P20 billion in one tranche.

On the other hand, Lim said the company should float $300 million (about P13.5 billion), which would involve a syndication of loans, by the end of the first half of the year.

Proceeds from the P20 billion would be used for the further expansion in the Philippine of SM Prime’s chains of malls, residential condominiums and office spaces; the $300 million would be used for its mall expansion in China.

Lim said SM Prime is working on acquiring three more lots in China within the next two years, and all of these would be for its mall development and not for residential ventures.

“I think we have to be more careful [about our residential venture in China]. We have to do the mall first, and then the mall will bring in the value and we will decide whether we will go joint venture or sell the land so it will subsidize the cost of mall development,” Lim said.

“It’s like we buy property now with a portion for the residential but we don’t immediately do the residential project as we do the mall first,” he added.

Lim said the company needs funds for the construction of its Tianjin mall, which is touted to become the world’s biggest mall and which will open next year.

He said planning for its newest mall in Yangzhou has already started and construction is set to begin by next year. The mall will open in 2016.

SM Prime, already Southeast Asia’s biggest property firm, unveiled its five-year plan last week that aims to double both its revenues and net income in five years, or by 2018, through aggressive expansion plans, primarily by putting up more shopping malls and launching residential developments.

Its revenues are expected to reach some P119.6 billion and net income to P32.6 billion by 2018; it will spend some P400 billion during that five-year period.

According to brokerage firm COL Financial Philippines, this implies a compounded annual growth rate of 14.9 percent from 2013 to 2018.

“We believe SM Prime is capable of executing on the plans laid out. Given its larger size, we believe SM Prime has the resources and capability to grow at a fast pace, especially as all the business segments work together under a unified vision for the future,” COL said in a research note.

SM Prime will start its five-year plan this year and is targeting to open at least three new malls in the country with a total gross floor area of about 280,000 square meters to bring its total for the year at 7.5 million sq m.

It will also start the construction of its three new condominium projects, with a total of 7,000 units during the second half of the year. The company is also putting up a convention center in Bacolod and a businessman’s hotel under the Park Inn brand in Clarkfield in Pampanga by the end of the year. According to its plan, by 2018, SM Prime would have a total of 85 malls, 11 of which will be in China. This translates to a total gross floor area of about 11 million sq m from the current 7 million sq m. SM currently has a total of 53 malls, 48 in the country and the rest in China.