One expands, the other exits: SM, ALI take opposite routes on China ventures

MANILA, Philippines - Two of the country’s largest property developers are taking different directions with respect to investing in China, with one heading for the exit and the other staying put, as growth in the world’s second largest economy continues to slow down.

SM Prime Holdings Inc., owned by Filipino-Chinese shopping mall tycoon Henry Sy Sr., remains bullish on China while Ayala Land Inc. (ALI) of the Ayala clan has chosen to call it quits – for now.

SM Investments Corp. senior vice president for investor relations Cora Guidote told The STAR the SM Group’s business is “still growing” in China despite problems besetting the country.

Guidote said SM does not intend to exit China any time soon.

“We will pursue moderate expansion of one mall per year in second and third tier cities,” Guidote said.

The SM Group ventured into the China market in 2007 and now has shopping centers in cities like Xiamen, Jinjiang, Chengdu, Suzhou, Chongqing and Zibo.

ALI, on the other hand, seems to have given up on China.

“We’re exiting China as you know. We are just trying to sell the remaining residential units in Tianjin,” ALI chief financial officer Jaime Ysmael said in a press briefing last Friday.

ALI made its entry into China’s property market in 2010 through a joint venture with the Sino-Singapore Tianjin Eco-City Investment and Development Co. Ltd.

The joint venture project involves the development of a $220 million residential complex in a 9.78-hectare property in Tianjin Eco-City.

ALI was contracted to develop more than 1,100 units within a 19-tower residential complex.

Ysmael said it is still not clear as to how ALI would make its exit but it might likely liquidate the company and “distribute whatever remains as capital.”

“We already gave up on other sites that were allocated for us. It is very difficult in the current market. Obviously, it (ALI’s decision to exit) was triggered by what happened in China. We felt it would be very difficult to continue,” he said.

When asked if ALI is still exploring opportunities in other areas in China, Ysmael said “not right now.”

Instead, the local property giant wants to focus its attention on other countries within the Association of South East Asian Nations such as Indonesia and Thailand.

“We have not done anything yet other than prospecting. Asean is what we’re really looking at but again it depends on the opportunity that comes. We really have to be careful in terms of evaluating the right project. We’re very particular about the partners,” Ysmael said.

Ysmael, however, said ALI has no regrets in entering China’s property market as it served as a learning ground for the company when it came to international ventures.

“We learned a lot. It opened our eyes on how they actually operate. They are really into scale, very massive projects. They want things done right away. We’re able to gain access to some of their supply chain and on the way they construct as well,” he said.

ALI, however, is not alone in its decision to get out of China as a pack of investors are leaving the world’s second largest economy due to rising costs, increased regulation, and an economic slowdown.