SM Prime earmarks P12 billion for expansion of RP, China malls

MANILA, Philippines - Shopping mall giant SM Prime Holdings Inc. has set a P12-billion capital expenditure program this year to further expand its reach and take advantage of a resurgence of consumer confidence and spending amid a global financial downturn.

“We remain bullish about the long-term prospects of the Philippines. With this in mind, we are pursuing expansion plans,” said SM Prime president Hans T. Sy at the company’s annual stockholders’ meeting yesterday.

Sy said the company continues to see steady growth in revenues in the first quarter this year. Revenues grew over 15 percent due to improved consumer spending. 

“There is continued support from overseas Filipino workers and the expansion of BPOs. Fastfoood and department store sales have gone up,” Sy said.

SM Prime executive vice-president and chief financial officer Jeffrey C. Lim said P6.5 billion of the programmed capital budget will be used to beef up local operations while the remaining P5.5 billion will go to its expansion in China.

Lim said the company is preparing the development of its properties in China, namely Chongqing, Suzhou and Zibo, targeted for opening between 2010 and 2012. This is in addition to its three existing malls — SM Xiamen, Jinjiang and Chengdu.

Suzhou, with a gross floor area of 73,000 square meters, is under construction and is expected to open in early 2010. Zibo and Chongqing, which has the biggest population in China, are scheduled to open in 2011 and 2012, respectively.

Meanwhile, among the local malls expected to open this year are SM Naga which opens this Friday; SM Pamplona, Las Pinas and Rosario, Cavite. Sky Garden, an expansion phase of SM North Edsa, is also set to open this year. All these will expand SM Prime’s gross floor area by five percent or 214,000 sqm to 4.5 million sqm from only 4.3 million sqm from end-2008.

In the pipeline are SM Tarlac; SM San Pablo, Laguna, Calamba; and Commonwealth.

When completed, the group’s GFA is expected to increase by nine percent in 2010, Lim said.

The group is also leasing a property in Taguig which will be converted into a department store and supermarket.

Construction is expected to start towards the end of the year and is targeted for completion in 2011.

Sy said the company continues to look for prime locations in Metro Manila and provinces for future expansion. “We will continue to construct new malls with an average size of 50,000 sqm,” he said.

Lim said the group has a property in Cabanatuan and studying the viability of putting up a mall there. 

“Given the challenges brought about by the global financial crisis, our main thrust right now is to protect and possibly, even increase our market share. We constantly look for ways to preserve, if not, improve our margins,” Lim said.

“We view things from a long-term perspective. It takes between 18 months to 24 months to develop our landbank into cash flow generating assets and although we remain positive about the prospects in the Philippines,we closely monitor the situation and calibrate our programs as the need arises,” Lim said.