Xiamen — SM Prime Holdings Corp. is ratcheting up its expansion across China with around RMB 3.58 billion (roughly P24 billion) allotted for the construction of four new malls slated for opening between 2010 and 2013.
Diane R. Dionisio, vice-president for finance of SM Prime’s China projects, said the group is stepping up its presence in the world’s second largest economy with plans to build its biggest shopping mall ever in Tianjin, the sixth largest city of the People’s Republic of China.
Dionisio said the SM Tianjin will rise on a 43-hectare property that would have approximately 530,000 square meters of gross floor area, about 30 percent bigger than its Mall of Asia on Roxas Boulevard. Targeted for opening in 2013, SM Tianjin will be built at a cost of RMB 2 billion (P13.4 billion), the highest investment ever to be made by the group.
The 70,000 square meter SM Suzhou with a development cost of RMB 450 million, is scheduled to open in December this year to be followed by SM Chongqing in the fourth quarter of 2011, SM Tianjin and SM Zibo in central Shandong province, both in 2013.
SM Prime has earmarked RMB 500 million for the construction of the Chongqing outlet which will have a gross floor area of 150,000. Around RMB 630 million has been set aside for SM Zibo with an estimated gross floor area of 170,000 square meters.
When completed, these malls would bring SM Prime’s total store network in China to eight. SM Prime entered China in 2007 after buying billionaire Henry Sy’s malls in Xiamen, Jinjiang and Chengdu for $252 million.
The group is looking at Fuzhou, the capital of Fujian province in China as future site for expansion.
With China’s growing economy, SM Prime is targeting to open one mall annually in that country beginning this year and accelerate this pace to as many as three yearly by 2013. China’s gross domestic product expanded by 11.1 percent year-on-year in the first half of 2010 to 17.28 trillion yuan. The government set the annual economic growth target at around 8 percent for this year.
SM Prime has doubled in October 2009 the size of its Xiamen mall, which Sy opened in 2001 to mark his first large-scale mall venture in China.
Marcus Dee said SM Lifestyle Center in Xiamen, which he manages, was built to cater to the rising middle class. From the existing 80 percent, SM Lifestyle Center’s occupancy rate is expected to reach 95 percent by yearend.
Dee said SM Xiamen has a daily foot traffic of 100,000 while the Lifestyle Center attracts between 12,000 and 14,000 people a day.
SM Supermalls president Annie S. Garcia said the group continues to look for ways to further improve its operations. In the hope of boosting growth, the group is considering doing projects that combine retail, dining, entertainment and residential living units.
In terms of gross revenues, the existing malls in China contributed P600 million in the first half this year or five percent of SM prime’s total consolidated revenues. In terms of net income, these malls accounted for P100 million or three percent of the total.
Rental revenue of the China malls continued to grow at a hefty pace of 26 percent largely due to improvements in the average occupancy rate, lease renewals, and the opening of the SM Xiamen Lifestyle Center. The average occupancy rate for the three malls in China is now at 87 percent.
SM Prime has set a P12 billion capital expenditure budget this year of which P8 billion will be for its domestic expansion while P4 billion will be spent for malls in China.
SM Prime is opening 4 malls in the Philippines this year (Tarlac, Calamba, Novaliches, San Pablo) to bring the total to 40 nationwide with an estimated combined GFA of 4.7 milion sqm.
Expanding in China is expected to open up opportunities for the Sy family’s other businesses which include banking, real estate development, and hotels.
SMIC, whose assets include the biggest Philippine bank by assets and the Southeast Asian country’s largest supermarket and department store operators, forecasts profit will grow between 12 percent and 14 percent this year from net earnings of P16 billion in 2009.