SM Prime allots P400 B for 5-year expansion

MANILA, Philippines - SM Prime Holdings Inc. (SMPH), the umbrella firm for the property businesses of the SM Group, is doubling its income and revenues in the next five years as it grows its office, mall, leisure, hotel and residential portfolio by two-fold in the same period.

The integrated property arm of the mall and banking conglomerate allotted P400 billion in the medium term to support its expansion in the Philippines, China and Southeast Asia, top company executives said.

“We project that from the current level in 2013, both revenues and net income will almost double in the next five years,” said SM Prime chief finance officer Jeffrey Lim.

SM Prime will likely post an annual growth of 10 percent in earnings every year, Lim said, adding that return-on-equity will improve to mid-teens in the next five years from last year’s 11 percent.

In 2013, the property arm of retail tycoon Henry Sy reported flat earnings of P16.27 billion due to one-time costs of consolidation. SM Prime’s consolidated net income would have grown eight percent to P17.55 billion without the one-time restructuring cost of P1.28 billion.

Under the five-year growth plan unveiled yesterday, SM Prime will double its malls to 85 (74 in the Philippines and 11 in China) with a gross floor area (GFA) of 6.95 million square meters (sqm) in 2018 from the current 53 (48 in the Philippines and five in China) with a GFA of 10.96 million sqm.

For the residential segment, SM Prime will complete the launch of 139,628 units for 41 projects in 2018 from the current 63,892 units in 21 projects.

SM Prime will also double its office space through seven projects with a GFA of 460,000 sqm from the current three projects with a GFA of 150,000 sqm.

The hotel business, for its part, will grow two-fold to 10 properties and 2,187 rooms from five projects with 1,362 rooms. SM Prime’s hotel portfolio include Conrad Manila, Park Inn by Radisson, Radisson Blu Hotel Cebu and Pico Sands Hotel.

Lastly, the leisure business will have 5,477 launched units through eight projects by 2018 from the current 4,988 launched units in four projects, SM Prime said.

“In terms of the total capital expenditures, we project that we will be spending about P400 billion in the next five years,” Lim said.

“We believe this will ensure that we will be able to grow and we will be able to improve the economic conditions of the communities we will be serving,” he added.

SM Prime president Hans Sy said the company allotted P70.57 billion for its capital spending requirements this year, 55 percent of which will support the mal expansion and 28 percent for the residential segment.

Lim said the mall and residential units will drive the growth in the medium term, even as China’s contribution will remain minimal.

“For the next five years, of course we are endeavoring to find other markets in Southeast Asia. With all our resources and skills, we are poised to go further outside Philippines shores,” said Sy.

In May, the SM Group announced merged its real estate businesses, creating the most valuable property firm in Southeast Asia. It consolidated upscale Tagaytay Highlands developer Highlands Prime Inc., condominium builder SM Development Corp., private firm SM Land Inc. and mall developer SM Prime.