SM Prime eyes new malls, REIT listing

SM Prime Holdings

SM Prime Holdings Inc. is ramping up its retail expansion this year with the launch of additional malls as it takes advantage of improving post-pandemic consumer spending.

“They are going to do three to four malls,” said Timothy Daniels, consultant for investor relations and sustainability at SM Prime’s parent firm, SM Investments Corp. (SMIC).

The malls will be developed in provincial locations, Daniels said last week. He did not disclose further details.

The Sy-led property developer will also refurbish and extend some of its existing malls, Daniels said. “It’s an ongoing thing with SM Prime’s malls. They always do it. They come back every few years, and they renovate and expand.”

This year’s capital expenditure budget of P100 billion, which will be used for land banking initiatives and developing SM Prime’s residential and commercial businesses, will also finance planned mall development.

The mall business, Daniels noted, already exceeded pre-pandemic levels in 2022 amid so-called “revenge spending.” This surge was maintained last year as “people have been going out to the malls in large numbers.”

“They (mall-goers) have been spending particularly on entertainment, food and beverage, services, as well as retail. That’s why the malls had a very good year in the Philippines in 2023.”

SM Prime saw its net income grow 33 percent to P40 billion last year from the P30.1 billion reported a year earlier, as consolidated revenues rose 21 percent to P128.1 billion from P105.8 billion.

Daniels said the SM group was optimistic about continuing to benefit from the positive consumer-driven story amid a favorable macroeconomic environment.

“Most of that will turn into consumer spending. The malls will carry on with that momentum,” he added.

SM Prime is the country’s largest mall developer, boasting 85 malls totaling 9.2 million square meters of gross floor area as of the end of 2023, Maybank Investment Banking Group data showed.

This year, the developer’s net income is forecast to grow 15 percent year-on-year on continued mall expansion, healthy mall occupancy rates, and stable rental escalations.

SM Prime, which last year postponed the market listing of its real estate investment trust (REIT), is also testing the waters to see if it is now feasible to proceed with the fundraising initiative.

“That’s something that is still being discussed. It really depends on the market situation,” SMIC President and Chief Executive Officer Frederic Dybuncio told reporters recently.

“But even if they don’t do the REIT, SM Prime will be able to fund the reclamation on their own,” he said.

The 360-hectare Pasay reclamation project, whose suspension was lifted by the Philippine Reclamation Authority late last month, will be linked to SM’s Mall of Asia (MOA) Complex, “and turned into a vibrant business district featuring a world-class mall, offices, residences, entertainment arena, 5-star hotel, and convention center,” according to SM Prime’s website.

SM Prime shares improved by 2.69 percent to P32.45 each last Friday, while SM Investments’ share price declined by 0.32 percent to P937.