SM Prime allots P33B for new malls

Shopping mall giant SM Prime Holdings is allotting P33 billion over the next five years for the continued construction of new malls and the expansion of existing ones  in line with its bid to further solidify its dominant position in the industry.

SM Prime president Hans Sy said the programmed capital budget still does not include their expansion initiatives in China, where the company is planning to put up its fourth mall in Chongquing covering 140,000 square meters (sqm) of leasable space.

Construction of SM Chonquing is slated in the third quarter this year and is expected to be operational by 2010. 

Sy said the company may build two more malls in China in 2011 to  capitalize on China’s growing economy and population which is 15 times that of the Philippines.  

For this year, the company is spending P6 billion to open new malls which include SM Marikina, SM City Baliuag and SM Supercenter Rosales in Pangasinan. Also underway are the expansion of SM Megamall,  SM City Fairview and SM North Edsa, all slated for completion in 2009.

SM Marikina will provide an additional (122,000 sqm) of  gross leasable space, SM Rosales (31,000 sqm) and SM Baliuag (61,000 sqm).

The company expects to end the year with a total of 33 malls with a gross floor area of 4.2 million sqm from 3.9 millionsqm in end-December 2007.

SM Prime chief finance officer Jeffrey C. Lim said funding for this year’s capex will be sourced from internally-generated cash and borrowings.

In Nov. 2007, SM Prime’s board approved the acquisition of three SM malls in China which are located  in the highly populated areas of Xiamen, Jinjiang and Chengdu. 

The move will allow SM Prime to gain a foothold in China’s  fast-growing economy and use this as a platform for long-term growth outside of the Philippines where it is the biggest mall developer.

Sy said while the company has taken an aggressive move to acquire malls in China, “the expansion overseas will be approached with caution.” 

“We will carefully study the business risks in each area we  penetrate. This continues to be our policy even as we open new malls in the Philippines where we are expected to already know the market pretty well,” Sy said.

Also in yesterday’s meeting, SM Prime’s board approved the declaration of a 24-centavo cash dividend per share worth P2.99 billion.  This is in line with SM Prime’s dividend policy of a 50-percent payout ratio of prior year’s net income which amounted to P5.97 billion for 2007.

Sy said the Mall of Asia is the company’s third best performing mall in terms of revenues, contributing nine percent of total revenues and five percent of net income.  Average foot traffic in the flagship mall  is between 200,000 and 300,000 during weekdays and up to 500,000 to one million during weekends.