SM Prime to open one mall every year in mainland China Wednesday, April 29, 2009
Kristine Jane R. Liu and Carmelito Q. Francisco, BusinessWorld
THE COUNTRY’S largest mall developer will be employing roughly the same strategy adopted for Philippine malls in running and expanding three malls in China.
"The direction of the China malls is similar to SM Prime Holdings, Inc. before it went public. We did not go into an expansion binge [until] we know that the organization and the brand are already there," SM Prime Holdings, Inc. President Hans T. Sy said in a news conference following the company’s annual stockholders’ meeting yesterday.
The plan is to open one mall in China a year.
SM has three malls in China — in Xiamen, Jinjiang, and Chengdu — and plans to open three more by 2012.
The new malls will be located in Suzhou, Chongquing and Zibo, all of which will have a combined value of P6 billion and a total gross floor area of almost 340,000 square meter (sq.m).
"The existing three malls in China look very promising and have shown significant improvements. There is no plan to aggressively expand and acquire more locations in China this year [since] our focus is to further improve the operational efficiency and enhance the returns of the three operating malls," SM Prime Executive Vice-President Jeffrey C. Lim said.
Mr. Lim said SM City Xiamen is now the strongest player in the city and enjoys full occupancy. SM Prime has started leasing for an expansion of the Xiamen mall, which is expected to open later this year.
Meanwhile, SM City Jinjiang has experienced an improvement in occupancy, at 94% last year from 72% in 2007, while SM City Chengdu enjoys an occupancy rate of 72%.
"The China malls are located in second and third tier cities. [Building malls in Shanghai and similar cities] is more on image rather than on business and we want to be in the business," Mr. Sy said.
Back home, the plan is to open at least three malls every year.
This year, the company increased its budget for capital expenditures by almost half to P12 billion, of which P6.5 billion would be for Philippine malls and the rest for China.
Money will come from internally generated funds and borrowings. The company raised P5 billion from floating and fixed-rate notes early this month.
SM Prime Holdings plans to open three more malls in the country this year — SM City Naga in Camarines Sur, SM City Rosario in Cavite, and SM City Pamplona in Las Piñas.
The mall operator said it would also open the Sky Garden at SM City North Edsa and expand SM City Rosales in Pangasinan.
By the end of the year, SM Prime will have 36 malls with an estimated total area of 4.9 million sq.m. Next year, the company will open four more malls — in Tarlac City, San Pablo and Calamba in Laguna, and Commonwealth Avenue in Quezon City.
"The topline of the company grew by over 15% in the first quarter of 2009 [as remittances from overseas Filipinos continue to come in]," Mr. Lim said.
Last year, profits of SM Prime grew by 7% to P1.6 billion while revenues climbed by 8% to P3.8 billion.
Shares of the company went down by 2.35% or P0.20 to P8.30 apiece yesterday.
SM Prime is laying the groundwork for a new shopping complex in Davao City’s Lanang district, about eight kilometers north of the city’s downtown. The company currently operates SM City Davao at Ecoland district, a kilometer south of the central business district.
The proposed shopping mall will need an initial 1,000 workers, said lawyer Pearly Joan L. Jayagan, SM City Davao Human Resources Department head.
Late last year, SM Prime bought a 10-hectare lot, previously hosting the Lanang Golf and Country Club, from the Dakudao family, one of the landed clans in this city. Although a member of the Dakudao clan confirmed the sale of the property to SM Prime, he declined to reveal the amount involved.
Late last year, workers have started demolishing the golf club apparently in preparation for the development of the new shopping mall.
Debbie A. Go, SM regional manager for Mindanao, declined to give details on the plan but confirmed that a retail complex would be constructed on the new site, noting the "big potential" in the northern sections of the city where upscale subdivisions are located.
The SM project, however, is just one of the major developments in the northern part of this metropolis.
In the second week of May, JG Summit Holdings, Inc.’s Robinsons Cybergate Davao is set to formally open, hosting contact centers and information technology-related firms as well as retail shops.
Also under development is Ayala Land, Inc. and the Anflo Management and Investment Co.’s 10-hectare Abreeza complex in Bajada district just two kilometers north of the city’s downtown. The P5-billion project will be completed in 2011, but officials of the two companies said last year its shopping mall will open in early 2010.
The New City Commercial Corp. (NCCC) has also bought a potential shopping mall site in Panacan district, near the Davao international airport and just about two kilometers from where the planned SM Davao north mall will be located.
NCCC currently operates two shopping malls in the city, and two others in Puerto Princesa in Palawan and in Tagum, Davao del Norte. It also operates a chain of convenience stores in this city.
No one among the members of the Lim family which owns the mall chain would confirm the reported acquisition of the Panacan land, however.