TO borrow or not to borrow: that was the question that cropped up during the media and analyst briefing on Thursday by SM Investment Corp. (SMIC), the holding company of billionaire Henry Sy, as its subsidiary said it has an option to borrow in view of the non implementation of the real-estate investment trust (REIT) fund law.

Shares of SM Prime Holdings Inc. (SMPH) rose by nearly 1.5 percent to P11.12 at the Philippine Stock Exchange (PSE). Its chief finance officer Jeffrey C. Lim said the company may need to raise $150 million if the implementing rules and regulations (IRR) for the trading of REIT remain on the desk of tax authorities.

“Our expansion program will continue; it’s just a matter of looking at other funding sources if and when the REIT rules are passed. We can look into either bonds or in the local retail-bond market.”

However, Jose T. Sio, chief financial officer of SMIC, SMPHI’s parent, said that while its subsidiary “has all the options; it can borrow locally, float bonds or issue equity, there are no plans to borrow at the end of the year.”

Sio then looked at Lim, who was seated to his left, before putting down the microphone on a long desk at the Tower Club in Makati City.

The REIT Act, or Republic Act 9856, is touted by the private sector as a shot-in-the-arm for the Philippines’ property industry, as well as the stock market, as it adds income-generating assets on the PSE.

Lim has been quoted by news reports as saying SMPHI plans to offer up to $300 million in a REIT fund.

However, public finance officials have cringed at the possible 30-percent loss to the government in corporate taxes while it struggles with a record P325-billion budget deficit for this year.

“We are still hopeful they [the REIT law’s IRR] may be issued before the end of this year. While there are some apprehensions on the REIT in terms of tax losses, we still believe that it’s still a net overall gain for government and development of the capital market,” Lim said.

He added, however, that if the IRR remains on the tax agency’s desk, they wouldn’t eye the $300 million for SMPHI.“If ever, what will be raised will be those required for this year and 2010.”

Lim said the money raised will be used for the expansion of its land bank and the building of more shopping malls. The company is eyeing to build three to five shopping centers in the Philippines in the next five years and one a year in China.

“We have 11 sites available for mall development but we still want to get land for development beyond 2012.”

He added that by 2013, SMPHI should have three or four more sites in China.

The company said in a statement it is set to open its fourth SM mall in mainland China, in the city of Suzhou.

By year-end, the company is expected to have 40 malls in the Philippines, with an estimated total gross floor area of 4.7 million sq m.

The statement said SMPHI posted a 10-percent increase in consolidated net income in the first six months of 2010, to P3.8 billion from P3.4 billion in the same period last year. It added that higher revenue includes operations of its three malls in the provinces of Jin-Jiang, Xiamen, and Chengdu, China.

Likewise, SMPHI said that “due to a marked increase in the number of blockbuster movies shown this year, notably James Cameron’s Avatar, cinema ticket sales from January to June 2010 surged 47 percent to P1.4 billion from P0.9 billion during the same period in 2009.”