APART from a plan to list its China mall unit overseas, the SM Group is considering taking these assets and spin them off  under real estate investment trusts (REIT), said a top company official.

In an interview, SM Investments Corp. chief finance officer Jose Sio said the conglomerate may implement the plan within five years, as he noted the large opportunities in China.

The conglomerate’s financial head already revealed SM’s intention to conduct an initial public offering (IPO) for its overseas subsidiary handling the China malls.

The conglomerate’s mall operations are held by locally listed SM Prime Holdings Inc., which oversees 36 shopping centers in the country, and three in China—located in Xiamen, Jinjiang in southern China and Chengdu in central China.

In November, Sio said SM Prime is looking at taking public its China mall subsidiary SM Land Hong Kong within the next five years, once its has established 8 to 10 shopping centers in the mainland.  

“The potential of China is so huge. We will do either an IPO or REIT  [but this will be] in three to five years,” said Sio.  He said the shares may likely be listed in Singapore and Hong Kong.

Sio shared that the company is also interested in transferring several local assets under REITs, which can provide an alternative source of capital for the SM Group.

“The REIT law in the Philippines was passed by Congres and it is now with the executive branch. If that is passed, there will be many local companies [that will be interested] and SM Prime is one of them,” said Sio.

The REIT law will allow firms to list income-producing property assets such as malls, office buildings, apartments and even highways. Investors may invest in these firms, allowing companies to raise funds from their REITs.

REITs must distribute 90 percent of the net income per year. In exchange, the law will allow tax perks and exemptions.

Sio added that SM Investments will likely hit its income target for the full-year 2009 boosted by the retail and property units. The company is targeting to end the year with P15 billion in net income, 14-percent higher than the 2008 level. The firm is also targeting revenues to hit P160 billion.

“The highest [contribution]  this year will be from our retail and the property segments,” Sio said, noting that the company is optimistic particularly on demand driven by overseas remittances.