TYCOON HENRY SY’S SM GROUP may accelerate its shopping mall expansion in mainland China after 2010 by building two to three new malls a year to capture more opportunities in that booming economy.

SM Investments Corp. chief investment officer Jose Sio told reporters that returns in China could go as high as 25 times of capital compared to only to 14 to 15 times of the potential in the Philippines.

“If you have business there, the potential is huge,” Sio said. “I think beyond next year we have to review whether we should accelerate.”

At present, the SM group, through its shopping mall development arm SM Primes Holdings Inc. (SMPH), is only opening one new mall each year. It has three shopping malls in China and is set to open its fourth in 2010.

The latest mall, located in Suzhou with a gross floor area of 73,000 square meters, is under construction and will open early next year. The next two locations are in the cities of Chongqing and Zibo, which are scheduled to open in 2011 and 2012, respectively.

The shopping malls in China are under Hong Kong-based unit SM China Ltd. Sio said the plan was to either bring this unit to a public debut or offer its assets under the real estate investment trusts (REITs) scheme within the next five years.

The plan is to scale up SM China’s operations to eight or 10 shopping malls for any initial public offering to be more attractive.
On the other hand, REITs are instruments where investors can invest directly in finished real estate products such as residential, office, hotels or shopping malls or even infrastructure ventures like toll roads and power plants.

In the Philippines, Congress is working on a new REIT law, which requires the distribution of 90 percent of income annually. This means investors can look forward to earning much more from dividends declared on top of potential stock price appreciation.

Sio said that while the group was bullish on China, the Philippine economy still offered a lot of opportunities.

“If the elections turn out okay next year, it will be really good for the economy,” Sio said.
“If you buy one condominium in Hong Kong, you can buy five here at the same price. That means there’s a lot of potential for the Philippines that hasn’t been explored,” he said.