Plans of mall developer and operator SM Prime Holdings, Inc. to expand into the China market will primarily depend on how much profit the China venture will contribute to the overall performance of the Sy-led company.

SM Prime President Hans Sy told reporters Friday that there are a lot of factors to consider before the listed company can “take a final decisionplunge into China. For one, the investments have to reach a certain level of profitability, from 85 to 9%, and to churn in bigger revenues.

“We are also looking at China right now although nothing is final yet. We should be able to finalize this very soon. SM Prime is seriously considering looking into investing and going into China, he said, adding that investment bankers have been taped to do a study on how to go about the financing. Mr. Sy did not disclose further details.

Jeffrey C. Lim, SM Prime vice-president for finance and administration, said expanding in China “has always been an option for the listed holding company.

“That is still under evaluation. The SM malls in China are investments of the Sy family not any of SM companies. The option is SM Prime will participate but it will also absorb [the costs], he said.

The Sy group has been studying how its mall operator SM Prime and flagship holding company SM Investments Corp. can participate in running the Sy family’s malls ad other properties in China, which are privately held but carry the SM trademark.

“We have to study if we should [enter China] at his point. China’s projects are still very new. We have to make sure they can really bring in enough income before we do that. In China, it is not easy to make money. We are still starting,SM Investments vice-chairman Teresita Sy-Coson has said.

The Sys entered the booming China market with a 120,000-square meter mall in Xiamen in 2003 and opened a second mall which covers 165,000 square meters to 175,000 square meters at the province of Jin Jiang City.

It started construction of its third mal located in Zhengdu province and was looking for another site for a fourth mall to be constructed next year. The third mall in China had retail giant Wal-Mart Stores, Inc. and Laiya, a leading supermarket operator in Thailand, as anchor tenants.

Mr. Sy said SM is not keen on developing malls in developing cities such as Shanghai.

“Wal-Mart management told us we are on the right track. The ones making money are of the other cites, he added.

Cebu Hotel
Mr. Sy, who is also first executive vice-president of SM Investments, also said that it is in serious negotiations with two foreign companies for the possible operations of a hotel within SM City Cebu complex.

Mr. Sy said they were looking for a partner that could put in equity into the project as well as manage the hotel.

“There’s nothing concrete yet. But it’s [negotiations] on serious stage. We wanted some group that could put in equity because we always believe that if there’s going to be equity, they would be more attentive to it [project], Mr. Sy told Cebu reporters after a press briefing in SM Mall of Asia.

He said they would want their partner to also manage the hotel because the SM Group does not have expertise in hotel operations.

“We are good at as shopping centers. We admit when it comes to hotels, we are not,he said.

SM Investments build the hotel in the late nineties. It has a come to be known in Cebu as the Sheraton because it was reportedly going to be managed by the Sheraton Group, but this did not materialize. Until now, the hotel has not opened thought the exterior has been finished. Officials said it would take less than six months to complete the interiors.

Mr. Sy said they have not considered leasing out the structure to commercial centers. But if they see potentials they might consider it, he added.

Meanwhile, Mr. Sy said were always on the lookout for properties of at least three hectares in Cebu.

“We see the potential of commercial development in Cebu, we wanted to develop supercenters but we didn’t get [the property] he said, referring to a government owned lot in Banilad. The Group was among the company that expresses interest in leasing the property form the Cebu provincial government. Mr. Sy said they planning to build a supercenter and a hypermarket with several shots. The property went Cebu-based company.

The company has allotted P6.5 billion to P7 billion for capital expenditure this year and plans to borrow P4 billion to P5 billion, possibly in the domestic market, to finance the construction of new malls and land acquisitions.

The company is redeveloping its first shopping mall in North Edsa to compete with Trinoma, Ayala’s first shopping mall in Quezon City, which is set to open in 2007.