Sy-led SM Prime Holdings Inc., a leading integrated property developer in Southeast Asia, is expecting to register record profits this year even as it takes its time to decide when to launch its $1 billion real estate investment trust (REIT) initial public offering.
In an interview, SM Prime President Jeffrey Lim said 2024 is turning out to be a banner year as “for the first two quarters, we met our targets and I don’t see any major issue (that will change the trend).”
He also noted that the easing inflation will translate to even more profitability but added that, “I think our worry is the calamities like the one we had last week (Typhoon Kristine) and our mall in Naga was badly affected.”
SM’s mall in Naga was built with a higher elevation of one-and-a-half meters above street level, “so, if our mall was flooded, you can just imagine the other areas. So the problem is accessibility because everywhere you go was flooded,” said Lim adding that water supply was also affected and this delayed the cleaning of the mall.
SM Prime posted a 33 percent jump in consolidated net income to P40 billion in 2023 while consolidated revenues grew 21 percent to P128.1 billion.
Lim said earlier that, “We continue to see this growth momentum this year as we pursue our expansion plans in our key businesses, and explore new opportunities to expand our businesses.”
Meanwhile, Lim said during the interview they will again look at the feasibility of launching the REIT IPO next year considering that interest rates are already going down.
“We’ll have to see first. I think its more of, how we will use the proceeds,” he said noting that SM Prime has a lot of funding options for its capital expenditures, such as its $3 billion Euro Medium Term Note programme, even without the $1 billion that it aims to raise from the REIT IPO.
While they still plan to do the REIT IPO, Lim said “it’s not on the top of the list since we are able to get funds (elsewhere) for our expansion. But, if the right opportunity is there, then we will consider the IPO.”
However, despite being spoiled with various fund-raising options, he said the size of the REIT IPO will still be at $1 billion because, “if we will do one, it has to be of a size that will be attractive to foreign investors. Since you have to have the size and liquidity."
While the shares will be offered to both foreign and domestic investors, Lim said SM REIT will be listed only in the Philippines as there are no plans yet for dual listing with a bourse overseas.
SM Prime initially planned to undertake its REIT IPO late in 2022 to help fund its massive P136 billion capital expenditures for 2023 to 2024 including a portion of the $2.5 billion to $3 billion needed for the reclamation project along Manila Bay.
However, Lim said the delay in the REIT IPO will not affect the company’s expansion plans because “so far we are able to fund our requirements thru borrowings.”