Billionaire Henry Sy, the richest person in the Philippines, plans to develop apartments, offices and hotels around his shopping malls to maximize the value of his property holdings in the face of similar moves by competitors.
Fifteen of 50 shopping malls now owned by Sy’s SM Prime Holdings Inc. are on land large enough for high-density, mixed-used development, executive vice president Jeffrey Lim, 53, told Bloomberg News in an interview in Manila.
Depending on demand, five so-called townships will be built in two years and about 10 more over five years, Lim said.
The townships will be part SM Prime’s 500 billion peso (US$11 billion) expansion from now through 2019, he said.
The projects will pit the largest Philippine mall developer against Ayala Land Inc. and Megaworld Corp., the biggest builders of mixed-used projects.
Ayala and Megaworld have been building townships for several years, capitalizing on the rising office-space needs of outsourcing companies, while cash sent home by Filipinos working abroad have fueled home purchases.
“SM Prime has plenty of resources around its malls, and these will become expensive parking lots if they don’t do this,” said Richard Laneda, an analyst at COL Financial Group Inc., who has a buy rating on the company’s stock. “If they don’t do this, the market will go to the other developers.”
The push for townships by publicly held Philippine builders have boosted their capital spending to a record 331 billion pesos, according to broker Savills Plc. Congestion in Metro Manila is driving demand in these micro-districts, it said.
“The live-work-play lifestyle in these townships have resulted into a lot of success for some major developers,” said Michael McCullough, Manila-based managing director at KMC MAG Group Inc., the local associate of Savills.
SM Prime “has to be on their toes to continue to have the upper hand,” said Allan Yu, first vice president at Manila-based Metropolitan Bank & Trust Co. “They have to upgrade their existing assets, not just expand their portfolio.”
The company plans to spend 70 billion pesos this year to build malls and homes. After constructing three to four malls a year, SM Prime has said it plans to open as many as five in 2015.
It plans to start five new residential projects this year and expand existing developments if there is demand, Bloomberg said.
As part of its strategy for 2015, SM Prime aims to sell as many as 14,000 homes valued at about about 3 million pesos each, Lim said.
There is no supply glut in that portion of the market, he said. The company gets about a third of its revenue from home sales.
For the longer term, the company has applied to reclaim 600 hectares of land along Manila Bay and spend about 100 billion pesos to turn the property into a master planned integrated and mixed-use community. The development is adjacent to the group’s Mall of Asia complex and the strip of four integrated casino resorts that will make up Pagcor Entertainment City.
Shares in SM Prime have gained 37 percent over the last year, exceeding the 30 percent gain in Megaworld and the 29 percent advance in Ayala Land.
The Philippine Stock Exchange Index grew 24 percent during the period while the Bloomberg Asia Pacific Real Estate Index was up 24 percent.
The company’s landbank stands at 900 hectares, Lim said. Before Sy pooled his property assets into SM Prime in 2013, the mall builder’s landbank was about 120 hectares.
Sy, who is 90, has an estimated net worth of US$13.4 billion, according to the Bloomberg Billionaires Index.
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