February 19, 2014

SM acquires 34% of community mall builder

In a disclosure to the Exchange yesterday, SM Investments Corp said that it has acquired a 34% stake in CityMall Commercial Center Inc, with the remaining 66% interest held by Double Dragon Properties Corp. The latter is a 50/50 jv between Injap Investments and Honeystar Holdings Corp (headed by the Jollibee Foods Corp chairman).

CityMall intends to build small community malls with 5,000-10,000 sqms in GLA, with the first mall to be built on a 12,654 square meter property in Roxas City. Double Dragon is reportedly planning to build 100 malls by 2020.

News portal interaksyon.com reported that Double Dragon plans to raise P1.16b through an IPO to finance the expansion of its real estate portfolio.

Our take: It remains unclear why SM and not SM Prime will be pursuing the investment given that mall operation is supposed to be SM Prime’s expertise. Also, SM has already consolidated its property-related portfolio under SM Prime.

We also take note of earlier plans by SM Prime to enter into JVs with local government units to convert community public markets into town centers with less than 10,000sqm in GLA. If press reports are accurate, CityMall’s business model will be similar to the community center concept of SM Prime.– WealthSec