March 03, 2014

SMDC putting up RFO sales unit

News portal interaksyon.com today reported that SM Development Corp, the residential development arm of SM Prime Holdings, will be putting up a unit that will sell ready-for-occupancy units. The company believes there is a market for such product given the number of buyers who would like to see a furnished unit before buying.

The company’s assistant vice president for marketing said up to 20% of future projects will be reserved as RFO units. SMDC will offer 11,000 new residential units this year, slightly higher from the 10,000 new units offered last year.

Our Take: We believe that this move is part of the company’s measures to manage its inventory. Earlier, the company said it will rationalize its project launches amid increasing inventory levels.

However, we think that reserving up to 20% of future inventory for RFO sales may be quite excessive unless the company is less bullish on the prospects for residential presales. At any rate, adopting measures for inventory management bodes well for the company and the entire sector as this should limit the possibility of a glut. – WealthSec