by Avie M. Olarte

IT'S UNCERTAIN if retail/commercial real estate tycoon Henry Sy Sr. foresaw just how much he would be raking in when he built SM City North EDSA, the first SM mall, in 1985. But there is no doubt that it was his success that inspired others to try their hand at developing big shopping centers. Malls have proven to be so profitable that major developers based in Metro Manila have begun them outside of the capital, providing stiff competition to their provincial counterparts.

Based on annual reports, the biggest mall operators in the country continue to stuff their pockets with billions of pesos in profits despite the economic crisis and increasing competition. SM Prime Holdings and the Robinsons group of taipan John Gokongwei Jr. estimate that their net income from retail and shopping centers "increases by at least 10 percent a year." The Ayala group, which has only three major malls but is acknowledged as among the top players, posted an annual profit growth of 18 percent from its malls in 2000.

According to its 2001 annual report, SM Prime's gross revenue reached P7.14 billion last year, 16 percent higher than that of the previous year. Of the total earnings, 80 percent or P5.67 billion came from lease payments,15 percent from cinema ticket sales, and five percent from amusement centers (including bowling alleys, billiard centers, and ice skating rinks).

SM Supermalls boasts of a 98-percent occupancy rate. Its properties, which cover a total of 1.64 million square meters, continue to draw in crowds from the middle-income group. SM currently operates 12 malls at present — five of them outside of Metro Manila — with a combined total of over 3,000 tenants and a hundred cinemas. This excludes the upscale Podium in Pasig, which is a joint venture with the Keppel Group of Singapore. Sometime this year, SM Bicutan will open. SM is also set to open next year the P7-billion Mall of Asia, which will be a part of a sprawling mixed-use complex in a Manila Bay reclamation area. Once the Mall of Asia starts operations, SM will have a giant shopping center at each end of EDSA. It will also be in control of about 60 percent of the total mall space in the country.

In the meantime, Robinsons Land Corp. (RLC), the property developer and mall operator of the Gokongwei-owned JG Summit Holdings Inc., posted a 12.9 percent increase in gross revenues in 2001. From P3.02 billion in 2000, its gross earnings reached P3.41 billion last year. According to JG Summit's annual report, RLC's Commercial Centers Division, which manages the company's 11 malls, is its "major revenue driver, accounting for 35 percent of gross revenues." The core market of Robinsons malls is the same as that of SM. Gross rental revenues increased by 16 percent in 2001, jumping from the previous year's P1.33 billion to P1.54 billion. Aside from five Metro Manila malls, there are Robinsons shopping centers in Cavite, Laguna, Pampanga, Bacolod, Iloilo, and Cebu. Two new malls are expected to open this year and the next, bringing RLC's total leasable space to almost 557,000 square meters.

The Ayala group was actually way ahead of SM in developing shopping centers. Among the top three mall developers, however, it is the most conservative in terms of the number of commercial centers it has in operation: a grand total of five, three in Metro Manila (one of them a joint venture), one in Laguna (another joint venture), and one in Cebu. Yet this has not hampered its ability to post strong revenue growth. Ayala Land Inc, which is the real estate arm of Ayala Corp., enjoyed a 13-percent increase in its gross revenues last year, earning P11.69 billion in 2001, up from P10.31 billion the previous year. About 27 percent of the earnings in 2001 (P3.11 billion) came from rentals from shopping centers and office properties, with the acknowledged main money earner being Ayala Center in Makati, which is composed of the Glorietta and Greenbelt malls. By 2004, it will open the Market!Market! mall on C-5, with 30 percent of its 150,000 square meters of leasable space allotted to merchants from Tutuban, Binondo, and Greenhills.

Not all mall developers, however, have had the same streak of good luck as the top three industry players. Take Ever Gotesco, which started its operations in 1994, and had been generating a steady increase of revenues up until 1997. By the end of 2001, the company posted a net loss of P222.080 million from its gross rental revenue of P380.771 million. Ever Gotesco, which derives its income mainly from leasing operations, reported that the significant decrease in revenues was due to lower occupancy rate and closures of two cinemas and increase in operating costs, among others. But it was also apparently hurt by the closure of Orient Bank, a sister company, a few years ago.

Click here to view graph of mall operators' gross revenues.

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