SM group treats real estate like retail biz

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Condominium units and shoes have something in common

MANILA, Philippines – It’s not often that residential condominium units are offered on up to 40% discount as a Christmas promo.

In December, SM Development Corp., the real estate arm of the Sy-led SM Investments Corp., did just that for three of its residential projects in Metro Manila.

Jose Sio, the corporate finance officer of the holding company, told ANC’s Business Nightly on Thursday, Dec. 22, 2011, that the strategy makes business sense.

“We come from a retail (business) mentality,” he said during the business show’s year-end special.

The SM group’s massive cash flow was spawned from its profitable retail business. It operates the biggest mall network in the country, some of which are among the 10 largest malls in the world.

The group has since expanded into banking, gaming, commercial properties, and high-rise residential real estate. Just like its retail business, the money sent home by Filipinos working overseas also fuel real estate sales.

On the show, Sio likened the strategy of putting condominium units on sale to selling shoes on discount.

He cited how SM would put on promo some shoe sizes to move inventory or stimulate sales. There are some products in SM malls that are sold on deep discounts of up to 60%.

Some of these promotions are considered “sacrifice” on their margins.

On the other hand, the reduced profits are considered investments to “improve the company’s image,” Sio shared.

These are meant to create “long-term goodwill,” he added. “This is a Christmas present to our customers.”

In early December, SMDC announced discounts on its studio and/or one-bedroom units in its Mezza Residences near SM Sta. Mesa, Jazz Residences in Jupiter St. in Makati City, and Green Residences beside De La Salle Universty in Manila City.

For example, a 23.47-square-meter unit in Mezza Residences was available at 40% outright discount at only P1.848 million.

SMDC sold about 7,900 residential units worth P17.6 billion from January to September this year.

SMDC has 16 residential projects in the market, 14 of which are in Metro Manila and one in Tagaytay City.

It reported a consolidated 9-month net income of P3.1 billion, a robust 51% increase from the same period in 2010. 

Property consultant Colliers International cited SMDC for selling the most number of residential condominium units in the country for the past two years, until it was dislodged by Andrew Tan-led Megaworld Corp. in September this year. –

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