As a recap, CICT will be acquiring the whole of Paragon - both retail and office components - at an initial yield of 3.9%.
Upside potential includes rent growth and repositioning potential for retail and medical spaces while CICT is likely to undertake phased asset enhancements, he says.
The transaction will be partly funded by the sale of Asia Square Tower 2 for $2.45 billion, a 10% premium to valuation and an exit yield of around 3%.
Given warm demand from investors, CICT has upsized its equity fundraising from $600 million to $750 million, which should keep gearing at 38.7%. The transaction is DPU 1.7% accretive at FY2025 pro forma.
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Natarajan notes that CICT has trended sideways amid macroeconomic uncertainty but April retail sales data is showing positive momentum with an increase of 5.4% y-o-y and inflation staying benign.
Natarajan believes that tenant sales at CICT's malls are likely to see a similar uplift, supporting mid single-digit rental reversion growth in FY2026.
Meanwhile, record low office in Singapore CBD of 3.3% in 1Q2026, down from 4.5% in 4Q25 with around 1% q-o-q rent growth.
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"We expect rental reversion for its Singapore office portfolio to remain in the mid- to high-single digit range," says Natarajan.
According to the analyst, CICT is looking at divesting its assets in Germany, which account for around 3% of its AUM. While the market activity remains "weak", Natarajan believes that Gallileo – its 38-storey Grade A commercial building at $520 million – could draw interest from real estate funds given that CICT had recently commenced a long lease with the European Central Bank.
Meanwhile, CICT is spending some $160 million to enhance Plaza Singapura between 3Q2026 and 4Q2028, with a targeted ROI of 6-7%.
Natarajan derives his new target price after raising his DPU estimates for FY2027 and FY2028 by 1% to factor in the Paragon acquisition and divestment of Asia Square Tower 2 and Bukit Panjang Plaza.
CICT units closed at $2.39 on June 29, down 0.42%.
