CICT will partially fund this acquisition from sale of Asia Square Tower 2, which is being sold to IOI Properties at $2.5 billion, giving the REIT a divestment gain of $199.9 million.
CICT has raised another $750 million to fund the deal by issuing new units at $2.30 each via a private placement.
Koh estimates that these two transactions will be DPU accretive by 1.7%, while keeping aggregate leverage at a prudent 38.7%. "The capital redeployment enhances income resilience by shifting from a leasehold office asset into a freehold, mixed-use development with stable cash flows and defensive medical exposure," he adds.
CICT is assessing its own study on what is the kind of asset enhancements that should be done with Paragon. Unitholders were convinced to accept Paragon REIT's privatisation after they were told that up to $600 million is needed to fund enhancement works in order for the mall to be competitive.
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"CICT's management views Paragon’s strong tenant demand, prime location and exposure to medical tourism as key factors supporting sustainable long-term income growth," says Koh.
According to Koh, the management has guided for Management guided for mid-single-digit rental reversion for both its retail and office portfolios in 2026. The REIT will benefit from a full year’s contribution from its 50% stake in ION Orchard in 2025, which was completed in October 2024, while CapitaSpring has started to contribute based on 100% interest since last August.
By the end of this year, more upside and contribution should come from a later phase of another property Galileo and newly enhanced space at Tampines Mall. Down the road, CICT, says Koh, is expected to focus on expansion in Singapore, including Changi Jewel from its sponsor pipeline, while also exploring the divestment of assets overseas.
For now, Koh has raised his DPU estimates by 2.4% for FY2024 and 2.1% for FY2028, mainly from the acquisition of Paragon and lower cost of debt, leading to the raised target price of $3.06.
CICT units traded at $2.28 as at 3.02 pm, up 1.33%.
