CapitaLand Integrated Commercial Trust (CICT), Asia’s largest REIT, has announced the divestment of Asia Square Tower 2 (AST2) to IOI Properties for $2.476 billion, and the acquisition of the freehold Paragon for $3.9 billion. To partly fund Paragon, CICT has announced a placement to raise no less than $600 million.
According to CICT’s press release, AST2 had reached a stable phase in its investment cycle, presenting an opportune window to monetise the asset. The divestment, on an as-is-where-is basis, represents a 9.9% premium to the market valuation of $2.252 million as at Dec 31, 2025. CICT will redeploy the proceeds into the higher yielding Paragon, while preserving balance sheet strength.
Paragon is being acquired at a net property income yield of 3.9% compared to AST2’s divestment yield of 3%, making the transaction yield accretive. CICT's SGX announcement points to DPU potentially rising to 11.83 cents on a pro forma basis post-divestment of AST2 and acquisition of Paragon, compared to the FY2025 DPU of 11.58 cents. The assumptions for the 11.83 cents DPU (which translates into an accretion of 2.1%) is the issuance of 261.8 million new units priced at $2.292 cents, along with acquisition fees and 50% of management fees paid in units.
The divestment is expected to be completed in 2H2026, subject to the purchaser obtaining shareholders’ approval by way of an ordinary resolution at an extraordinary general meeting, and relevant tax confirmation from Inland Revenue Authority of Singapore. AST2 was valued at $2.252 billion as at Dec 31, 2025. CapitaLand Commercial Trust acquired AST2 in 2017 for $2.095 billion.
Tan Choon Siang, CEO of CICT's manager, says: “Paragon is a rare, premier freehold integrated development in the heart of Orchard Road. This acquisition strengthens the resilience and quality of CICT’s Singapore-focused portfolio, combining sizeable, upscale retail exposure with a defensive medical component, which is supported by strong structural tailwinds such as an ageing population and rising medical tourism. The asset’s ability to sustain strong committed occupancy across market cycles over the years underscores its enduring appeal to both tenants and consumers.
“The proposed acquisition also deepens our presence in Singapore’s tightly held and highly sought-after downtown precinct. Leveraging our proven track record, we are confident to continue delivering its sustainable income growth.
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“In addition, the timely divestment of AST2 at an exit yield of 3.0% enabled us to unlock value from a leasehold office asset and redeploy capital into a freehold integrated development, at a higher net yield of 3.9%. The proposed acquisition is expected to be DPU accretive, while maintaining CICT’s aggregate leverage at a prudent level. This demonstrates our continued focus on enhancing income resilience and creating long-term value for unitholders.”
In April 2025, Paragon REIT, in which Paragon was the main asset, was privatised. At the time, Paragon was valued at around $2.9 billion. The difference in valuation, according to analysts, is that CICT is acquiring Paragon with freehold tenure compared to Paragon REIT, which owned a 99-year lease on the land that Paragon occupies.
“CICT is acquiring the freehold title from the SPV [special purpose vehicle]. When Paragon REIT was privatised, Paragon was leasehold and priced at $3.2 billion. The 10% to 15% premium for freehold places Paragon at around $3.5 billion to $3.7 billion, and the rest is likely to be from the decline in interest rates,” suggests an analyst.
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In 2025, as part of the rationale for privatising Paragon REIT, the offeror, Cuscaden Peak had articulated that Paragon required extensive asset enhancement initiatives (AEIs) of $300 million to $600 million to be competitive along Orchard Road. This would negatively impact Paragon REIT’s NPI and DPU, the offeror had said.
“As with any asset that is in our portfolio, we will always try to seek the highest value that we can create out of the asset. After we buy over, we will take a look to see if AEI is necessary, if it's good for the portfolio — for the asset, for unitholders — and decide what is the best,” Tan elaborates. “The calculation of accretion or the financial return to unitholders is based on the assets and the portfolio. At Paragon’s existing level of NPI, we are able to generate returns and accretions.”
Paragon, owned by Paragon REIT, is a different proposition to Paragon held under CICT. In Paragon REIT, Paragon accounted for 72% of assets. Within CICT, Paragon is likely to account for around 13% of asset size.
“If we were to embark on an AEI — and we haven’t made a decision — we will do it such that it will not dent our cash flow as significantly and we will still maintain a stable DPU,” Tan says.
