Cuscaden Peak, the sponsor of Paragon REIT, is offering to privatise the REIT at 98 cents per unit, a premium over the Feb 10 closing price of 89 cents.
In addition, the REIT will pay 2HFY2024 cash distribution of 2.33 cents.
Cuscaden Peak, held by Mapletree Investments and CLA Real Estate Holdings, became the sponsor of Paragon REIT in April 2022, after the completion of the acquisition of Singapore Press Holdings' non-media assets.
The media businesses are now held under the Singapore Media Trust.
Paragon REIT now owns a portfolio of retail properties anchored by the shopping mall Paragon, alongside The Clementi Mall and Westfield Marion Shopping Centre in Australia.
According to the offerors' statement, Paragon REIT faces "trading conditions that constrain potential for sustained growth" and is heavily reliant on Paragon, which accounts for 72% of the REIT’s appraised value.
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"However, Paragon’s premier upscale status is being challenged by malls undergoing major upgrades and upcoming redevelopments in the surrounding catchment which are expected to significantly ramp up competition once completed," the offeror says.
To "future proof" Paragon, the offeror expects to potentially spend $300 million to $600 million to refurbish the mall, which will take between three to four years to complete.
During that period, potential changes in market conditions may also impact leasing demand and/or rental rates.
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"In the face of the uncertainties in the execution and extent of such an initiative, it would be more suitably carried out with Paragon REIT as a private entity," says Gerald Yong, CEO of the sponsor and a director of the offeror.
An EGM will be called in April to seek unit holders' go-ahead.
Separately, Paragon REIT announced net property income of $113.9 million for its 2HFY2024, up 4.5% y-o-y. In the same six months ended Dec 31 2024, gross revenue increased by 5.3% y-o-y to $153.6 million, thanks to higher rental reversions.
Following news of the offer, Paragon REIT units closed at 99 cents on Feb 11, up 11.24% for the day, extending the 12-month gain to 19.28%.
