On 22nd November 2024, Paragon REIT announced they will divest Figtree Grove. Paragon REIT has, through its 85% owned trust, Figtree Trust, entered into a put and call option deed with an unrelated
party to divest Figtree Grove Shopping Centre for a cash consideration of A$192.0 million. The divestment consideration of A$192.0 million reflects a A$9.0 million or 5% premium over the independent valuation of A$183.0 million.
With the divestment of The Rail Mall in August 2024 and Figtree Grove, Paragon REIT will be left with 2 retail malls in Singapore and 1 retail mall in Australia. In Singapore, the malls are Paragon and The Clementi Mall. In Australia, the remaining mall is Westfield Marion SA.
What is Paragon REIT’s rationale for Divesting Figtree Grove?
As shared in the announcement, the divestment consideration of A$192.0 million represents a A$9.0 million premium to the book value.
The proceeds from the divestment would also allow Paragon REIT to optimise its capital structure and improves its financial flexibility to pursue growth opportunities to enhance the resilience and growth potential of Paragon REIT’s portfolio. Growth opportunities can refer to acquisitions of new properties to add to its portfolio.
Based on Paragon REIT’s 3QFY2024 business updates, its current gearing stood at 35.9%. The net proceeds may be used to par down its debt.
What will the proceeds from the divestment of Figtree Grove be used for?
According to the announcement, the proceeds from the divestment will be used for
- To repay debt
- To finance any capital expenditure
- Asset enhancement works
- Fund acquisitions
- Distribute to Unitholders
- Finance general corporate and working capital requirements.
What is Paragon REIT’s Pro forma DPU of the Divestment?
Above is an illustration on the pro forma financial effects of the divestment on Paragon REIT’s DPU for FY2023, as if the divestment was completed on 1 January 2023. With the divestment of Figtree Grove, the pro forma Distribution Per Unit (DPU) is estimated to decline from 4.89 cents to 4.80 cents.
What is Paragon REIT Share Price?
On Friday, Paragon REIT share price closed at S$0.86. Based on PARAGON REIT share price of S$0.86 and FY2023 full year distribution of 5.02 cents, this translates to a current dividend yield of 5.84%.
