The Rail Mall

The Rail Mall Sold!

The Rail Mall has been sold! On 20th June 2024, Paragon REIT announced the divestment of The Rail Mall for a cash consideration (the “Consideration”) of S$78.5 million. The Rail Mall (also commonly known as Railway Mall) is a charming strip mall located along Upper Bukit Timah Road in Singapore. The nearest MRT is Hillview MRT.

As an investor of Paragon REIT, I have many questions in my mind. Was the divestment of The Rail Mall because of poor occupancy? Based on the latest quarter business updates, the occupancy at The Rail Mall stood at 100%. The divestment is not because of poor occupancy. As of 31st December 2023, The Rail Mall was valuated at S$62 million. The cash consideration of S$78.5 million represents a gain above its valuation.

What will the net proceeds from the divestment of The Rail Mall be used for? In this case, the net proceeds from the divestment of The Rail Mall will be deployed to pare down outstanding debt obligations, finance potential acquisitions and asset enhancement initiatives, and/or make distributions to unitholders.

Paragon REIT 1QFY2024 Debt

As you can see from the above, the paring down of outstanding debt does not make sense to me. Paragon REIT has an extremely low gearing of 29.9%. Paragon REIT have access to available facilities of S$225 million.

The divestment of The Rail Mall from Paragon REIT’s portfolio will complete in 2H FY2024. There will be 2 properties left in Paragon REIT’s Singapore portfolio after the divestment of The Rail Mall. The remaining 2 properties are Paragon and The Clementi Mall. In Australia, Paragon REIT holds an 85% stake in Figtree Grove Shopping Centre and a 50% stake in Westfield Marion Shopping Centre.

Paragon REIT Share Price with The Rail Mall Sold

Paragon REIT Share Price 21-Jun-2024

Investors seem to welcome the divestment of The Rail Mall. As you can see from the above price chart, Paragon REIT’s share price increased from S$0.84 to close at S$0.86 on Friday. Based on Paragon REIT’s share price of S$0.86 and FY2023 full year distribution of 5.02 cents, the current dividend yield is 5.83%.

I am closing this post with my thoughts. Paragon REIT is one of the REITs with the least assets in its portfolio. The gearing has also been extremely low since the days it was known as SPH REIT.

To be honest, I didn’t like its Australian assets as the performance could not match its Singapore ones. If not for Paragon and The Clementi Mall, I would have divested Paragon REIT. As a REIT investor, I would want to see how the manager could leverage the gearing to acquire more quality assets that can grow the Distribution Per Unit year-on-year rather than divesting assets for one time gain.

Investors of Paragon REIT, please share your thoughts!

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