TIMES Properties, a wholly owned subsidiary of Cuscaden Peak Investments, is looking to take Paragon Real Estate Investment Trust (Reit) private by way of a trust scheme of arrangement, for S$0.98 per unit.
The offeror is looking to acquire all units in Paragon Reit held by unitholders, other than Cuscaden Peak and its subsidiaries.
Cuscaden Peak Investments is a wholly owned subsidiary of Cuscaden Peak. Shareholders of Cuscaden Peak include Adenium, a wholly owned subsidiary of CLA Real Estate, as well as Mapletree Fortress, an indirect wholly owned subsidiary of Mapletree Investments, who each hold 50 per cent of the shares of Cuscaden Peak.
As at the joint announcement date on Tuesday (Feb 11), Times Properties holds directly and indirectly approximately 21.5 per cent of the issued units of Paragon Reit.
The directors of Times Properties include Gerald Yong, who is also the chief executive and director of Cuscaden Peak, as well as Chin Yean Cheng, chief financial officer of CapitaLand Development.
The offer price represents a 10.1 per cent premium to the counter’s last transacted price of S$0.89 on Monday. It also represents a premium over the volume weighted adjusted price – of 10.9 per cent for one month; 11.6 per cent for three months and 12.8 per cent for 12 months.
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Long-term competitiveness
Cuscaden Peak Investments and Paragon Reit said the scheme would allow unitholders “to realise their investment in cash at an attractive valuation with no trading costs”, and enable them “to immediately reinvest proceeds into other opportunities”.
They noted that Paragon Reit has one of the lowest free floats among its retail Singapore Reit (S-Reit) peers and has historically experienced low trading liquidity. Its total assets have grown 1.3 times since its initial public offering in 2013, compared to the average of 2.9 times for other retail S-Reits, they added.
The offeror believes that Paragon Reit “faces trading conditions that will continue to constrain its potential for sustained growth and long-term value creation”.
The Reit’s portfolio comprises three assets – and it depends “heavily” on Paragon, which accounts for 72 per cent of the portfolio value. However, the mall’s premier upscale status is being challenged with increased competition from upcoming retail malls in the surrounding catchment, as well as existing malls undergoing major upgrades, based on the release. This includes voco Orchard, Forum The Shopping Mall and Tangling Shopping Centre.
“In addition to these competitive pressures, a persistent slowdown in luxury spending post-pandemic, with international luxury spending at 74 per cent of its 2019 peak, has also weighed on Paragon’s performance,” the statement said.
The Reit also owns Clementi Mall in Singapore, and in Australia, has a 50 per cent freehold interest in Westfield Marion Shopping Centre.
The offeror believes that a major asset enhancement initiative (AEI) is necessary for Paragon “to maintain its long-term competitiveness”.
However, it pointed out that given the execution risks associated with a significant potential AEI, such as uncertainties around cost and timing, this would be “more suitably carried out in a private setting”.
The proposed scheme of arrangement will be submitted to the unitholders of Paragon Reit for voting, with the offeror and its concert party group abstaining from voting.
In the event that the scheme is not approved by unitholders, the offeror said it hopes to continue engaging with Paragon Reit to consider an appropriate plan as it believes that an AEI “is critical for Paragon to remain competitive”.
On the other hand, if the scheme is approved and completed, Paragon Reit will be wholly owned by the Cuscaden Peak Group and will, subject to the approval of the Singapore Exchange, be delisted.
Units of Paragon Reit closed 0.6 per cent or S$0.005 lower at S$0.89 on Monday, before calling for a trading halt on Tuesday morning.
