Cuscaden Peak-Managed Paragon REIT Sells Singapore Strip Mall for $58M

Paragon REIT has agreed to sell a strip mall in the Upper Bukit Timah area for S$78.5 million ($58 million), reducing the Singapore-listed trust to just two properties in its home market, with another two in Australia.

“The divestment is part of the Manager’s proactive portfolio management strategy and is in line with its objective to unlock value in Paragon REIT’s portfolio,” the trust’s manager said in announcing the agreement to sell the Rail Mall, with the identity of the buyer left undisclosed.

Sources familiar with the transaction have identified the buyer to Mingtiandi as the Yong family which controls privately held construction firm Woh Hup Holdings, with the deal for the property near Singapore’s Rail Corridor park taking place at a nearly 27 percent premium to the asset’s valuation of S$62 million as of 31 December.

The deal represents the latest disposal of a property formerly linked to Singapore Press Holdings since the company’s real estate holdings and the manager of SPH REIT (later rebranded as Paragon REIT) were acquired by Cuscaden Peak, a joint venture between controversial businessman Ong Beng Seng, Mapletree Investments and CapitaLand Ltd in 2022.

Leasehold Expiry Approaching

With the Rail Mall measuring 49,886 square feet (4,635 square metres) of net lettable area, the deal is taking place at the equivalent of S$1,574 per square foot. With the property having generated net property income of S$5.2 million in 2023, the transaction represents a yield of 6.6 percent.

The high yield on the deal can be linked in part, according to property analysts, to the Rail Mall having less than 22 years remaining on its 99-year leasehold. The 43-unit mall has 360 metres of frontage on Upper Bukit Timah Road and is less than half of a kilometre from the Hillview MRT station.

Anchored by a Cold Storage grocery store, the Rail Mall was 95.5 percent occupied as of 31 December, according to Paragon REIT’s annual report, with other tenants including fast-food chain Popeye’s and a Fish & Co restaurant. Tenant sales at the mall rose 10.8 percent in 2023 from a year earlier.

The Rail Mall accounted for 1.5 percent of the total valuation of Paragon REIT’s portfolio as of 31 December and 1.82 percent of its Singapore property holdings, with the manager indicating that it doesn’t expect the divestment to have a material impact on net asset value or distributions for this year.

The deal is expected to close in the second half of this year with Paragon REIT’s manager saying it could use the net proceeds, “to pare down outstanding debt obligations, finance potential acquisitions and asset enhancement initiatives, and/or make distributions to unitholders.”

Woh Hup, the construction company controlled by the reported buyer, in March this year teamed up with SGX-listed Far East Orchard to acquire a student housing asset in Glasgow, Scotland for £38.9 million (then $50 million). Those same partners had established a £26.6 million joint venture in 2022 to develop a student housing project in Bristol, England.

Also in 2022, Woh Hup joined with SGX-listed Metro Holdings and Lee Kim Tah Holdings to acquire a set of four UK student housing properties in Exeter, Durham, Glasgow and Kingston.

SPH Real Estate Liquidation Continues

“Paragon REIT remains well positioned to seek yield-accretive opportunities for future growth,” the trust’s manager said in announcing the divestment, which marks the third disposal by a Cuscaden Peak entity this year.

In April Cuscaden agreed to sell a portfolio of 31 European student housing properties to Mapletree Investments, with those assets having previously been part of the Singapore Press Holdings real estate portfolio.

That deal came just one month after a joint venture between Cuscaden Peak and developer Yanlord Land’s United Engineers Ltd unit completed its S$550 million ($410 million) sale of the Seletar Mall in northeastern Singapore to Robert Kuok’s Allgreen Properties.

In 2023 Cuscaden Peak sold three mansions on Singapore’s Nassim Road for S$206.7 million ($155 million), with the firm’s stake in the recently completed Woodleigh Residences condo project in the Bidadari area, along with its associated mall, now its last directly owned assets.

Following the disposal of the Rail Mall, Cuscaden-managed Paragon REIT will continue to hold the Paragon and Clementi Malls in Singapore, along with the Westfield Marion mall in Adelaide, Australia and the Figtree Mall in Wollongong, New South Wales.