Paragon's value up by over $100 million in 6 months

Freehold mall to be injected into new SPH reit on 99-year leasehold basis

Upscale Paragon Mall - one of two malls to be spun off into a new Singapore Press Holdings (SPH) Reit - jumped in value by over $100 million in six months.

The mall, at 290 Orchard Road, was valued at about $2.4 billion in August last year.

But the most recent independent valuation by consultancy Knight Frank found that it was worth $2.61 billion on a freehold basis as of Feb 28 this year.

The freehold mall is being injected into the real estate investment trust (reit) on a 99-year leasehold basis, beginning from the reit's listing date.

On that 99-year leasehold basis, it was worth $2.502 billion as of Feb 28, Knight Frank said.

SPH chief executive Alan Chan told a briefing yesterday that this approach was in line with market practice, noting that The Clementi Mall is on a 99-year lease.

The media group yesterday announced that Paragon and The Clementi Mall will be spun off into the reit. SPH fully owns Paragon and owns 60 per cent of The Clementi Mall. It also owns 70 per cent of The Seletar Mall.

Mr Chan said The Seletar Mall will also be sold to the reit when it is ready.

Paragon is being sold to the retail reit for $2.5 billion.

The mall has 483,690 sq ft of retail space and 223,000 sq ft of medical suite and office space, which add up to a total net lettable area of 706,690 sq ft.

About 18.6 million shoppers visited Paragon last year.

It provided a pro forma net property income of $112.2 million for the financial year 2012, ending Aug 31 last year.

"Paragon is doing pretty well and has a good tenant mix. You can see other malls coming up along Orchard Road but Paragon's location is very prime," said HSR consultancy head Teo Li Kim.

The Clementi Mall is more family-focused and its transport links drive a lot of shopper traffic and walk-in customers, she added.

The mall, whose 99-year lease began on Aug 31, 2010, was valued at $570 million as at February by Knight Frank. It is being sold to the reit for $570.5 million.

The Clementi Mall consists of a five-storey retail podium and one basement level with 192,089 sq ft of retail net lettable area.

The suburban retail mall also houses a public library and is part of an integrated mixed-use development that includes Housing Board flats, a bus interchange and a connection to the Clementi MRT station.

SPH said in a statement yesterday that the mall "enjoys high levels of visitation" with more than 27.1 million visitors last year.

The Clementi Mall's pro forma net property income for the financial year ending on Aug 31 last year was $25.4 million.

SPH sent out a circular to shareholders yesterday evening, as it will need shareholder approval at an extraordinary general meeting.

The circular stated that SPH would provide income support for The Clementi Mall.

If the mall's net property income is below a threshold of $31 million in a financial year, SPH will top up the difference.

This is intended to provide a "more stabilised" level of income for The Clementi Mall, SPH said.

The income support will continue for up to five years from the reit's listing date or until the total amount of top-ups reaches $20 million, whichever happens first.

SPH said it was doing this as the mall was "still maturing in terms of shopper recognition, tenant performance and passing rents".

It noted that the mall got its second Temporary Occupation Permit in March 2011 and therefore a significant portion of its leases were still in the first term.

melissat@sph.com.sg

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