Paragon Reit offer is fair and reasonable, says independent financial adviser
Sign up now: Get ST's newsletters delivered to your inbox
Paragon Reit currently owns Paragon mall, which accounts for 72 per cent of the Reit’s value.
ST PHOTO: DESMOND WEE
Follow topic:
SINGAPORE - A $2.78 billion offer to privatise the real estate investment trust (Reit) that holds the Paragon mall in Orchard Road has been deemed “fair and reasonable” by an independent assessor.
The Reit’s independent directors are thus recommending that unit holders vote in favour of the deal.
Documents lodged on the Singapore Exchange on March 27 revealed that PrimePartners, the independent financial adviser appointed by Paragon Reit
The offer to take Paragon Reit private
PrimePartners noted in the documents that the offer price is fair and reasonable as it is higher than the Reit’s value per share after excluding debt, potential fees and cash reserves.
The offer price also represents a premium over the last traded price before the offer was announced, and is higher than the level at which the Reit had been traded over the past two years.
It is also higher than the current market price of similar Singapore retail Reits, as well as the average target price analysts have ascribed to the stock.
Consequently, the Reit’s independent directors are of the view that the offer represents the most attractive and credible option available, and delivers immediate deal certainty by allowing unit holders to fully monetise their investments in cash.
They are recommending that unit holders vote in favour of the deal at an extraordinary general meeting (EGM) on April 22 at 2.30pm. The deadline to submit proxy forms is on April 19.
Cuscaden Peak Investments – formerly Singapore Press Holdings – first proposed on Feb 11 to privatise and delist Paragon Reit by way of a trust scheme of arrangement. It is a subsidiary of Cuscaden Peak, an investment company jointly held by Temasek subsidiaries Mapletree Investments and CLA Real Estate.
Paragon Reit currently owns Paragon mall, which accounts for 72 per cent of the Reit’s value, as well as The Clementi Mall and South Australia’s Westfield Marion Shopping Centre.
If unit holders approve the deal, Cuscaden Peak Investments has said that it plans to renovate and upgrade Paragon mall for between $300 million and $600 million. Changes will be made to the mall’s facade, interior and facilities, with work carried out in phases to avoid the mall’s full closure.
In its pitch to unit holders, Cuscaden Peak Investments said that given the significant amount of capital needed, and weaker investor demand for Reits due to high interest rates and market uncertainties, keeping Paragon Reit listed while undertaking the renovations would not be beneficial to unit holders.
However, it is worth noting that unlike most of its other assets, including The Seletar Mall, Woodleigh Mall and The Rail Mall, which were divested or put up for sale over the past two years, Cuscaden Peak Investments not only retained Paragon mall, but plans to invest heavily to keep it appealing to investors.
This implies that Cuscaden Peak Investments still sees considerable long-term value and returns in Paragon mall. Like-minded investors might want to consider this potential when voting for the deal.
Executives of the Reit noted in February that regardless of whether it is privatised, plans to renovate the mall will take place, as competition from other malls in Orchard Road has been intensifying.
Analysts warn that should the deal fall through, unit holders may need to contend with disruptions to operations at the mall as renovations are carried out over the next few years.
The offer will require amendments to the Paragon Reit Trust Deed, which must be approved by at least 75 per cent of unit holders voting at the EGM.
The offer must also be approved by more than 50 per cent of unit holders, representing at least 75 per cent of the value of units held, at a meeting to approve the scheme after the EGM.
Cuscaden Peak and its subsidiaries, which hold 61.5 per cent of Paragon Reit, will abstain from voting.
Units of Paragon Reit were trading flat at 97 cents on March 27.
