Could Paragon, Singapore’s Crown Jewel, Soon Be Sold?

Singapore’s iconic Paragon mall, located in the heart of Orchard Road, is sparking widespread speculation about its future as key stakeholders consider selling the luxury property. This move would mark a pivotal shift for Paragon Reit, the retail-focused real estate investment trust that owns the asset.

A Premium Asset in a Competitive Market
Paragon is valued at S$2.83 billion, thanks to its unparalleled location and high-end offerings. With capitalisation rates for its retail space set at 4.5% and its office and medical suites at 3.75%, the property stands out for its scarcity value and premium quality. Despite these slim rates, industry experts believe the mall could command a “frothy” price if put on the market, given its status as one of Orchard Road’s most successful retail landmarks.

Cuscaden Peak’s Strategic Divestments
Cuscaden Peak Investments, which owns 61% of Paragon Reit, has been on a selling spree. After acquiring Singapore Press Holdings (SPH) in 2022, the consortium—comprising Hotel Properties Limited, Temasek’s Mapletree Investments, and CLA Real Estate Holdings—has divested several high-profile properties. These include:

Three Nassim Road bungalows sold for S$207 million.\n- Seletar Mall, sold earlier this year for S$550 million.\n- Purpose-built student housing assets in the UK and Germany, sold for £1 billion.\n\nAdditionally, The Rail Mall in Bukit Timah and Figtree Grove Shopping Centre in Australia have also been sold above valuation.

What’s Next for Paragon Reit?
As the portfolio shrinks, speculation mounts that Paragon Reit might wind down entirely. After completing the sale of Figtree Grove in early 2025, its assets will include only The Clementi Mall, Westfield Marion in Australia, and The Paragon. Analysts suggest this could be the precursor to a complete liquidation, providing unitholders with a generous cash payout from the proceeds.

A New Wave of Investor Interest
Falling interest rates could reignite demand for high-quality investment properties, positioning Paragon Reit to capitalise on its remaining assets. The Clementi Mall, valued at S$630 million, is expected to attract strong investor interest due to its prime location in a major residential area. Meanwhile, Westfield Marion in South Australia, valued at A$580 million, could sell above valuation due to its high occupancy and improving tenant sales.

A Rare Opportunity on Orchard Road
Paragon’s retail and medical spaces make it a sought-after prize. Recent sales in the vicinity underscore this demand, such as Parkway Hospitals’ purchase of strata office space nearby for S$4,562 per square foot. With few high-quality retail assets available on Orchard Road, Paragon’s sale would likely trigger intense competition among deep-pocketed investors.

Unitholders Could Benefit
For Paragon Reit’s unitholders, a complete divestment offers the promise of attractive returns. The trust’s manager has already distributed special payouts following recent sales, including 1.85 Singapore cents per unit from The Rail Mall transaction. A full wind-down could provide even greater returns, making this potential shift a win for investors.

The Bigger Picture
As Paragon Reit grapples with its future, questions remain about the broader implications for Orchard Road. Revitalising this iconic shopping belt could benefit not only Paragon but also other key stakeholders, including Hotel Properties Limited, which may seek to redevelop its nearby assets such as Forum and voco Orchard Singapore.

With its prime location, scarcity value, and premium quality, Paragon stands as both a trophy asset and a symbol of Orchard Road’s enduring appeal. The coming months will reveal whether this storied mall begins a new chapter under different ownership.

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