Paragon Reit in advanced talks to sell The Rail Mall at shade above S$80 million: sources

PARAGON Reit is in advanced negotiations to sell The Rail Mall in Upper Bukit Timah; the price is understood to be slightly higher than S$80 million.

The single-storey strip mall, with nearly 50,000 square feet (sq ft) of net lettable area (NLA), is on a site sold by the state with a 99-year leasehold tenure from March 1947. This leaves a balance of about 21 years and nine months. The property was valued at S$62 million as at Dec 31, 2023.

The Business Times (BT) understands the intending buyer is a private investor.

Located about 450 m from Hillview MRT station, the mall has a 360 m frontage to Upper Bukit Timah Road. It is also adjacent to the Rail Corridor, a popular nature trail. The property has 43 retail units and 89 car parking spaces.

Last year, The Rail Mall generated net property income of S$5.2 million, up from S$4.9 million in 2022, based on information in Paragon Reit’s annual report. Tenant sales at the mall rose 10.8 per cent last year.

As at Mar 31, 2024, the property had full occupancy.

Leases accounting for 47 per cent of The Rail Mall’s NLA, or 38 per cent of its gross rental income (GRI), are due to expire in 2025. Another 34 per cent of the mall’s leases by NLA, or 40 per cent of leases by GRI, will expire in 2026.

Retail and dining offerings at The Rail Mall include a Cold Storage supermarket, Starbucks Coffee and The Coffee Bean & Tea Leaf.

Other tenants include Popeyes Famous Louisiana Chicken, Springleaf Prata Place and vegetarian cafe Green on Earth.

CBRE is understood to have conducted an expression of interest exercise for the property that closed in April.

Paragon Reit, formerly known as SPH Reit, acquired The Rail Mall for S$63.2 million in 2018 from Pulau Properties, owned by Lee Foundation and members of the Lee family.

The Rail Mall came into being when Lee Rubber subsidiary Singapore Engineers gave the 43 one-storey units a S$5 million facelift in 1994 to turn the asset into a neighbourhood centre targeting residents in nearby estates.

The mall went through another revamp in 2008 as its management tried to position it as a food and lifestyle hub for the western region of Singapore.

Room for acquisition?

Paragon Reit’s gearing stood at 29.9 per cent as at March 31, 2024, with a 4.57 per cent average cost of debt and 3.4 times interest cover.

Besides The Rail Mall, Paragon Reit owns the high-end Paragon mall and medical suite/office property in Orchard Road and The Clementi Mall in Singapore, and has stakes in two malls in Australia: Westfield Marion in Adelaide and Figtree Grove in Wollongong.

In its first-quarter business update on May 6, 2024, Paragon Reit said that it plans to explore acquisition opportunities. The Reit has a right of first refusal on future income-producing properties of its sponsor, Cuscaden Peak Investments, that are used primarily for retail purposes in the Asia-Pacific.

One such property is The Woodleigh Mall, which opened in May 2023.

Cuscaden Peak Investments – formerly known as Singapore Press Holdings before its privatisation in May 2022 – is a wholly owned subsidiary of Cuscaden Peak, a consortium made up of three shareholders: Hotel Properties, Mapletree Investments and CLA Real Estate Holdings.

In March this year, Cuscaden Peak Investments and United Engineers sold The Seletar Mall for S$550 million to Allgreen Properties.