Singapore Retail REITs - DBS Research 2025-03-13: Orchard Road’s Gold Rush

• ION Orchard deal and privatisation offer for Paragon are driving renewed investment interest in Orchard Road’s trophy malls.
• Investor confidence in prime retail assets in Singapore has reached new heights, underscored by the landmark S$1.85bn sale of a 50% stake in ION Orchard – an unprecedented S$5,928psf price tag (or 4.9% yield) for a trophy retail mall.
• - Read this at SGinvestors.io -

Buyers not batting an eye at low-4% cap rates for prime retail malls

REIT transactions executed at high-4% cap rate cross DPU accretion hurdle.

• - Read this at SGinvestors.io -
• Nex Mall (Frasers Centrepoint Trust’s acquisition of 24.5% stake) – executed at a cap rate of roughly 5%, above the valuer’s cap of 4.5%.

These deals acknowledge potential tax leakage, as assets not fully owned by the REIT remain taxable, and also indicate that the REITs and sponsors’ interests are aligned, with the cap rates ensuring positive DPU accretion for REITs.

We see opportunities for these assets to compress to a cap rate of 4.5% or lower in the medium term as the REIT captures full ownership on an asset level or unlocks a more tax-efficient structure.

Asset sales at low-4% cap rate typically accompanied by redevelopment and repositioning opportunities.

• Read more at SGinvestors.io.

Geraldine WONG DBS Group Research | Derek TAN DBS Group Research | https://www.dbs.com/insightsdirect/ 2025-03-13 SGinvestors.io

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