On 11 February 2025, Paragon REIT received a privatization offer from Times Properties, a wholly owned subsidiary of Cuscaden Peak Investments, at a 10.1% premium to the counter’s last transacted price.
The reason for the privatization offers revolves around the “low” liquidity and free float as well as the offeror’s intention to conduct major asset enhancement initiatives (AEI), which the offeror believes is “more suitably carried out in a private setting.”
Based on the offeror’s rationale, given that Paragon accounts for 72% of the REIT’s portfolio, any AEI will result in massive disruption in the operating performances, and DPU and hence result in undesirable drawdowns which limits the manager’s ability to maintain the mall’s competitiveness in the long run.
In this article, we’ll examine the REIT market in Singapore and identify the REITs that exhibit similar liquidity constraints and portfolio concentration risk so that investors can have a better sense of the likelihood of future privatization.
Defining Daily Liquidity
To facilitate the analysis, we’ll be quantifying market liquidity based on the following formula:
Daily Liquidity = 30 Day Average Trading Volume in $ / Market Capitalization
This provides us with a sense of the average market depth while accounting for the impact of market capitalization by examining it in a ratio rather than from a nominal figure. (i.e. a $10 billion market capitalization REIT will have a higher trading volume (in $) as compared to a $1 billion market capitalization REIT).
By applying the formula and ranking the 38 S-REITs that REITsavvy tracks in descending order (data as of 12 Feb 2025), the findings are as follows and there are at least 7 S-REITs that trade below Paragon REIT based on daily liquidity which is based on the REIT market capitalisation.
