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Quick REIT - PARAGON REIT 2023 Full Year Financial Results

PARAGON REIT announced its financial results for the full year ended 31 December 2023 (“FY2023”) on 5 February 2024.

2024 Paragon REIT Banner*Image from Paragon REIT presentation slide

Financial Performance

In the financial year 2023, PARAGON REIT showcased little growth of a 1.8% increase in gross revenue, reaching to S$288.9 million.

The Net Property Income (NPI) also experienced a slight boost, rising by 1.7% to reach S$215.1 million during the same period.

Despite these positive results, the Distribution per Unit (DPU) for FY2023 saw a decline of 9% year-on-year. This decrease can primarily be attributed to the mounting interest costs.


Operational Performance

PARAGON REIT's assets occupancy rate continue to be stable at 98.1% thanks to the resilience of retail spending as of December 31, 2023.

In FY2023, PARAGON REIT achieved a remarkable rental reversion rate of 6.3%, reflecting the optimistic leasing sentiments among retailers in a post-pandemic world.

This positive response from retailers indicates their readiness to capitalize on the progressive growth ahead.

Furthermore, the portfolio's weighted average lease expiry, measured by net lettable area and gross rental income, stands at 5.1 years and 3.0 years respectively.

2024 Feb Paragon Operational v2*Image from Paragon REIT presentation slide


Paragon Asset Valuation

PARAGON REIT possesses a total of 5 properties within its asset portfolio, comprising 3 in Singapore and 2 in Australia.

The valuation trends exhibit variance between the two countries.  In Singapore, the valuation of the 3 assets remained relatively stable, with minimal fluctuations of around +-2%.

However, in Australia, the valuation experienced a decline of 5.0% and 7.4% for Westfield Marion and Figtree Grove Shopping Centre, respectively.  

Despite the decline in valuation for the Australian properties, the management reported a noteworthy 7% year-on-year increase in tenant sales across the Australian portfolio.

2024 Feb Paragon Asset Valuation v3*Image from Paragon REIT presentation slide


Capital Management

The REIT's total borrowings amounted to S$1.3 billion, representing a gearing ratio of about 30%.

The proportion of fixed debt remained steady at 85%, and the debt maturity profile showed an average term to maturity of 2.1 years, with an average debt cost of 4.30% for the fiscal year 2023.

2024 Feb Paragon Capital Management*Image from Paragon REIT presentation slide


Our Comments

Paragon REIT has maintained relatively stable revenue and property income, showing a slight year-on-year increase in the resilient retail sector.

The overall Net Asset Value (NAV) has remained unchanged at S$0.91 for both 2022 and 2023, indicating no growth. However, in this context, a stable NAV is considered favorable coupled with the REIT's low gearing ratio of 30% during these period of time.

Nonetheless, there are concerns regarding its high average cost of debt, standing at 4.3%, and upcoming debt maturities requiring refinancing in 2024 and 2025, totaling S$223 million and S$447 million respectively.  

It remains to be seen if the management can secure more favorable refinancing terms to alleviate the burden of high interest expenses, which could potentially impact the Distribution Per Unit (DPU) despite stable revenue and net property income.

Invest wisely, REITsavvy Readers!

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