Paragon REIT : Improved Performance Underpinned By Retail Resurgence And Resilient Portfolio

Improved performance underpinned by retail resurgence and resilient portfolio

• NPI rose 3.3% yoy to S$279.9 million for 16M FY2022
• DPU of 1.72 cents as final distribution for four months ended 31 December 2022
• Near full occupancy across all assets to benefit from retail recovery

SINGAPORE, 13 February 2022 - PARAGON REIT Management Pte. Ltd. ("PARAGON RM" or the "Manager"), the Manager of PARAGON REIT1 (formerly known as "SPH REIT"), today announced its financial results for the 16 months2 ended 31 December 2022 ("16M FY2022"). With the easing of Covid-19 restrictions, PARAGON REIT registered strong recovery in tenant sales to near pre-Covid levels. As 16M FY2022 comprised a period of 16 months, comparative figures for the corresponding 16-month period ended 31 December 2021 ("CP 2021") are also disclosed.

Financial Performance

PARAGON REIT's gross revenue increased 1.8% over CP 2021 to S$376.4 million, and Net Property Income ("NPI") increased 3.3% over CP 2021 to S$279.9 million. Gross revenue for the 12 months ended 31 December 2022 ("CY2022") increased 1.5% over the 12 months ended 31 December 2021 ("CY2021"). NPI for CY2022 increased 3.6% over CY2021. The performance was supported by the retail recovery in Singapore.

Distribution per unit ("DPU") for the four months ended 31 December 2022 ("4M FY2022") was 1.72 cents, representing an annualised yield of 5.73%3. 4M FY2022 distribution is expected be paid on 28 March 2023.

1. On 29 December 2022, PARAGON REIT announced a change in name of the trust from "SPH REIT" to "PARAGON REIT" with effect from 3 January 2023. The new counter name is "PARAGONREIT" with the counter code remaining unchanged as "SK6U". The registered name of the manager has also been changed to "PARAGON REIT Management Pte Ltd" with effect from 3 January 2023.
2. On 29 July 2022, PARAGON REIT announced a change in its financial year-end from 31 August 2022 to 31 December 2022. The current reporting period will therefore be a 16-month period from 1 September 2021 to 31 December 2022. Thereafter, PARAGON REIT's financial year will be a 12-month period ending on 31 December each year.
3. Based on S$0.90 per unit closing price on 30 December 2022.

Operational Performance

PARAGON REIT adopts a proactive leasing strategy and works closely with retailers to be at the forefront of evolving retail and consumer trends. This enables PARAGON REIT to mitigate vacancies, as evidenced by its strong portfolio occupancy rate of 98.5%. PARAGON REIT's assets are well-positioned to benefit from the retail sector recovery, with near full occupancy across the portfolio.

Tenant retention ratio was 80%, which reflects the strong relationships and confidence our tenants have in the performance of PARAGON REIT's assets.

Portfolio negative rental reversion rate had lowered from -8.4% to -4.1% due to recovering retail sentiments. Tenant sales returned close to near pre-Covid levels across PARAGON REIT's portfolio.

The portfolio weighted average lease expiry ("WALE") stood at 5.2 years by net lettable area ("NLA") and 2.8 years by gross rental income ("GRI").

Singapore Assets

Covid-19safe-distancing measures were substantially lifted in April 2022, which led to increased visitation and spending. PARAGON REIT's portfolio in Singapore recorded a 24% increase both in tenant sales and footfall over CP 2021. For CY2022, tenant sales and footfall increased 35% yoy and 33% yoy, respectively.

International arrivals recovered significantly in 2022, with 6.3 million arrivals compared to

0.3 million arrivals in 2021. Paragon, in particular, which is located in the heart of Orchard Road, Singapore's shopping and tourist precinct, benefited from this resumption in international arrivals.

Paragon's position as a premier upscale mall was further enhanced with the introduction of new concept stores, such as Zegna's retrofitted flagship outlet, which showcases its latest brand concept, as well as a total shop refit from Ferragamo. Paragon will soon welcome Saint Laurent, one of Kering Group's top performing brands, to its premises in 2H 2023.

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Australia Assets

Australia largely ended its Covid-19 social distancing requirements in early 2022. PARAGON REIT's portfolio in Australia recorded a 7% increase in tenant sales over CP 2021. Footfall, however, was impacted by four months of lockdown in New South Wales from July to October 2021, and recorded a 1% decrease over CP 2021. For CY2022, tenant sales and footfall increased 9% yoy and 1% yoy, respectively.

Westfield Marion, the largest shopping mall in South Australia, continues to attract quality tenants such as NASDAQ listed Canadian athleisure retailer, Lululemon, which opened its doors in November 2022.

Stable Valuations

Singapore assets recorded higher valuations as compared to 31 August 2021, with valuation rising to S$3,338.7 million as at 31 December 2022, representing a 1.3% increase from S$3,296.2 million as at 31 August 2021.

Australian portfolio valuation also rose to A$847.0 million as at 31 December 2022, representing a 0.8% increase from A$840.5 million as at 31 August 2021.

Capital Management

PARAGON REIT's fixed debt percentage stood at 84%, with an average cost of debt of 2.05% for the 16M FY2022.

In December 2022, PARAGON REIT successfully completed various loan refinancings of approximately S$235 million. Effective interest rate as at 31 December 2022 was 3.09%. There is no major concentration of loans maturing in FY 2023, with only S$95 million or 7% of total debt, scheduled to be refinanced.

Total borrowings amounted to S$1.3 billion at a gearing ratio of 29.8%, providing debt headroom flexibility.

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Market Outlook

PARAGON REIT's portfolio is a key beneficiary of the domestic retail recovery and the gradual return of international visitor arrivals. Nonetheless, high inflation, continued geopolitical tensions, and economic headwinds could potentially weigh on consumer behaviour.

Dr Leong Horn Kee, Chairman of PARAGON REIT, said: "Our assets displayed strong operational recovery, which is proof of the quality of our portfolio, and the effectiveness of our strategies. This is evident from the higher retail sales across our portfolio. We are pleased to announce a stable DPU of 1.72 cents for the four months ended 31 December 2022. PARAGON REIT remains well-positioned to capture the rebound in retail sales, and we will strive to maintain our resilience against potential headwinds."

Ms Susan Leng, CEO of PARAGON REIT, said: "As we return to normalcy, our operating metrics in terms of tenant sales and footfall continue to improve. Over the festive season, we saw encouraging tenant sales at our assets. The stable asset valuation reflects our strategic positioning, as well as the strong demand for our assets. We will continue to proactively manage our assets and work closely with our stakeholders to ensure that we remain at the forefront of evolving retail and consumer trends."

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Summary Results of PARAGON REIT

Notes:

1. Distribution to unitholders for 4M ended 31 Dec 2021 of S$48.2 million includes distribution for the period 1 September 2021 to 30 November 2021 of S$34.8 million and the pro-rated 1 month distribution from the 3-months period 1 December 2021 to 28 February 2022 of S$40.4 million.
2. Distribution per unit (DPU) for 4M ended 31 Dec 2021 of 1.72 cents includes DPU for the period 1 September 2021 to 30 November 2021 of 1.24 cents and the pro-rated 1 month DPU from the 3-months period 1 December 2021 to 28 February 2022 of 1.44 cents.
3. Based on S$0.90 per unit closing price on 30 December 2022.
4. Based on S$1.00 per unit closing price on 31 December 2021.
5. The distribution to unitholders for 12M FY2021 includes S$14.5 million of FY2020 distributable income deferred as allowed under COVID-19 relief measures, which is equivalent to 0.52 cents per unit.
6. Based on S$0.91 per unit closing price on 31 August 2021.

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