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RAM Ratings assigns preliminary ratings to 2025-Issue 1 MTNs to be issued by Paradigm REIT-sponsored vehicle
Published on 28 Apr 2025.
RAM Ratings has assigned long-term preliminary ratings (see table below) to the RM[850] mil 2025-Issue 1 Medium-Term Notes (MTNs) under Paradigm Capital Berhad’s (the Issuer) RM5.0 bil MTN Programme (the Programme).
The 2025-Issue 1 MTNs will be secured against a portfolio of three retail malls – Bukit Tinggi Shopping Centre (BTSC) and Paradigm Mall Petaling Jaya in Selangor and Paradigm Mall Johor Bahru in Johor Bahru (collectively, the Secured Properties). Paradigm Capital is a funding conduit of Paradigm Real Estate Investment Trust (Paradigm REIT or the REIT) to facilitate the fundraising exercise under the Programme.
Proceeds from the 2025-Issue 1 MTNs will be advanced to Paradigm REIT via a REIT Trustee Financing Agreement, to fund its acquisition of the Secured Properties, upfront transaction expenses and the minimum amount required in the Issuer’s Debt Service Reserve Account. MTN coupon payments will be met by rental income from the Secured Properties while principal redemption will be funded through refinancing or asset disposal.
RAM has assigned the three malls property scores ranging from [R-3.75] to [R-4.30], anchored by each asset’s competitive positioning in terms of location, tenant mix and market catchment, as well as management quality and proactiveness in asset enhancement initiatives, which translate to capitalisation rates of between [8.25]% and [8.75]%. We ascribed sustainable cashflow (SCF) of RM147.0 mil per annum to the portfolio based on its past and expected future cashflow performance, tenant and lease profiles. The SCF and the portfolio’s adjusted value of RM[1.74] bil translate into respective LTV ratios and stressed DSCRs that are commensurate with the preliminary ratings assigned to the Class A and B MTNs.
Between 2019 and 2023, the geographically diversified malls recorded average occupancy rates (AORs) of 94%-97% and decent average net property income (NPI) margins of 61.4%. Portfolio AORs and NPI margins have since surpassed these levels (2024: 98.6% and 67.3%). Excluding BTSC, the portfolio faces low tenant concentration risk, with the top 10 tenants contributing only 14.3% of gross rental income as at end-March 2025. A unique feature of the portfolio is the more prominent mix of experiential, activity-based retailers that encourage longer shopper dwell time. Overall, the portfolio lease expiry profile is fairly spread out and healthy, partly attributed to the long-term master lease with AEON Co. (M) Berhad at BTSC, that not only enhances portfolio margins but also reduces portfolio cashflow variability.
The preliminary ratings also consider the transaction’s structural features and trigger mechanism that initiates the disposal of the Secured Properties upon the occurrence of a trigger event, before an event of default occurs. The acquisition of the Secured Properties will form the initial portfolio of the newly established Paradigm REIT, targeted for listing in [June] 2025.
Analytical contacts
Joel Thum
(603) 2708 8232
joel@ram.com.my
Tan Han Nee
(603) 2708 8322
hannee@ram.com.my
Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
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