Muhammad Atif Chaudhry
PACRA assigns Initial rating to TPL REIT Fund I
|Rating Type||REIT Fund Rating|
|Long Term||RFR 3+|
TPL REIT Fund I (or the "Fund") is a perpetual, closed-end, shariah-compliant hybrid Non-PPP REIT Scheme launched by TPL REIT Management Company Limited. The Fund’s objective is to achieve regular and stable returns through investments in a diversified portfolio of sustainable developments and yielding assets in the real estate sector in Pakistan. The Fund would be listed on the stock exchange within three years of financial close. The REIT Fund size is proposed to be PKR 80bln (~USD 350mln). The RMC is seeking to raise 60% of the targeted fund from foreign investors, 30% from domestic investors, and the rest from its strategic investor, TPL Properties Ltd. Foreign funds would be routed in Pakistan through one or more feeder funds established in acceptable offshore jurisdictions which will allow foreign investors to invest in REIT through a regulated tax-efficient vehicle. The fund achieved first close of PKR 18.35bln, out of which PKR 14.975 bln (1st and 2nd tranches) has been raised till now. TPL Properties subscribed ~40% of the units while the remaining units are subscribed by the eight leading financial institutions of the country. The investment in Real Estate Development Assets is through SPV structure. The funds raised are utilized to i) acquire and inject the equity in project SPVs and ii) pay the expenses and liabilities of the Fund.
The investments raised under the Fund in the 1st and 2nd tranches are being used to finance three real estate projects; i) Technology Park: This would be the first kind of technology park in Pakistan with high- end technology infrastructure, accompanied by a 42 key business hotel ii) Mangrove: Master planned community including mid-rise residential apartment towers, retail space, offices and hospitality asset located at the waterfront and iii) One Hoshang: Pakistan's one of a kind premium end residential apartment tower and showrooms with world-class amenities. The assigned rating captures the risk profile of the three projects which will be financed through the First Close. The rating may be impacted by the risk characteristics of future projects. All projects are located at prime locations in Karachi. The total area that would be covered under the scheme is 13,375,000 sq. ft. The total cost of the three projects would be financed be a mix of equity, debt, and customer advances against the sale of developed inventory.
The ratings are dependent upon the company’s ability to sustain its healthy business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remain important. Moreover, upholding of governance framework is vital.
TPL REIT Management Company Limited was incorporated on ‘Oct’ 2018 as a public limited company. It is licensed by the Securities and Exchange Commission of Pakistan to carry out REIT management services under the Non-Banking Finance Companies Regulations, 2008, and REIT Regulations, 2015. The Company is engaged in the launch and management of REITs. The Company is a wholly-owned subsidiary of TPL Properties Limited which is the real estate arm of TPL Corp. TPL Group aims to establish new ventures with industry players who contribute business acumen and best practices. The company’s Board of Directors comprises seven members including four independent directors, two non- executive directors and one executive director. Chairman of the board is not appointed yet. Mr. Ali Asghar is the CEO of the Company. A team of qualified individuals is associated with the Company. The Company has launched its first hybrid Shariah Compliant REIT Fund.