PACRA maintains REIT fund rating of JS Rental REIT
|Rental REIT Fund
JS Rental REIT Fund (or the "Fund") is a perpetual, closed-end, conventional rental Scheme launched by JS Investments Limited | RMC. The Fund’s objective is to achieve regular and stable returns through investments in a fully developed portfolio of sustainable developments and yielding assets in the real estate sector in Pakistan. The assigned rating incorporates sound governance, an experienced management team, an adequate control environment, and the pioneer status of JS Investments Limited in the capital markets. The compliance function ensures adherence to all applicable internal and external rules and regulations. The RMC is deriving its core income from its dominating asset "The Centre" which is enjoying an almost 100% occupancy level. The building “The Centre” has been targeted for the REIT scheme which is situated at Abdullah Haroon Road, Saddar, Karachi. The site has a land area of 3,988 sq. yds. The building is relatively new and completed in 2013. The building is a state of the art with branded lifts installed, an HVAC plant, and the latest security structure along with ample car parking space, a cafeteria, and a gym. Out of the total 22 floors with the ground and mezzanine floor dedicated to the shopping mall, six floors are parking floors, 8th floor is MEP and the 9th-14th floors are currently vacant. Currently, five floors i.e. 16th- 20th, are occupied by JS Investments and JS Global as tenants. The initial size of the Rental REIT fund was PKR 657.59mln as of Jun'22. The AUM of the Fund shows an increase of ~12% as of Sep'23 and stood at ~735.76mln (Mar'23: 670.50mln). The rental income of RMC stood at ~58mln as of FY23 which is expected to increase by 5% during FY24. The only investor of the JS Rental REIT Fund is JS Lands Private Limited which holds 100% units of the Fund.
The rating would remain dependent on the sustainability of the RMC, successful fundraising, achievement of milestones, and listing of the Fund. Successful completion of each project falling under the REIT scheme and generation of expected return would remain critical for rating. Moreover, upholding of governance framework is vital.
JSIL, established in 1995, is listed on the Pakistan Stock Exchange. The Company is part of the Jahangir Siddiqui (JS) Group. JS Bank Limited holds ~85% shareholding in the Company. JS Group has a strong presence in the financial sector with entities operating in the banking, insurance, brokerage, and asset management sectors. The group has recently ventured into energy infrastructure and OMC segments. JSIL possesses licenses for Asset Management, Investment Advisory, Private Equity/Venture Capital, and REIT management. In addition, the Company also acts as Pension Fund Manager under the Voluntary Pension System Rules, 2005.
JSIL’s control vests in the eight-member board of directors including the CEO. There are three independent directors while all other directors except the CEO are non-executive. Assets under the management of the Company are spread across seventeen funds in thirteen different Conventional and Shariah Compliant Categories, two voluntary pension schemes, one Exchange Traded Fund, and one dedicated equity fund. The JS AMC had AUMs of PKR 51bln at end of Sep'23 and PKR 58.5bln as of Nov'23 (Sep'22: ~PKR 35.8bln, Nov'22: PKR 37.3bln) and JS RMC had PKR ~736mln as of Sep'23.