PACRA maintains REIT fund rating of JS Rental REIT | Positive Outlook

The JS Rental REIT Fund (or the "Fund"), a perpetual closed-end scheme by JS Investments Limited, aims to provide stable returns through investments in fully developed, income-generating real estate assets in Pakistan. The assigned rating also incorporates sound governance, an experienced management team, and an adequate control environment. The compliance function ensures adherence to all applicable internal and external rules and regulations. The only investor of the JS Rental REIT Fund is JS Lands Private Limited which holds 100% units of the Fund.
The positive outlook reflects the expanded fund size, enhanced market share, and anticipated yield improvement of the JS Rental REIT. During CY24, the JS Investment Limited-RMC ("JSIL-RMC" or the "Company) added five additional floors (9th-13th) to the rental REIT increasing the fund size from PKR 719mln to PKR 2.2bln as of Sep'24 and bringing the total number of floors under the REIT from two (19th and 20th) to seven (9th-13th, 19th-20th). The JSIL-RMC is deriving its core income from its dominating asset "The Centre". The building targeted for the REIT scheme is located on Abdullah Haroon Road, Saddar, Karachi. The site has a land area of 3,988 sq. yds. 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. The tenancy agreements for the newly added floors are currently under negotiation. Meanwhile, the 19th and 20th floors rented to group companies, boast a strong tenant profile.
At the end of 9MCY24, rental income from REIT Rental Fund stood at PKR 15.8mln (9MCY23: PKR 15.1mln). Whereas, the profit after tax (PAT) of the Fund decreased by 69% and stood at PKR 3.6mln as of 9MCY24 (9MCY23: PKR 11.9mln) due to maintenance charges of PKR 8mln.
The rating would remain dependent on the sustainability of the JSIL-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.

About the Entity
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.