PACRA maintains the rating of TPL REIT Fund I

TPL REIT Fund I (the "Fund") is a perpetual, closed-end, Shariah-compliant hybrid REIT scheme launched by TPL REIT Management Company Limited. The REIT Fund initial size was proposed to be PKR 80bln (~USD 350mln) out of which 60% of the targeted fund from foreign investors, 30% from domestic investors, and the rest 10% from its strategic investor, TPL Properties Ltd. Currently, the domestic Fund completed its first funding round of PKR 18.35bln in tranches, with the third and final tranche of PKR 3.375bln received from anchor investors last year. Following disbursement, TPL Properties (strategic investor) holds 38.02%, while other investors collectively hold 61.98% of the Fund. While 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.
In May 2024, the Fund was listed on the Pakistan Stock Exchange (PSX)—the sale of 33,473,295 units during the IPO generated PKR 588.8mln.The funds raised from the final tranche have been utilized for: a) the Completion of site design for The Mangroves project b) the Construction of a Biodiversity Park at The Mangroves c) Covering other ancillary costs related to the project. TPL REIT Fund I, comprises three real estate projects under three SPVs 1) Mangrove: Master planned community including mid-rise residential apartment towers, retail space, offices, and hospitality asset located at the waterfront ii) One Hoshang: Pakistan's one-of-a-kind premium high-end residential apartment tower and showrooms with world-class amenities and iii) Technology Park. The total cost of the projects would be financed by a majority mix of equity and customer advances against the sale of developed inventory with minimal debt financing. The Mangrove and One Hoshang projects are progressing steadily. One Hoshang: To date grey structure up to 2nd floor has been completed. Pakistan's real estate sector faced challenges in FY24, including property value adjustments, high interest rates, delayed construction progress, and a decline in business activity. Going forward, real estate landscape will be influenced by the lower expected interest rate trajectory. This evolving enviornment is likely to create favorable conditions for the commercial real estate market. In view of the depressed demand during FY24, for office space market the Fund is considering revisiting the Technology Park project to reposition the portfolio, aligning it with the evolving market dynamics and investor expectations. On financial front, the Fund generated a bottom line of PKR 376mln (FY23: PKR 9.2bln) the decline in profitability is attributable to the significant decrease in the unrealized gain on an investment property. While the NAV reported at Jun'2024 was 17.87/unit (FY23: 19.39/unit). The assigned rating captures the risk profile of all projects and may be impacted by the risk profile of future projects.
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 remains important. Moreover, upholding of governance framework is vital.

About the Entity
TPL REIT Management Company Limited, a 100% owned subsidiary of TPL Properties Limited launched the first Shariah Compliant Hybrid REIT Fund of Pakistan namely TPL REIT FUND – I (“The Fund”). TPL REIT FUND – I seeks long-term growth in NAV and dividend distribution for its Unitholders through investing in sustainable real estate assets in Pakistan. Currently the Fund has invested in three projects: Mangrove – Master Planned Community for Mix Development use, One Hoshang – Pakistan’s one of a kind premium-end Residential Apartment Tower and Tech Park – First of a kind Technology Park in Pakistan.