PACRA Assigns Initial Entity Ratings to Packages Real Estate (Pvt.) Limited

Packages Real Estate (Pvt.) Limited (PREL) is the real estate arm of the Packages Group, a leading conglomerate in the Country. The Company benefits from strong parentage and the strategic location of its flagship project, Packages Mall, situated in the center of Lahore. Packages Limited own/occupies 100 acres on Walton Road, leasing 52 acres to PREL for commercial real estate. This house Packages Mall, office spaces, and offers expansion potential, supporting long-term growth and assigned ratings. PREL currently manages Packages Mall, one of the country's largest malls, with ~100% occupancy. Beyond retail, PREL leases premium office spaces to multinationals like Nestlé Pakistan and BAT, securing stable revenue streams and resilience against market fluctuations. PREL has maintained steady growth since its operationalization, supported by diverse lease agreements, including fixed rental, revenue-sharing, and long-term contracts, achieving a 13% CAGR in revenue. The mall's revenue streams primarily consist of three key areas: rental income, maintenance and parking fees, and advertising revenue. Additionally, this revenue base is further strengthened by income generated from purpose-built office spaces that are leased out. Moreover, the availability of land parcels for future development enhances the revenue stream and adds diversity to PREL’s financial portfolio. During CY24 the revenue clocked to PKR 6.01bln (CY23: PKR 5.3bln, CY22: PKR 4.5bln). A pass-through cost structure ensures profitability, with gross margin at 49.4% and operating margin at 40.6% in CY24. Net profit margin rose to 10.6% (CY23: 4.2%). The Company’s equity base is decent as of CY24 and is growing with consistent profitability. Regarding working capital, the nature of PREL’s operations does not require extensive borrowings. However, the Company short-term financing is used to bridge semi-annual loan repayments. However, the Company plans to reduce reliance on short-term financing as interest rates eases and older loans are repaid. Additionally, new loans for expansion come with a grace period. PREL's gearing ratio remains high at 65% in CY24 and is expected to stay within this range, with future expansions expected to be funded through debt. Expansions align with the board’s structured debt management policy, ensuring new debt is acquired only after repaying existing obligations, allowing for the reuse of the same security and optimizing financing costs. To maintain financial stability, expansion projects will be executed in phases. PREL’s most advanced expansion plans include extending the mall’s right side for additional retail brands and developing purpose-built office space for corporate leasing, with discussions underway with major tenants.
Despite competition from other malls, PREL maintains a strong position through high patronage, a prime location, ample parking, and tie-ups with established brands. Future ratings depend on financial stability, tenant retention, timely expansion, and prudent management of debt levels—particularly in relation to the expansion—along with improved equity.

About the Entity
Packages Real Estate (Private) Limited (PREL) was incorporated on March 9, 2006, as a private limited company with the primary objective of construction, real estate development, and management. The Company commenced operations in 2017 with the launch of Packages Mall, followed by the development of office spaces leased to major corporate clients. It is a subsidiary of Packages Limited, which holds a 75.16% stake, while IGI Investments (Private) Limited owns 24.84%. The seven-member BoD includes the Chairman, CEO, one independent director, and six non-executive directors, including two from the sponsoring family. Mr. Syed Hyder Ali is Chairman, and Mr. Khurram Raza Bakhtayari serves as CEO, leading an experienced team.