The Pakistan Credit Rating Agency Limited
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Muhammad Jhangeer Hanif

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PACRA Assigns Initial Ratings to TFC | TPL Properties Limited

Rating Type Debt Instrument
Action Initial
Long Term AA-
Short Term -
Outlook Stable
Rating Watch -

The ratings incorporate strong fundamentals of the company. TPL Properties owns a high-end office building (Centrepoint) in Karachi. The company is following BOMR (build, own, maintain and rent-out) model. The business profile of TPL Properties is expected to remain strong as Centrepoint enjoys full occupancy coupled with relatively long-term agreements engendering low business risk. The agreements also incorporate annual rent escalation clause. Furthermore, TPL Group is at an advance level with its second project in real estate - HKC Tower. The company is planning to launch green building concept in the country through this project comprising luxury residential apartments. TPLP will follow sale model for HKC Tower apartments. The management is also eyeing third project of residential apartments which is planned to be completed by FY23. The company is in process of raising debt through TFC. A substantial portion of amount raised will be utilized to finance existing debt – a factor considered positive while assigning rating. The remaining amount of TFC will be used for the equity investment in projects. The financial risk of the company will be managed by limiting additional borrowing, existing cashflows, rent escalation and developers margin. Moreover, comfort can be drawn from financial strength of ultimate parent of TPL Properties Limited in case of any payment constraint, they will service interest and principal installment.

The ratings are dependent on management's ability to ensure adequacy of cashflows against debt repayment commitments. Any material deviation in strategy impacting risk profile of the company will be negative.

About the Entity
TPL Properties is the real estate arm of TPL Group. The company is engaged in real estate
development and property management. 'Centrepoint' is the company's first project. It is a 28 storey commercial building including 17 office floors (rentable space). TPL Properties is majority (45%) owned by TPL Group. Centrepoint Management Services (CMS) - 100% subsidiary of TPL Properties - is responsible for providing maintenance services to 'Centrepoint'. TPL Properties has eight-member board of directors. Five members, including one executive and four non-executive members, represent TPL Group while three independent from sponsoring group. Mr. Ali Jameel, the CEO, is supported by an experienced team.

About the Instrument
TPL properties is planning to issue privately placed and Secured Term Finanace Certificates (TFC) of amount PKR 3.5bln inclusive of green shoe option of PKR 500mln. The tenor of TFC is 10 years and will follow step-up repayments. A substantial portion of raised amount will be used to repay the existing debt facility. The remaining amount of TFC will be used for the equity investment in projects.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.