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The Pakistan Credit Rating Agency Limited
Press Release

Date
09-Nov-19

Analyst
Usama Zubair
usama.zubair@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Revises Rating of TPL Properties Limited | TFC 'Series A'

Rating Type Debt Instrument
Current
(09-Nov-19)
Previous
(10-May-19)
Action Downgrade Maintain
Long Term A+ AA-
Short Term - -
Outlook Stable Stable
Rating Watch - -

The ratings incorporate sustained 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) for Centrepoint. The business profile of TPL Properties is expected to remain same as ‘Centrepoint’ has full occupancy coupled with relatively long-term agreements. The agreements also incorporate annual rent escalation clause. TPL Group is pursuing its second project in real estate – One Hofshang. One Hofshang will comprise luxury residential apartments and advance sale model will be followed for this project. The project previously faced delays owing to ban on high rise constructions in Karachi. The management is expecting to receive handsome developer's margin in upcoming year. Earlier, the company raised debt through TFC (Series A) to swap long term finance present on book which was previously obtained at higher spread and finance pre-construction expenses of One Hofshang. The financial risk profile is stressed owing to hike in interest costs (key policy rate) coupled with largely maintained free cashflows. Some of the related projects (REIT & Development Projects) are also on the cards which will alleviate concerns pertaining to cash flows. Any further increase in leveraging beyond 'Tranche A' may put stress on cushion available if upcoming investments are unable to contribute healthy cashflows. Furthermore, there exists guarantee from ultimate parent of 'TPL Properties Limited' in case of any payment constraint, they will service interest and principal installment. The comfort is drawn from sponsor's willingness to cut any of the current transactions, in which TPL Properties is currently dealing, to hold and/ or generate cash flows, if need be.
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 story commercial building including 17 office floors (rentable space). TPL Properties is majority (45.7%) 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. Four members, including one executive and three non-executive members, represent TPL Group while three members are independent from sponsoring group. Mr. Ali Jameel, the CEO, is supported by an experienced team. During the year a casual vacancy was created upon the resignation of Mr. Zafar Ul Hassan Naqvi and subsequently filled by Mrs. Sabiha Sultan as a member of board of director.

About the Instrument
TPL Properties has issued ‘Series A’ of privately placed and Secured Term Finance Certificates (TFC) of amount PKR 2.2bln. The tenor of TFC is 10 years and will follow step-up repayments. The company has repaid amount of PKR 1.7bln - previous debt facility by funds received from ‘Series A’ of TFC.

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.