The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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

Rating Type Debt Instrument
Action Maintain Maintain
Long Term AA- 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 healthy as ‘Centrepoint’ enjoys full occupancy coupled with relatively long-term agreements engendering low business risk. The agreements also incorporate annual rent escalation clause. TPL Group is pursuing its second project in real estate - HKC Tower. HKC tower will comprise luxury residential apartments and advance sale model will be followed for this project. The project was facing delay due to ban on high rise constructions in Karachi. Last year, 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 HKC Tower. The lower spread on the TFC was due to improved risk profile of the Company – a factor considered positive while assigning rating. The remaining amount of TFC (Series B) will be used for equity investment in projects. The financial risk profile is adequate and current financial commitments are manageable from existing cashflows of the company. Any further increase in leveraging beyond 'Tranche A' may have negative implications if upcoming investments are unable to contribute positive cashflows. 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 (45.7%) 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. Five members, including one executive and four 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.

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.