The Pakistan Credit Rating Agency Limited
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Muhammad Junaid

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PACRA Maintains Entity Ratings of ISE Towers REIT Management Company Ltd

Rating Type Entity
(07-Jan-22 )
(07-Jan-21 )
Action Maintain Initial
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The assigned rating emanates from ISE Towers REIT Management Company Ltd.'s ("ISE Towers or "The Company") business profile characterized by stable operating revenue and robust demand. The diversified shareholding pattern of the Company comprises 236 shareholders (Corporates, Banks, DFIs, Insurance Companies, Modarabas, pension funds, and others). The assigned rating incorporate sound corporate governance, an experienced management team, an adequate control environment, and Company's pioneer status in the capital markets. The compliance function ensures adherence to all applicable internal and external rules and regulations. The Company is deriving its core income from its dominating asset "ISE Towers" which is enjoying an almost 100% occupancy level. The rental revenue grew by only ~6% due to strained operating environment caused by the pandemic. The multistory building is situated in the prime location Blue Area, Islamabad. The Company is planning to convert the ISE Towers into REIT Fund. The project has achieved significant progress, in the shape of obtaining requisite approvals under REIT Regulation, 2015, and the REIT Fund is likely to be launched in FY22. The funds generated from this fund will be utilized to undertake new REIT projects. The Company is planning to diversify into hybrid and development REIT schemes. The profitability of the company is growing at a moderate pace and reported at ~PKR 510mln for FY21 (FY20: PKR 339mln). The Company has acquired a trustee company "Digital Custodian Company Limited" in order to diversify its business. The business risk of the company is supported by high-profile tenants, economic recoveries, and improving COVID-19 situation in the country. The Company has zero leveraging and its liquidity position remains comfortable. The equity stood at ~PKR 6.1bln at the end-Jun'21 (Jun'20: ~PKR 5.7bln).
The ratings are dependent on the Company's aptness to uphold its business and financial risk profile under the prevailing volatile macroeconomic environment and risk profile of new REIT projects. Sustenance of growth momentum is imperative.

About the Entity
ISE Towers REIT Management Company Ltd ("ISE Towers" or "The Company") was initially incorporated as Islamabad Stock Exchange (Guarantee) Limited (ISE). On January 11, 2016, upon integration of the stock exchange operation of the Company with Karachi Stock Exchange (KSE) and Lahore Stock Exchange (LSE), the Company got converted from ISE to a REIT Management Company under the Companies Act, 2017. Consequently, the name and scope of the Company have been changed. The principal activities of the Company are to form, launch and manage Real Estate Investment Trust (REIT) under REIT Regulations, 2015. The overall control of the company vests with an eleven members Board. Board's Chairman, Mr. Zahid Latif Khan has a diversified experience of the capital market spanning over twenty-five years. He is accompanied by a team of experienced management professionals. Mr. Sagheer Mushtaq is the Chief Executive Officer of the Company. He is a member of the Institute of Cost and Management Accountants of Pakistan and a commerce graduate and has over fifteen years of diversified experience in the field of finance, operation, and regulatory compliance.

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.