PACRA Maintains the rating of TPL REIT Fund I

TPL REIT Fund I (the "Fund") is a perpetual, closed-end, Shariah-compliant hybrid REIT scheme. The Fund was initially proposed with a size of approximately PKR 80bln (~USD 350mln), with the targeted investment envisaged at 60% from foreign investors, 30% from domestic investors, and 10% from the strategic investor, TPL Properties Limited. The domestic portion of the Fund completed its first close at PKR 18.35bln in three tranches and was subsequently listed on May'2024 on the Pakistan Stock Exchange. TPL Properties holds 38.02% of the Fund, while other investors (eight banks) collectively hold 60.24%. The proceeds from the Fund’s first close were invested in three projects housed in separate Special Purpose Vehicles (SPVs) namely: i) The Mangrove (Waterfront mid-rise community); ii) Technology Park (Commercial Office & Business Hotel); and iii) One Hoshang (Luxury residences), with The Mangrove being the primary project comprising more than 90% of the envisaged built-up area. As of now, the Fund has announced divestment from One Hoshang, while the project land for Technology Park has been divested and the project has been relocated to The Mangrove Project site, in view of a more feasible value proposition. As a result, the Fund’s operations would be concentrated in its primary project, The Mangrove, which remains the only active development in the portfolio. With investors’ consent, the Fund intends to reinvest the Technology Park sale proceeds into Mangrove to support its ongoing development and construction.
The Mangrove is expected to generate cash flows in a phased manner, with project completion planned across six phases. The Fund’s projects are primarily financed through a mix of equity and customer advances from pre-sold inventory, with minimal reliance on debt. The Mangrove is the current focus, with construction and associated developments continuing in line with planned timelines. Pakistan’s real estate and construction sector would be gradually improving in FY25, supported by easing inflation, lower interest rates, and a more stable macroeconomic environment. Recovery would gain momentum with rising RMC registrations, stabilized investment flows, stronger PSDP spending, and government measures, including anticipated tax relief, driving a steady rebound in sector activity. On the financial front, during FY25, the Fund reported a PAT of PKR 758.3mln (FY24: PKR 376.4mln), reflecting higher unrealized gains on investment properties. During FY25, the per unit NAV of the Fund stood at PKR 18.28 (FY24: 17.87).
The ratings are contingent on the Fund’s ability to maintain a strong profile amid competition, with prudent management of financial and operational risks remaining crucial. Sensitivity would be on a single remaining REIT Fund project, making its timely execution and performance critical. Adherence to robust governance and regulatory standards will continue to be essential. The Rating Watch and Developing Outlook reflect PACRA’s expectation that the Fund will successfully execute the ongoing sale transactions, while sustaining financial stability and ensuring steady progress on the ongoing project within the defined timelines.

About the Entity
TPL REIT Management Company Limited ("TPL-RMC" or the "Company”) is the management company of the Fund. The RMC is 100% owned subsidiary of TPL Properties Limited. The first Shariah Compliant Hybrid REIT Fund of Pakistan, namely TPL REIT Fund I, was launched under the management of the RMC in December 2021. At present, the Fund would be vested solely in a single project, Mangrove.