TPL REIT Fund I: CEO Ali Asgher says optimistic about IPO’s prospects

KARACHI: Ali Asgher, CEO of TPL REIT Management Company Limited (RMC) Ltd, expressed confidence that the Initial Public Offering (IPO) of Pakistan’s first Shariah-compliant hybrid REIT – TPL REIT Fund I, which is scheduled for public subscription on May 2-3, 2024 – will be oversubscribed.

The IPO is expected to be one of the largest in recent years, and comes as a silver lining for the Pakistan Stock Exchange (PSX) that has struggled to add companies to its mainboard in recent years.

In an interview with Business Recorder, Ali Asgher highlighted the potential of the real estate sector, pitching REITs as a reliable investment instrument.

TPL REIT Fund-I public subscription opens today

“Real estate is a lucrative sector with a promising outlook. REITs can help provide a structured and reliable investment instrument,” he said.

Asgher noted that while the real estate sector has experienced a slowdown, particularly for open plots, TPL REIT focuses on the development side of real estate, where there is significant demand due to the country’s shortfall of millions of houses. He also emphasized that TPL REIT will prioritise sustainable development practices in its real estate projects.

The IPO offer consists of a base offer of 22.94 million units, which is 1.25% of the total units of the REIT Scheme, having a face value of Rs10/unit, stated brokerage house Topline Securities in a report.

This is also accompanied by a green shoe option of up to 22.39 million units representing a further 1.22% of the REIT Scheme.

The offer is being made through the fixed price method at Rs 17.59 per unit which is equivalent to the NAV of the REIT. This will help offerers raise Rs 403-797 million depending upon the green shoe option utilisation.

TPL RMC is a 100% owned subsidiary of TPL Properties Limited, and its REIT Fund I has currently invested in three projects, namely Mangrove, One Hoshang, and Technology Park.

The initial REIT size is Rs18.35 billion, out of which 61% is held by the anchor investors and remaining 39% by TPL Properties.

To highlight, TPL Properties is the strategic investor in the TPL REIT scheme, and eight commercial banks are the anchor investors. The strategic investor made a non-cash contribution of real estate assets into the REIT Scheme, valued at Rs7.1 billion, while anchor investors made a collective cash equity contribution of Rs11.25 billion.

Post IPO, as per the base offer, 1.25% of shareholding will be transferred to the General Public, with existing unitholders’ holding reducing on a pro rata basis.

The real estate sector, which consists of housing, construction, retailing, hoteling, and renting of spaces for official or trading purposes, is the largest segment of Pakistan’s economy. The sector is connected with the growth of 40 allied industries including cement, glass, furniture, paint companies, plastics, electric fittings, cables, and electronics.

The real estate sector of Pakistan is a vast and complex industry, with a share in GDP of 8.1%. According to the World Bank, around 80% of the wealth held by Pakistanis is related to real estate. Pakistan is ranked as the fifth most populous country in the world with a fast-growing population, around 2% annually, and an urban population growing rapidly at 3% per annum.

This growth fuels demand for housing; currently, the overall housing deficit in the country is estimated at 10 million units out of which nearly half are in the urban areas.

Moreover, according to the State Bank of Pakistan, urban housing demand is going up by 350,000 units every year, of which only 150,000 units is met.

Copyright Business Recorder, 2024