PSX Prepares for TPL REIT Fund I Offer For Sale on May 2-3

Staff Report

The Pakistan Stock Exchange (PSX) is poised to witness the Offer For Sale (OFS) of TPL REIT Fund I, with public subscription scheduled for May 2-3, 2024.

The offer comprises a base offer of 22.94 million units, equivalent to 1.25% of the total units of the REIT Scheme, with a face value of Rs10 per unit.

Additionally, there is a green shoe option of up to 22.39 million units, representing an additional 1.22% of the REIT Scheme.

The offer is being conducted through the Fixed Price Method at Rs17.59 per unit, which is equivalent to the NAV of the REIT. PSX Surges on Circular Debt Breakthrough

This will enable offerors to raise between Rs403 million to Rs797 million, depending on the utilization of the green shoe option.

The purposes of the offer for sales are threefold:

1. Compliance with REIT Regulations: This offer ensures compliance with Regulation 7 of the REIT Regulations, which mandates a REIT Scheme to be listed within a maximum period of 3 years from the date of Transfer of Real Estate or Financial Close, whichever is later. The financial close of the fund was announced/declared on June 24, 2022.
2. Interest of Foreign Investors: Listing will facilitate the accommodation of foreign investors’ interest, as TPL RMC has received queries from multiple foreign investors regarding participation in TPL REIT, according to their prospectus.
3. Price Discovery: Quarterly dissemination of NAV due to ongoing progress on the three projects of TPL REIT through PSX will provide potential investors with periodic updates, stimulating the listed Units’ price. A quoted price will be beneficial to all investor portfolios that are marked to market.

TPL REIT Management Company Limited (TPL RMC), a wholly-owned subsidiary of TPL Properties Limited, has launched Pakistan’s first and largest hybrid Shariah-compliant REIT, namely TPL REIT Fund I.

TPL REIT is established under a Master-Feeder Fund Structure and is formed as a trust under REIT Regulations in Pakistan.

TPL REIT Fund I has currently invested in three projects, namely Mangrove, One Hoshang, and Technology Park. The initial REIT size is Rs18.35 billion, with 61% held by Anchor Investors and 39% by TPL Properties.

TPL Properties, a reputable and corporatized Real Estate company in Pakistan, listed on the stock exchange, provides a one-stop solution for real estate development, facility management, and investment.

The Strategic Investor made a non-cash contribution of real estate assets valued at Rs7.1 billion into the REIT Scheme, while the Anchor Investors collectively made a cash equity contribution of Rs11.25 billion.

Currently, the unitholders of the REIT scheme consist of TPL Properties and eight commercial banks.

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

In terms of price comparison, the company is launching an offer for sale equal to its NAV value of Rs17.59 per share.

According to the prospectus, there are no direct competitors of TPL REIT because it’s a perpetual and Hybrid REIT, having a substantial developmental component.

However, it’s worth noting that a finite-life developmental REIT called Globe Residency (GRR) is trading at a premium of 13% of its NAV value.