Karachi, December 20, 2022 (PPI-OT):VIS Credit Rating Company Limited has assigned initial rating of RFR2 (dr) to Globe Residency REIT (GRR). REIT Fund Rating of RFR2 denotes that successful implementation of the REIT project is very likely. Risk factors impacting value of REIT assets are modest over the foreseeable future. Outlook on the assigned ratings is ‘Stable’.
GRR scheme having a size of Rs. 2.8b (financing mix- 50% through equity units of the REIT and remaining through long-term loan) was launched in April’22. The scheme is launched as a Limited-life (period of five years), Closed-end, Rated, Privately Placed (planned to be listed in the ongoing year), Developmental REIT Scheme. Purpose of the scheme is to acquire and construct ‘Globe Residency Apartments’ project comprising land parcels in Naya Nazimabad, Karachi from Javedan Corporation Limited (JCL) and generate return for unit holders. At end-June’22, 100% units of the REIT scheme were owned by JCL which have been offered for listing as per PSX notice by JCL on August 30, 2022. As per regulatory requirement, around 25% of the units will continue to be held by JCL, as the strategic investor in this REIT in accordance with REIT Regulations 2022.
The project entails development of 40,500 square yards of land divided into 5 flat sites, 9 towers and 1,344 apartments. The land has been acquired at end-June’22 by the REIT and construction on the sites have commenced with grey structure expected to be completed by end-September’23. The land has been transferred in the name of the trustee and all relevant NOCs have been obtained. The total cost of the project will be largely financed through customer advances along with equity, debt, and Mushrakah arrangement with Meezan Bank. The Fund is being managed by Arif Habib Dolmen REIT Management Company (RMC) which has an established track record of managing Dolmen City REIT. The Development Advisors on the project are Arch Vision and Arif Habib Development and Engineering Consultants (Private) Limited.
Assessment of business risk profile takes into account market position and strength of the sponsors (Javedan Corporation and Arif Habib Group) and favourable location of the project. Assigned rating factor in sensitivity of cash flows and liquidity metrics to variability in execution of sales plan. Ratings draw comfort from sound operational track record along with financial soundness of all the parties involved in the execution of the project which to a large extent mitigates the risk of potential delay in completion of the project. With around 50% of the apartments already sold at end-Nov’22, VIS expects project offtake risk to be modest. Timely completion of key milestones without any significant cost and time overruns while maintaining healthy sales velocity and collection efficiency, as projected, will remain key rating sensitivities, going forward.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/