A unit of Pakistan’s TPL Corporation plans to raise $500 million through a private real estate investment trust, one of the largest such fundraisers in the country’s history.
According to Ali Jamil, CEO of TPL Corporation, the TPL real estate management company wants to collect 60% from foreign investors, 30% from domestic investors and the rest from its parents, TPL Properties Limited. He said the trust plans to close the deal by June, and will offer an internal rate of return of more than 30% in local currency.
The REIT is the third to be announced in the country this year — and fourth overall — as Prime Minister Imran Khan looks at the construction industry as a catalyst to boost the economic growth. The South Asian nation is giving tax evaders a free pass to invest in construction projects and offering subsidies for low-cost houses, while banks have been asked to increase credit exposure to 5% of the loan portfolio for the industry.
Shares of TPL Properties rose as much as 4.8% in Karachi before paring gains to close up 2%. The benchmark KSE-100 Index advanced 0.1%.
“Construction activity is picking up rapidly due to access to finance for both the developer and the buyer, and this is expected to grow exponentially over the next two years,” Jameel said in an interview at his office in Karachi. “The offering will give investors an opportunity to tap into Pakistan’s booming real estate.”
The company plans to list the REIT within three years in Pakistan and overseas. The funds will be used to finance three real estate projects — a tech park, a high-end residential building and a gated seafront community — in Karachi, he said.
TPL Corp., a Pakistani group with businesses including vehicle tracking and insurance, is trying to scale up its realty business. TPL’s REIT is the third to be announced this year in the country after a hiatus since the nation’s first such in 2015, as regulatory changes led by the Securities and Exchange Commission of Pakistan and the State Bank of Pakistan made it attractive for issuers.
Pakistan’s first REIT, which holds rental assets including Karachi’s most prominent mall and an office tower, offers a dividend yield of around 12% a year. REITs for a housing project in Karachi were announced in July to raise 8 billion rupees ($48 million) with an expected internal rate of return of more than 30%.