Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has maintained its rating of TPL REIT Fund I, a perpetual, closed-end, Shariah-compliant hybrid Real Estate Investment Trust (REIT) scheme. The decision comes as the Fund undergoes significant changes in its investment strategy and project focus.

Initially proposed with an approximate size of PKR 80 billion, the Fund aimed for a 60% investment from foreign investors, 30% from domestic investors, and 10% from its strategic investor, TPL Properties Limited. As of May 2024, the domestic portion of the Fund completed its first close at PKR 18.35 billion and was subsequently listed on the Pakistan Stock Exchange.

Currently, TPL Properties holds a 38.02% stake in the Fund, with the remaining 61.98% held by eight banks. The proceeds from the Fund's first close were invested in three projects, each housed in separate Special Purpose Vehicles (SPVs): Mangrove, One Hoshang, and Technology Park.

In fiscal year 2024, the Fund initiated divestment from the Technology Park project due to real estate challenges and financing requirements. The sale agreement for Technology Park has been finalized, with an advance payment received and the transaction expected to conclude in early 2026. Additionally, the Fund plans to divest from One Hoshang in November 2025.

As a result, the Fund will concentrate its efforts on the Mangrove project. The financing for Mangrove is planned through advance sales and proceeds from the sale of Technology Park, with reinvestment into Mangrove supported by investor consent.

Mangrove's development is expected to generate cash flows in a phased manner across seven stages. The project's financing primarily relies on equity and customer advances from pre-sold inventory, with minimal debt involvement.

Pakistan's real estate sector is anticipated to gradually improve in fiscal year 2025, supported by easing inflation and lower interest rates. The Fund reported a profit after tax of PKR 758.3 million during fiscal year 2025, reflecting higher unrealized gains on investment properties. The net asset value per unit stood at PKR 18.28 by the end of September 2025.

PACRA's maintained rating is contingent on the Fund's ability to uphold a strong profile amid competition, with prudent financial and operational risk management remaining crucial. The focus on a single remaining project heightens the importance of its timely execution and performance. Adherence to governance and regulatory standards will continue to be essential.