KARACHI: After radio silence of over half a dozen companies with licenses to manage real estate investment trusts (REITs), six transactions worth up to Rs 38 billion are likely to take place within 2021-22.
talking to dawn In a recent interview, Muhammad Aijaz, CEO of Arif Habib Dolmen REIT Management, said that his company will soon launch four REITs in addition to the two plans that the company announced earlier this month.
REITs collect money from investors and deploy it in real estate projects. They operate like any other company but provide more transparency to the investors as the trustees control all the assets and the entity must be listed on the stock exchange within three years. Small investors can then take exposure to the capital-intensive and illiquid real estate market by publicly trading REIT units like common shares.
Mr. Ejaz’s REIT management company – a joint venture with equal shareholding between the Arif Habib Group and Dolmen Group – created the country’s first REIT to sell Dolmen Mall Clifton and the adjoining Harbor Front building in a transaction of Rs 22.2 billion in 2015. Safe and sold. The REIT sector remained dormant for the next six years as adverse changes in the tax and regulatory regime discouraged investors, Mr. Ejaz said.
Appreciated the changes made by SBP, FBR and SECP to bring back investors
“The State Bank of Pakistan, the Federal Board of Revenue and the Securities and Exchange Commission of Pakistan have been instrumental in bringing investors back to REITs,” Ijaz said.
With a fund size of Rs 3 billion, Arif Habib Dolmen REIT Management has recently launched Silk Islamic Development REIT in Surjani Town, a low income area in the northern part of Karachi. The second scheme to be launched in the same area as Silk World Development REIT will have a fund of Rs 5 billion.
For the other four plans, the CEO said they would have a collective corpus of Rs 30 billion and would be located in more than one city.
transaction structure
Ajaz-led REIT management company Silk Islamic Development is one of five equal shareholders in the REIT. Other investors include Yunus Brothers, Arif Habib Group, Liberty Group and Fatima Group.
As its trustee, the Central Depository Company (CDC) currently holds Rs 3 billion in an account on behalf of five shareholders. The REIT management company will use the money to buy 60 acres of land from a group of vendors led by SilkBank.
According to Mr. Ejaz, the land vendors will get part payment in advance and the remaining balance will be received from the project proceeds. “The deferred payment arrangement has made the project more viable,” he said.
Noting that the project design details have not been finalized, Mr. Ejaz said the plan would have 12,000 two- and three-bed-plus-lounge residential units. “I cannot give you any price range right now. The construction cost is very volatile,” he said, adding that the scheme would start selling the flats in 16 to 18 months. Allottees would get possession within four years of the project start, he said Will go
When asked what he meant by middle class, he said, “We are building flats for middle class families with household income ranging from Rs 80,000 to Rs 250,000.
The second REIT scheme, which is located on 86 acres of land, has only one shareholder: Mahmood Trankwala-owned World Group. The plan will have 1,500 villas and the same number of apartments, in addition to 600 low-cost housing units to be sold under the Naya Pakistan Housing Program.
Both REITs must go public within three years. Sponsors will give at least 25 percent of their stake to the general public through a listing. Alternatively, existing shareholders can issue new units or shares to raise fresh cash for project needs.
Published in Dawn, July 21, 2021