Press Release

VIS Assigns Initial REIT Rating to IMAGE REIT

Karachi, March 19, 2025: VIS Credit Rating Company Limited (VIS) has assigned initial REIT rating to IMAGE REIT (“Image” or the “Scheme”) of ‘RFR3 (hr)’ (REIT Fund Rating Three (Hybrid REIT)). The hybrid REIT rating of ‘RFR3 (hr)’ indicates successful implementation of REIT project is likely. Risk factors impacting value of REIT assets may vary with possible changes in the economy over the foreseeable future. Outlook on the assigned rating is ‘Stable.’

Image REIT is a perpetual, closed-end, shariah-compliant hybrid REIT, formally established through a Trust Deed dated July 1, 2022, executed between Sinolink REIT Management Company Limited (SRMCL) as the REIT Management Company (RMC) and Central Depository Company of Pakistan Limited (CDCPL) as the Trustee. The Trust Deed was registered on the same date. The Securities and Exchange Commission of Pakistan (SECP) granted approval for the registration of the REIT Scheme on March 7, 2023, following the guidelines of the REIT Regulations, 2022.

The Scheme is sponsored by Mr. Asad Ahmed, CEO of Image Pakistan Limited which is a publicly listed and majority family-owned fashion retail company, specializing in unstitched and ready-to-wear embroidered fabric under the “Image” brand. For the year ended June 30, 2024, the Company reported a turnover of Rs. 2.9 bn and a net profit of Rs. 285 mn, with total assets of Rs. 4.8 bn and equity of Rs. 3.5 bn. The sponsor group possesses a reasonable understanding of real estate investments and development. In addition, their strategic selection of prime locations along major city arteries and commitment to quality construction provides leverage to the Scheme’s positioning. Image REIT, with a prospective fund size of Rs. 2.8 billion, operates across residential, commercial, and retail segments. As a hybrid REIT, it generates lease rental income while also benefiting from property value appreciation. While tenant concentration is high, the presence of associated companies as tenants enhances cash flow stability and reduces vacancy risk. However, replacement risk remains elevated due to relatively high lease rates. The Scheme's development component is supported by a moderate project scale, a prime location, and a well-structured sales plan. The use of mid-tier third-party contractors introduces potential construction risks. However, the conservatively estimated two-year project completion timeline provides a sufficient buffer against delays. These factors contribute to a reasonable return potential for investors, with a projected internal rate of return (IRR) of 14.05%, though it remains sensitive to fluctuations in rental rates and property prices.

The Scheme is characterized by a debt-free capital structure, relying entirely on equity and customer advances. An Initial Public Offering (IPO) is planned in the ongoing year, to raise additional funds for completion of the development piece of the project, which will reduce the strategic stake of sponsors to 66.6%. Availability of equity upfront addresses potential funding constraints which strengthens the completion timeline of the developmental component. Concurrently, the Scheme’s existing rental income provides liquidity buffer, supporting operational stability.

Going forward, rating remains underpinned on successful achievement of development milestones and sales plan, along with sustaining high occupancy levels. The timely and successful execution of the IPO will also be a crucial factor. Additionally, maintaining a debt-free capital structure and sufficient liquidity buffers will be essential for mitigating financial risks and ensuring long-term returns for investors.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.


Applicable Rating Criteria: Real Estate Investment Trust (REIT) Fund
https://docs.vis.com.pk/docs/REIT-Methodology-2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .