Foot in the boom: Small-time investors look to own Dolmen City
Book-building process for Dolmen City REIT begins
REITs are collective investment schemes that pool investors’ funds for onward investment in real estate. PHOTO: ATHAR KHAN/EXPRESS
KARACHI:
Business magnate Arif Habib said on Monday the listing of Pakistan’s first real estate investment trust (REIT) scheme will enable small investors to benefit from a booming real estate market.
Speaking at the gong-ringing ceremony at the Karachi Stock Exchange (KSE) that kick-started the book-building procedure for Dolmen City REIT, Habib said it is modelled after mutual funds and provides investors with regular income streams, diversification and long-term capital appreciation.
REITs are collective investment schemes that pool investors’ funds for onward investment in real estate.
Dolmen City REIT offers investors the opportunity to become unit holders of two components of the Dolmen City project — Dolmen Mall Clifton and the Harbor Front building – located on the Karachi seafront.
The property is originally owned by International Complex Project (ICP). The Arif Habib Group controlled 20% shares in ICP while 80% ownership rested with the Dolmen Group before the public listing.
The monetary value of the total fund of Dolmen City REIT is Rs22.2 billion. In Pakistan, REITs operate like close-end funds, as pooled capital is invested in real estate and its units are listed on the stock exchange that investors can buy and sell just like ordinary stocks.
The property will generate rental income that will be distributed by the REIT scheme among unit holders in the shape of dividends. Any possible appreciation in the value of the property will be an added benefit.
Small investors have traditionally been unable to take part in real estate investments in Pakistan, as the property market is considered to be highly illiquid and capital intensive. There are few publicly listed property developers in Pakistan while REITs have practically been non-existent so far.
The pre-IPO phase consisted of the placement of 75% of the offer’s total units with the sponsors of the ICP and the REIT management company at Rs10 per unit. The rest of the 25% units are being publicly offered during the IPO in two separate phases. Three-fourths of the 25% units currently on offer will be sold to institutional investors and high net worth individuals through book building on June 8 and 9.
The remaining one-fourth units of the IPO phase will be sold to retail investors on June 12 at a strike price determined during the preceding book building phase.
The net operating income generated by the proposed REIT as per the last financial year’s statements of ICP (present owner) is Rs1.54 billion, according to the prospectus of Dolmen City REIT. In the best case scenario based on full occupancy, 100% payout and 10% growth in rent rates per annum, the expected dividend yield is almost 9.5% in the first year. It is expected to increase to 13.8% in the fifth year and 22.5% in the tenth year.
In the worst case scenario based on 85% occupancy, 90% payout and 5% growth in rent rates per annum, the expected dividend yield is 6.5% in the first year, 8.3% in the fifth year and 11.5% in the tenth year.
In addition to the cash yield, capital appreciation is ‘conservatively projected’ at 5% per annum. This will be reflected in the net asset value and will be realisable through the sale of units on the stock exchange.
Published in The Express Tribune, June 9th, 2015.
Business magnate Arif Habib said on Monday the listing of Pakistan’s first real estate investment trust (REIT) scheme will enable small investors to benefit from a booming real estate market.
Speaking at the gong-ringing ceremony at the Karachi Stock Exchange (KSE) that kick-started the book-building procedure for Dolmen City REIT, Habib said it is modelled after mutual funds and provides investors with regular income streams, diversification and long-term capital appreciation.
REITs are collective investment schemes that pool investors’ funds for onward investment in real estate.
Dolmen City REIT offers investors the opportunity to become unit holders of two components of the Dolmen City project — Dolmen Mall Clifton and the Harbor Front building – located on the Karachi seafront.
The property is originally owned by International Complex Project (ICP). The Arif Habib Group controlled 20% shares in ICP while 80% ownership rested with the Dolmen Group before the public listing.
The monetary value of the total fund of Dolmen City REIT is Rs22.2 billion. In Pakistan, REITs operate like close-end funds, as pooled capital is invested in real estate and its units are listed on the stock exchange that investors can buy and sell just like ordinary stocks.
The property will generate rental income that will be distributed by the REIT scheme among unit holders in the shape of dividends. Any possible appreciation in the value of the property will be an added benefit.
Small investors have traditionally been unable to take part in real estate investments in Pakistan, as the property market is considered to be highly illiquid and capital intensive. There are few publicly listed property developers in Pakistan while REITs have practically been non-existent so far.
The pre-IPO phase consisted of the placement of 75% of the offer’s total units with the sponsors of the ICP and the REIT management company at Rs10 per unit. The rest of the 25% units are being publicly offered during the IPO in two separate phases. Three-fourths of the 25% units currently on offer will be sold to institutional investors and high net worth individuals through book building on June 8 and 9.
The remaining one-fourth units of the IPO phase will be sold to retail investors on June 12 at a strike price determined during the preceding book building phase.
The net operating income generated by the proposed REIT as per the last financial year’s statements of ICP (present owner) is Rs1.54 billion, according to the prospectus of Dolmen City REIT. In the best case scenario based on full occupancy, 100% payout and 10% growth in rent rates per annum, the expected dividend yield is almost 9.5% in the first year. It is expected to increase to 13.8% in the fifth year and 22.5% in the tenth year.
In the worst case scenario based on 85% occupancy, 90% payout and 5% growth in rent rates per annum, the expected dividend yield is 6.5% in the first year, 8.3% in the fifth year and 11.5% in the tenth year.
In addition to the cash yield, capital appreciation is ‘conservatively projected’ at 5% per annum. This will be reflected in the net asset value and will be realisable through the sale of units on the stock exchange.
Published in The Express Tribune, June 9th, 2015.