TPL Properties (TPLP) plans to raise the target fund size of $500 million (Rs. 90 billion) after recently securing the first round of funding worth Rs. 18.3 billion for its REIT Fund-I.
According to brokerage firm JS Global, the company plans to raise the funds in multiple rounds through international investors under a Master-Feeder Fund. Their report maintains that roadshows to market the Feeder fund are expected to commence from April 2022.
First Round of Financing Secured
TPLP held its Corporate Briefing Session on Wednesday, where the management apprised about its future projects. The company recently secured the first round of funding worth Rs. 18.3 billion for its REIT fund–I, where Rs. 11.3 billion were raised from local financial institutions, while TPLP invested Rs. 7.1 billion, being the strategic investor.
According to the report, the management shared that it expects disbursements of the investment proceeds by mid of April 2022. The management also shared that it targets the transfer of properties to the REIT scheme during the same month, where this transfer of assets to the respective SPVs would enable TPLP to realize a distributable gain of Rs. 4.3 billion or Rs. 8.4/share in 4QFY22.
Second Round of Financing to also Kick-in
TPL RMC plans to eventually raise the target fund size of $500 million (around Rs. 90 billion) in multiple rounds through international and local Investors. The funds shall be raised from International investors under a Master-Feeder Fund structure, whereby Feeder Funds will be set up in International Jurisdictions with the objective to invest in the Master Fund, i.e., TPL REIT Fund I.
According to the report, roadshows to market the Feeder Fund for round two of financing are expected to commence next month. The feeder fund will be managed by TPL Investment Management, a foreign AMC incorporated in Abu Dhabi Global Market. Additionally, TPLP has planned an IPO of the REIT within three years from the first financial close.
Multiple Revenue Streams Ahead
The company plans to have multiple revenue streams going forward, where major sources of earnings for the group would be the dividend income from the newly established REIT fund, development fees for the development of projects through TPL Development Management Ltd, and management fees earned by the RMC. TPL Properties’ wholly-owned RMC would oversee the REIT fund investments.
TPLP is currently pursuing four projects. One of them is a Logistics Park, in which the company has invested Rs. 600 million through a Special Purpose Vehicle (SPV) by acquiring around 40 percent stake. The project has already started getting traction from major shipping and courier companies.
The remaining three projects would be under The REIT Fund managed through separate SPVs, which would include:
1) A tech park
2) A Luxury Residential tower – One Hoshang; which is a planned community with retail spaces and residential suites.
Dividends to Company
Over the coming years, the REIT will provide dividends to the company by virtue of its holding (38 percent units) in the fund. According to the management, development work on the One Hoshang project is underway, and the project will be delivered in 3 years’ time.
As the owner of the REIT Management Company, TPLP would receive dividends as the RMC earns management fees for managing the REIT fund. The main source of earnings for the REIT management company would be a management fee (1.5 percent of NAV), a performance fee based on the NAV accretion, and 15 percent carried interest on the gain that it will likely earn as the SPVs achieve their intention of selling the inventory developed under them.
To recall, TPLP released its 1HFY22 results on 28 February 2022 with a consolidated after-tax profit of Rs. 3.48 billion (EPS of Rs. 10.30) against a loss after tax of Rs. 8.3 million (LPS of Rs. 0.02) in 1HFY21. The sequential increase in earnings is mostly attributable to a one-time event in the December quarter.
In lieu of reassessment of the fair value of investment assets related to Mangrove and Technology Park, the business recognized gains in its consolidated accounts of Rs. 3.6 billion (about Rs. 7/share before tax).
The REIT assets will be re-valued on a regular basis in the future, and any rise in the valuation of REIT units will be shown as income in the profit and loss statement for the relevant quarter. Due to the lack of Centrepoint’s participation, the company’s revenue was extremely low. The corporation posted fewer finance expenses since the profits from the Centrepoint sale were used to pay down debt obligations.
