VIS Assigns Initial Management Quality Rating to Sinolink REIT Management Company

Karachi: VIS Credit Rating Company Limited (VIS) has assigned an initial Management Quality Rating (MQR) of ‘AM3 (RMC)’ to Sinolink REIT Management Company Limited (SRMCL). This rating suggests that the asset manager demonstrates good management qualities, with the outlook on the assigned rating being ‘Stable.’

Founded on December 10, 2021, in Pakistan, SRMCL is an unlisted public company that received a three-year license from the Securities and Exchange Commission of Pakistan (SECP) on February 7, 2022. This license enables the company to launch Real Estate Investment Trusts (REITs) under the REIT Regulations, 2022. The company’s operations are headquartered in Karachi, focusing on forming, launching, and managing REITs.

The company is sponsored by Mr. Asad Ahmed, who also serves as the CEO of Image Pakistan Limited. This publicly listed fashion retail company, involved in manufacturing fabric under the women’s apparel brand “Image,” reported a turnover of Rs 2.9 billion and a net profit of Rs 285 million for the year ending June 30, 2024.

The rating reflects SRMCL’s early-stage development, supported by a governance framework, internal controls, and investment processes. While centralized leadership facilitates decision-making, independent representation is minimal. The internal control framework is designed for risk mitigation and regulatory compliance, though challenges remain in addressing risks related to related-party transactions and operational independence. The investment process includes decision-making protocols and risk mitigation measures. The company plans to enhance its project execution and quality through improved third-party selection processes.

SRMCL registered its first REIT, the Image REIT Scheme, with the SECP on March 7, 2022. This perpetual, closed-end, Shariah-compliant hybrid REIT has a total size of Rs. 1.8 billion, including both rental and development components. The commercial rental segment is fully leased to related parties, providing stable income, while the residential and retail mix is under development, expected to complete in two years. The REIT fund aims to list within the year, expanding to Rs. 2.8 billion, with IPO proceeds funding the development component.

SRMCL maintains a debt-free capital structure, with no revenue recognized to date due to group tax efficiencies. Income is generated through a financing arrangement with a related entity. The rating is contingent on realizing management fees for long-term sustainability and enhancing governance and internal control frameworks. Sustainability measures for project design and execution will be important going forward.