Image REIT IPO: A Fresh Breeze or Storm Warning?

September 8, 2025 (MLN): The morning buzz at Pakistan Stock Exchange carries an unmistakable energy as something new is stirring.

SECP and PSX have opened doors to hybrid real estate investment trusts, creating fresh opportunities for both retail and institutional investors. The promise is compelling: professionally managed real estate exposure wrapped in regulatory protection.

Today marks a vibrant milestone at the Pakistan Stock Exchange. Image REIT's registration has commenced, and the excitement is infectious. Investors are buzzing with anticipation, viewing this debut with genuine enthusiasm.

Many believe they have found a promising new avenue for fresh capital deployment, a chance to diversify into professionally managed real estate through a regulated investment vehicle that could finally bridge the gap between traditional property investment and modern portfolio management.

Image REIT is emerging as a pioneering venture in this space, Pakistan's first hybrid REIT offering an innovative blend of development potential and rental income stability.

The concept is undeniably appealing as investors gain exposure to prime Karachi real estate through a debt-free, Shariah-compliant structure that promises both regular income and capital appreciation.

For a market hungry for new investment avenues, Image REIT presents an attractive proposition that could democratize real estate investment for smaller investors while providing the professional management and regulatory oversight that direct property investment often lacks.

The Promise of Innovation

Image REIT, positioned as Pakistan's first hybrid REIT, combines developmental and rental assets under Sinolink REIT Management Company's stewardship.

The structure promises Shariah-compliant, debt-free exposure to prime Karachi real estate with projected returns that could appeal to yield-hungry investors.

The regulatory framework provides multiple layers of oversight, including SECP monitoring, trustee supervision, and mandatory disclosures, all positive developments for market transparency.

The Offering Structure

The Image REIT public offering comprises 92,015,467 units representing 33.36% of the post-IPO paid-up units, with each unit carrying a face value of PKR 10. The entire issue will be offered through a book-building method with a floor price of PKR 10 per unit and a maximum premium band of up to 40%, bringing the ceiling price to PKR 14 per unit.

The allocation structure favours institutional investors with 75% of the issue (69,011,600 units) reserved for successful bidders, while the remaining 25% (23,003,867 units) will be offered to retail investors through the general public portion at the strike price.

The timeline for this offering is tightly scheduled, with eligible investor registration opening on September 8, 2025, and closing on September 11, 2025.

The Asset Portfolio

Image REIT's hybrid model revolves around two fundamentally different assets that represent distinct investment philosophies and risk profiles. The development component centers on a mixed-use project located on Tipu Sultan Road, Karachi, spanning 4,500 square feet of land area with an ambitious built-up area of approximately 68,891 square feet.

This project envisions 22 residential apartments, of which 18 are earmarked for sale while 4 will be retained for rental income generation.

The development also includes ground and first-floor retail spaces along with mezzanine areas designated for storage and service functions, with projected completion targeted for 2028.

The financial expectations from this development are substantial, with projected one-time sales proceeds of approximately PKR 3.0 billion from the sale of apartments, retail spaces, and mezzanine areas.

Additionally, the four retained apartments are expected to generate around PKR 20 million annually in rental income, providing a recurring revenue stream alongside the development sales.

In contrast, the rental component represents immediate cash flow generation through Image Tower, a fully operational office building located on the prime Shahrah-e-Faisal corridor.

This asset sits on 3,240 square feet of land with a built-up area of approximately 22,924 square feet and is currently fully occupied, generating annual rental income in the range of PKR 130-140 million.

However, as this groundbreaking REIT prepares for its public debut, a closer examination reveals patterns that potential investors must carefully consider before embracing this market innovation.

Management Musical Chairs

One immediate concern emerges from the management structure. The prospectus originally listed Anjum Adil as CEO of Sinolink REIT Management Company, yet the PSX website now shows Ms. Marium Ahmed in this role.

Such pre-IPO leadership changes, particularly at the CEO level, raise questions about organizational stability and strategic direction during the critical launch phase.

More concerning is the sponsor group's track record. The driving force behind Image REIT is the same management team led by Asad Ahmad, who serves as CEO across multiple entities: Tri-Star Power Limited (TSPL), First Tri-Star Modaraba (FTSM), Tri-Star Mutual Fund Limited (TSMF), and Image Pakistan Limited (IMAGE).

This group's history includes Tristar Shipping Lines, which was delisted from PSX decades ago, and the 2021 transformation of Tri-star Polyester Limited into Image Pakistan Limited.

Unfortunately, investors in these publicly listed companies have not experienced favourable returns, which naturally leads to questions about the management team's ability to deliver on the ambitious promises presented in the REIT structure.

Pricing Reality Check

The REIT's financial model assumes residential sales at PKR 40,000 per square foot for properties on Tipu Sultan Road. However, market evidence suggests this pricing may be optimistic.

Ready-to-occupy properties in the same vicinity are available between PKR 30,000-34,000 per square foot, representing a significant premium that Image REIT must justify.

Local market comparisons reveal concerning gaps:

• Roshan Tower (above Agheethi): 4-bedroom units (2,400 sq ft net) currently demand PKR 8.50 crore, with recent transactions around PKR 8-8.25 crore
• Remco Towers (above Xanders): 4-bedroom units (2,200 sq ft net) trade around PKR 7 crore, while 3-bedroom units (1,600 sq ft net) fetch approximately PKR 5.5 crore

These comparables suggest that ready properties command premiums over installment-based developments, yet Image REIT's pricing assumes premium rates for under-construction inventory, a challenging proposition in current market conditions.

Rental Income Reality: The Roshan Tower Benchmark

The CEO's responses regarding rental income projections deserve scrutiny when compared to actual market rates. For context, Roshan Apartment (a comparable property) commands PKR 225,000 monthly rent for a 2,000 square foot unit, translating to approximately PKR 113 per square foot monthly rent.

Using Image REIT's projected 10% annual rental escalations:

• 2026: PKR 124 per sq ft
• 2027: PKR 136 per sq ft
• 2028: PKR 150 per sq ft

While the REIT's rental projections align with market escalation patterns, the base rates appear optimistic given current market conditions and the extended development timeline.

Comparative Perspective: Alfalah's Alternative

Interestingly, while Image REIT navigates these challenges, Alfalah Asset Management Limited offers a contrasting approach through their Investment Based REIT Fund 1. Their public documentation shows investments in Emaar apartments at PKR 36,500 per square foot, notably lower than Image REIT's assumptions.

Emaar properties benefit from established international brand recognition, comprehensive amenities, and proven market acceptance, potentially offering more conservative risk-return profiles.

Alfalah's REIT targets 30 residential apartments in Emaar's premium developments, with transparent valuation reports from MYK Associates (PKR 691 million) and KG Traders (PKR 683 million) for initial inventory. Their approach emphasizes:

• Focus on 1-2 bedroom units for better liquidity
• Higher floors for view advantages
• Boulevard-facing units at substantial discounts
• Target portfolio diversification

The pricing differential, Emaar at PKR 36,500 vs. Image REIT's PKR 40,000 per square foot, highlights the premium Image REIT assumes for Tipu Sultan Road properties.

CEO Addressing Investor Concerns

During our investigation, Image REIT's management responded to key investor concerns:

1. Economic Volatility: How do you justify a 2028 timeline with current economic uncertainty and luxury pricing at PKR 40,000/sq ft?

Reply: Yes, the current selling price in the vicinity of Tipu Sultan Road is around PKR 40,000 per sq. ft. Market sentiment remains positive, and with economic indicators improving—particularly the downward trend in interest rates—there is potential for further price appreciation in the near term."

2. REIT Structure: Critics say this is a development company disguised as a REIT. How do you respond to claims you're funding construction rather than providing stable REIT income?

Reply: This is not a development company in disguise. IMAGE REIT is a regulated, sharia compliant, hybrid REIT, which means it can invest in both development and rental assets. The goal is to give investors stable rental income along with the upside from development, all within a transparent and Shariah-compliant structure.

3. Pricing Strategy: What market research supports PKR 40,000/sq ft pricing? Do you have pre-sales commitments?

Reply: No bookings have been initiated at this stage, as our strategy prioritizes raising funds through the IPO to ensure smooth construction progress without relying on instalment-based pre-bookings, which can sometimes cause delays.

For market research, we have benchmarked the price against recent transactions and data available through leading real estate agents and property market platforms, which confirm the PKR 40,000 per sq. ft. rate. 

Financial & Governance Issues

4. Land Valuation: Land went from PKR 450M to PKR 550M (22% gain). Why such modest appreciation? Pls explain

Reply: The land value increased from PKR 450 million to PKR 550 million, reflecting a 22% gain. This appreciation is in line with documented transactions in the vicinity and is considered realistic and sustainable. Rather than inflating values, we have kept the appreciation conservative to ensure transparency, regulatory compliance, and to safeguard investor confidence.

5. Related Party Transactions: Retail space leased to Image Pakistan Ltd at above-market rates. What percentage of revenue comes from sponsor-related entities?

Reply: The retail space has been leased to Image Pakistan Ltd. on an arm’s-length basis at rates determined through independent valuation, ensuring fairness and compliance with regulatory requirements. At present, sponsor-related entities account for 100% of the rental revenue; however, this arrangement is subject to change upon expiry of the tenancy agreement, providing flexibility to diversify the tenant base going forward.

6. Income Distribution: Prospectus says distributions are "subject to construction costs." When will investors actually receive dividends?

Reply: Distributions will begin once the project achieves completion however rental income is there for investors from the first day of IPO. During the construction phase, cash flows are primarily allocated to development costs to ensure timely delivery. As soon as rental income stabilizes, regular dividends will be paid to investors in line with REIT regulations. It is expected that during initial 3 years of construction period over all around Rs. 7 per unit will be paid as dividend with chance of capital appreciation is there as stock market is on improving trend.

Execution Risks

7. Construction Costs: With volatile material prices, how confident are you in PKR 3.0B revenue projections? Do you have fixed-price contracts?

Reply: We are mindful of volatility in construction material prices. To manage this risk, we have engaged reputable contractors and are in the process of negotiating fixed-price and milestone-based contracts where feasible. Our PKR 3.0 billion revenue projections are based on conservative assumptions, validated against market comparable, giving us confidence in their achievability despite cost fluctuations.

8. Timeline Certainty: What's Sinolink's track record? What pending approvals could delay the 2028 completion?

Reply: Sinolink REIT Management Company Limited is duly licensed by SECP and has successfully structured demonstrating compliance, governance, and execution capabilities. For this project, all major regulatory approvals for the REIT scheme and prospectus for IPO have already been obtained. No construction related approvals are pending at the moment. At this stage, we do not foresee any material delays to the targeted 2028 completion.

9. Interest Rate Sensitivity: How do rising rates affect your business model? At what point does it become unviable?

Reply: Sponsors do not believe in Debt which is evident of the fact that currently the project is 100% equity financed and is shariah compliant.

Investment Case

10. Value Proposition: Why should investors choose Image REIT over direct property investment, government securities, or established REITs with proven track records?

Reply: A REIT is like a mutual fund, but instead of investing in stocks or bonds, it invests in real estate. SECP has set separate regulations for REITs, making them safer and more transparent than direct property investments. Image REIT gives investors access to a diversified, income-generating portfolio without the hassles of property management or large capital needs.

Compared to government securities, it offers higher return potential and inflation protection, while staying Shariah-compliant and fully regulated. Unlike existing REITs, Image REIT brings a unique hybrid model, first-mover advantage, and 100% equity financing that shows strong sponsor commitment. This makes it a smart choice for both retail and institutional investors.

11. Worst Case Scenario: What protection exists if residential sales fail, construction delays occur, or Image Pakistan defaults on rent?

Reply: Investors are protected through multiple layers of safeguards. First, Image REIT is structured under SECP’s dedicated REIT Regulations, ensuring strict monitoring and transparency. In case of slower residential sales or construction delays, rental income from completed commercial assets provides a steady cash flow buffer.

Furthermore, rent obligations from Image Pakistan are secured through long-term lease agreements, and default risk is mitigated by corporate guarantees and oversight from the Trustee. This combination of regulatory protection, diversified income sources, and contractual safeguards reduces the risk for investors even in adverse scenarios.

12. Land Acquisition Price: What was the actual per square foot price paid for the land acquisition?

Reply: Rs. 100,000/- per square feet (Rs. 450 million for 500 square yards)

13. Equity Pricing: What is the manufacturing/construction cost per square foot, and how did you price your equity accordingly?

Reply: Construction Cost 14,952 per sq foot (11 floors to be built up), already built up area construction cost is Rs. 9,050 per square foot (2 basement, Ground floor, Mezzanine, First floor Commercial.

For equity pricing, Net asset value is considered, which currently stands at Rs. 13.05 per unit as at 30 June 2025. Book Building investors are being offered to subscribe at PKR 10/- (as reference price for bidding), which is a par value per unit and gives a discount to NAV of 23.37%.

The Investment Verdict

While Pakistan's REIT market development deserves applause, Image REIT presents a complex risk-return proposition that demands careful investor consideration. The hybrid structure offers innovation, but execution risks, pricing assumptions, and management track records raise substantial concerns.

Potential investors must weigh the promise of regulatory protection and professional management against the realities of:

• Unproven management performance in delivering shareholder returns
• Aggressive pricing assumptions in uncertain market conditions
• Extended timelines with significant execution risks
• Heavy reliance on sponsor-related rental income
• Premium valuations compared to established alternatives

For retail investors seeking stable income, Image REIT resembles a speculative development play more than a traditional income-generating REIT.

The 3-5 year horizon before meaningful returns, combined with construction and market risks, may not align with typical REIT investor expectations.

The fresh breeze of REIT innovation in Pakistan is welcome, but investors should approach Image REIT with the same caution they would apply to any high-risk development project.

Sometimes, the most prudent investment strategy is patience, waiting for proven track records and more conservative structures that prioritize investor protection over ambitious growth projections.

In the evolving scene of Pakistani REITs, Image REIT may represent innovation, but prospective investors should carefully consider whether they are investing in a regulated real estate investment trust or funding another development venture wrapped in REIT clothing.

The distinction matters significantly for long-term investment outcomes and portfolio risk management.

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