REIT Management Company Rating Criteria

VIS REIT Management Company
JANUARY 2025
Credit Rating Company Limited
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VIS
Credit Rating Company Limited
REIT MANAGEMENT COMPANY vis.com.pk VIS Credit Rating Company Limited

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VIS
Credit Rating Company Limited
REIT Management Company
JUNE 2026
Table of Contents
SCOPE OF CRITERIA...........................................................................................................................3
SUMMARY OF CRITERIA CHANGES......................................................................................................3
AN OVERVIEW OF RATINGS FRAMEWORK..........................................................................................3
QUALITATIVE FACTORS......................................................................................................................4
A. OWNERSHIP, MANAGEMENT & GOVERNANCE..............................................................................4
B. INTERNAL CONTROL FRAMEWORK ..............................................................................................5
C. INVESTMENT PROCESS................................................................................................................5
QUANTITATIVE FACTORS ...................................................................................................................6
A. ASSETS UNDER MANAGEMENT .....................................................................................................6
B. PERFORMANCE OF ASSETS UNDER MANAGEMENT ......................................................................6
C. FINANCIAL STRENGTH ................................................................................................................7
CONCLUSION ..................................................................................................................................7

VIS
Credit Rating Company Limited
REIT Management Company
JUNE 2026
SCOPE OF CRITERIA
VIS Credit Rating Company Limited’s definition of Management Quality (MQ) Ratings consistently applies across various types of investments, including the category of REIT Management Companies (RMCs). This applies to Rental, Developmental and Hybrid Real Estate Investment Trust (REIT) funds. The Management Quality rating scale for RMCs is appended with the suffix RMC to distinguish it from other MQ Ratings outstanding by VIS. The conduct of RMCs, akin to other types of investment managers, is evaluated in context of best practices in the investment management industry. Broadly speaking, the methodology remains consistent with our other MQ rating assessments. This document captures those specific areas as well that are innate to the real estate business or stem from the specific regulations introduced for REITs and therefore require consideration while assessing RMCs. SUMMARY OF CRITERIA CHANGES The REIT Management Company’ methodology dated January 2025 has been reviewed and the fundamental criteria as outlined in the aforesaid methodology remain the same. The document continues to capture the relevant updates in regulatory, economic and ESG environment . AN OVERVIEW OF RATINGS FRAMEWORK “REIT Project” means a Real Estate project with revenue generating capability executed under the REIT Scheme, which is structured as a closed-end scheme and managed by a REIT Management Company (RMC). REIT schemes can be either a Rental REIT or a Development REIT or a hybrid of both. As per the REIT regulations, 2022 issued by the Securities & Exchange Commission of Pakistan (SECP) and amendments therein, an RMC has certain duties and obligations, off which some of the key ones are mentioned below and which outline the framework of an RMC:

• Conducting due diligence of the real estate to ensure that the title of the Real Estate is free from all defects,
  encroachments and encumbrances.
• Ensuring that the Trust Deed has been drafted in accordance with the REIT regulations.
• Ensuring completion of offering document and business plan as well as other relevant documentation.
• Ensuring that all material contracts forthe functioning ofthe REIT scheme, including Concession Agreement in case
  of Public Private Partnership are legitimate, valid, binding and enforceable.
• Appointment of third-party service providers including Auditor, Valuer, Development Advisor, Property Manager,
  Transaction Advisor,Independent consultant or other REIT intermediaries.Ensure ongoing Shariah compliance in accordance with the Shariah Governance Regulations, 2023; where applicable.
• Ensuring development, maintenance, renting and sale of real estate.
  VIS methodology for REIT Management Quality Rating encompasses an assessment of certain qualitative and quantitative factors. Qualitative factors encompass A) Ownership B) Governance & Management profile and C) Investment Process and experience in REIT fund management. Management meetings are a very important part of the rating process, which may be extended to the key personnel of some of the institutions engaged for their professional

VIS
Credit Rating Company Limited
REIT Management Company
JUNE 2026 services. Quantitative analysis includes a review of A) Assets Under Management, the B) performance of the real estate assets and C) assessment of the financial strength of the project. QUALITATIVE FACTORS A. OWNERSHIP, MANAGEMENT & GOVERNANCE The assessment of ownership in a REIT Management Company is a critical exercise in transparency, governance and ensuring the alignment of interests between the REIT, its investors, and its managers. Ownership structure can provide insights into the strategic priorities and potential future decisions. If the management company is owned by reputable, experienced entities or individuals, it can provide comfort to the extent that interests if the REIT’s stakeholders are being properly represented. Financial stability and business expertise if the owners can also affect the management company’s ability to effectively manage the REIT’s assets and ultimately its long-term success. A review of the legal structure can also highlight the complexities and its impact on decision-making. Moreover, there is possibility that sponsors of an RMC may hold assets that may compete with those held by a REIT scheme managed by an RMC, or a REIT scheme proposed to be launched by an RMC may purchase property from one of its sponsors. These situations may pose varying degrees of conflict of interest, which need to be managed effectively. This also makes policy with respect to related party transactions particularly important; these contracts must be executed at an arm’s length basis. The governance practices instituted at any organization are evaluated with keen interest by VIS. A Board of Directors (BoD) comprising a blend of professionals, with relevant industry experience can provide better guidance in strategic matters to the management team, to benefit all stakeholders. Adequate representation of independent directors on Board is also considered positive from a rating perspective. While VIS views an independent management favorably, which has powers to manage the day-to-day operations of the company; the quality of input provided by the Board in terms of the broad policy guidelines is also considered important. Moreover, VIS also evaluates the Board’s access to information, necessary to fulfill their duties, and the extent to which the Board exercises funds’ oversight, either directly or through its constituted committees. VIS evaluates how the organizational structure facilitates decision-making and timely response to environmental influences. To avoid ambiguity, the organization’s hierarchical pattern must be distinctly defined so that the employees are aware oftheirjob definitions, responsibilities and authorities and there is sufficient segregation of functional duties. An important aspect of the rating process includes an in-depth review of profile of key personnel. The experience and discipline of key personnel are critical to the success of the company. They are assessed for their educational background and
experience of real estate markets, research and financial analysis; a company must possess staff skill set in line with Factors Factors

VIS
Credit Rating Company Limited
REIT Management Company
JUNE 2026 the requirements of its planned activities. This also involves appraising senior management and any committees involved in investment decision making. Reliance on few key employees and lack of succession planning may adversely impact ratings. Even in case of small organizational setups, it is important to have personnel for key positions in place so that th e investment decision-making process is not affected. B. INTERNAL CONTROL FRAMEWORK VIS places special emphasis on controls relating to conflicts of interest and overall control environment in a company, including internal audit and compliance set up and reporting mechanisms; the policy framework must address all workflows. VIS analyzes the operating procedures and management’s ability to meet fiduciary responsibility and to effectively carry out operating functions in line with the defined policies. This analysis includes historical review of company’s compliance with regulations and internal policy framework. A review may be made as to the existence, frequency and causes of any violations. An evaluation of information systems is also carried out to assess company’s ability to efficiently conduct day-to-day activities and generate the relevant reports for management’s review. This includes analytical tools for performance and risk analysis. Seamless workflow for NAV calculation, validation and assessment is considered favorably by VIS. Back -up procedures must be adequately defined, implemented and tested to ensure un-interrupted operations.
C. INVESTMENT PROCESS
At the core of RMC’s activities are the investment processes put in place to manage funds. While in general, this would include research capabilities, risk management infrastructure and investment decision-making process for any asset management company, an RMC has added responsibilities stipulated under the regulations. These include various activities prior to the launch of the REIT scheme, such as conducting due diligence to certify and ensure that the title to the real estate to be acquired for the purposes of the REIT Scheme is free from all defects and encumbrances; arranging transfer of real estate in the name of Trustee of the REIT Scheme; ensuring that all material contracts, including agreement for purchase of real estate, rental agreements, service providers’ agreements entered into for furtherance of the objects of the REIT Scheme are legitimate, valid, binding and enforceable by or on behalf of the Trustee in accordance with the stipulated terms of such contracts and agreements. More importantly, the RMC would also be engaged in the development of business plan for a REIT scheme. In case of Rental REITs that provide an exit mechanism by way of sale of property held by the REIT, timely decision-making in case of depleting rental yields, for instance, may assume significant importance in terms of total return generated for the investors. These activities require business, financial and legal acumen specific to the real estate sector to support ratings. Various activities under regulations are required to be outsourced; third parties may include Property Manager, Development Advisor, Project Accountant, Trustee, Valuer, External Auditors, Shariah Advisor and the Registrar. VIS will evaluate the mechanism in place to solicit the services of various third-party service providers, within the parameters laid down under regulations, and post-facto monitoring of their compliance within the established criteria. The performance of REITs managed by an RMC is highly dependent on the strategy and abilities of certain outside parties such as Property Manager in case of Rental REITs and Development Advisor in case of Developmental REITs; the skill and experience ofthe management and employees also assumes significance in the rating process. For any fund manager, having access to market related data is considered critical for informed decision-making. Given the absence of formal data sources such as housing price index or rental yields in Pakistan, as is the case in more

VIS
Credit Rating Company Limited
REIT Management Company
JUNE 2026 developed economies, an RMC may have to rely on informal data sources. This means that the responsibility of developing even an initial database falls on to the shoulders of the RMC itself and it may need to rely on multiple channels such as property agents, real estate brokers, auctions, advertisements, to establish a sense of the market. VIS evaluates the depth of research undertaken and the tools used for both general market analysis and individual property assessments, as it feeds into the decision with respect to the launch of a particular REIT scheme. Management quality rating process also involves review of the practices and procedures to identify and analyze risks that are inherent in the specific geographic/market segment in which a REIT scheme is proposed to be launched. The risk and control functions must be represented at the executive level, with regular review of risk indicators. A well-sourced and independent risk function is considered favorably from a rating’s perspective. VIS also reviews the actual investment decision-making process and whether it allows for allrelevant personnel to voice their opinions. VIS also evaluates the extent of ESG integration into the strategies of REIT management companies. Adapting their investment strategies accordingly in support of sustainable construction practices to reduce environmental footprint together with striving for community-centric developments and those promoting inclusivity is factored positively. Governance in an RMC, as discussed earlier, is of greater importance and revolves around transparent operations, ethical land acquisition practices, and stakeholder engagement. QUANTITATIVE FACTORS A. ASSETS UNDER MANAGEMENT By regulations, REITs are required to be structured as close-end scheme, managed by a REIT Management Company. and could also be undertaken under a Public-Private Partnership (PPP) structure. A RIET Scheme encompasses any real estate other than those undertaken under PPP laws and could be a Rental REIT, Development REIT or a hybrid of the two. Developmental REITs, by definition, will have a limited life while Rental REITs which are generally perpetual may also be launched for a specific term. This implies that growth in assets under management will primarily be driven by the launch of new funds. The ability of a company to identify new projects and launch REITs, in line with its business plan or concession agreement, will be evaluated by VIS. B. PERFORMANCE OF ASSETS UNDER MANAGEMENT REITs, in itself is a new investment class in Pakistan, introduced only recently in view of which there is no historical data available which may be used as a yardstick to gauge performance of REIT funds. In addition to this, there are no readily available indices for the real estate sector, though informal sources do provide some indication of trend in rentals in certain geographic segments. There may be additional difficulties attached with evaluation of the performance of
developmental REITs. Given this limitation, VIS will evaluate the business plan for each fund and the basis used to determine the projected return for investors; post launch performance will be evaluated against the same. As a number of REITs are launched, peer group comparison may also become possible over time while launch of sector specific indices may also provide a good benchmark for performance evaluation.

VIS
Credit Rating Company Limited
REIT Management Company
JUNE 2026
C. FINANCIAL STRENGTH
Unlike other MQ rating assessments by VIS, financial strength of an RMC assumes greater weightage in the overall assessment. An RMC is required to have minimum equity of Rs. 50m, as per regulations. This sets the base level of equity required by an AMC. The regulations in this regard require that the sponsor or RMC should collectively hold a minimum of 25% of units issued. Depending on the size of funds proposed to be launched, the resource requirement for an RMC would be determined. Inability of sponsors to arrange funds necessary to satisfy the minimum holding requirement may impair a company’s ability to launch funds; in view of this, the financial strength of the RMC and its sponsors assumes added significance in the overall assessment process. VIS evaluates both business and financial sustainability of any organization. Earnings from core operations should be sufficient to meet operating costs on an on-going basis. Any form of external support available to the management company is factored in, where appropriate. D. SHARIAH COMPLIANCE Review of an annual Shariah review report as required under the Shariah Governance Regulations, 2023 (in case of Shariah compliant REIT), CONCLUSION Globally REITs are now accepted as mainstream investment vehicles that enable investors to pool their resources to take exposure in an otherwise illiquid asset class, while also featuring lower initial investment requirement vis-à-vis direct exposure. VIS believes that there is significant growth potential in the REITs sector in Pakistan and entry of participants in the same may lead to the development of ancillary services / service providers. Institutional practices and rating attributes may also evolve over time.

VIS
Credit Rating Company Limited
REIT Management Company
JUNE 2026
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DISCLAIMER
Information herein was obtained from sources believed to be accurate and reliable; however, 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. Rating is an opinion on credit quality only and is not a recommendation to buy or sell any securities. Copyright VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.