One of the largest ever real estate transactions to take place in Pakistan’s listed, corporate sector is unfolding as the Sindh Institute of Urology and Transplantation (SIUT) is set to buy the once swanky and fashionable Regent Plaza in uptown Karachi.
The buyer and the seller
The current transaction is taking place between SIUT and Pakistan Hotels Developers Limited (PHDL). The PHDL is a publicly listed company that owns and operates the Regent Plaza Hotel which has been a mainstay in Karachi for many decades. According to notifications posted on the PSX, the offer for Rs 14.5 billion has been extended in person through a letter sent on Tuesday the 10th of October.
One of the largest healthcare organisations in Pakistan, the SIUT depends on donations for its mission to provide healthcare to Pakistanis at their many facilities across the Sindh province. While many charitable organisations run side businesses which become steady revenue streams for them to operate their charitable activities, SIUT is reportedly thinking of a more direct use for the Regent Plaza. According to well placed sources the plaza is designed in a way that it can easily be converted into a hospital, which is what the institute plans on doing.
READ MORE: Can the miracle called SIUT ever be replicated?
The biggest property sale ever?
Valued at Rs 14.5 billion the transaction is the single largest real estate transaction in the country’s history in absolute rupee terms. In dollar terms the hotel is worth just over $52 million.
In rupee terms this really will be the biggest transaction for listed real estate in Pakistan’s history. However, there have been other transactions in the country’s history that are bigger in real terms.
Back in 2017, Habib Bank Ltd, paid Rs 14.4 billion for the new HBL Tower in Clifton Karachi. They bought this from Mega and Forbes, the shipping conglomerate owned by the reclusive billionaire Habibullah Khan. Back in 2017 however this transaction’s value in dollar terms was a whopping $137 million.
When comparing the transactions of HBL and Regent Plaza, a slight price difference is noticeable in rupee terms. However, when evaluated in dollar terms, HBL’s deal is significantly larger, being approximately 62 percent higher than that of Regent Plaza.
Another mega real estate transaction took place more recently in 2021 Bank Al Habib bought Centrepoint from TPL Properties for nearly $50 million. Companies regularly update property valuations in their financial statements so they reflect the current value of the property which increases their assets on their balance sheet. Going by their financial statements from that year, the rupee value of the building was listed at just over Rs 7 billion.
Centrepoint was, quite literally, at the heart of TPL’s ambitions and represents one of the largest developments in Pakistan’s real estate sector. Some key details about the building include its stature as a 28-story structure, standing 385 feet high, and constructed on 26,226 square feet of land, offering 197,810 square feet of rentable space across 17 floors (spanning from the 11th to the 24th, and also including the 26th and 27th floors). Notably, TPL Properties recorded Centrepoint on its balance sheet at Rs 7.65 billion, or around $49 million, given the dollar value at that time, and sold it to Bank Al Habib for Rs 7.75 billion, slightly above the value listed on their balance sheet.
Is the Regent worth Rs 14.5 billion?
Pakistan Hotels Developers Ltd. financial performance showcased variability, with profits and losses oscillating over the years. For example, while 2022-23 witnessed a profit before tax of Rs. 58.807 million, 2020-21 saw a loss of Rs. 46.357 million. Despite financial fluctuations, the company maintained its physical assets, valued at approximately Rs. 10 billion in 2022-23, and with less than ideal 19.00% room occupancy rate with 105 employees.
The notable point is that in the balance sheet, PHDL is listing the value of Regent Plaza’s land at Rs. 8.9 billion, while the building on the land is valued at Rs. 949 million. Accordingly, if PHDL’s property is assessed based on their own valuation, it does not exceed Rs. 9.85 billion. However, they are intending to sell this plaza for a sum that is nearly 47% more than the valuation price, specifically for Rs. 14.5 billion.
Location analysis
A lot of why each property is worth what it comes down to location. HBL Tower is located in Clifton, a well-known upscale area in Karachi, which is renowned for its modern infrastructure and proximity to high-end shopping malls, restaurants, and other amenities. This location might offer businesses and visitors a prestigious address and access to numerous facilities.
Centrepoint is situated on Main Korangi Road, near the KPT Flyover in Karachi. This location is significant due to its accessibility and connectivity to various parts of the city via the flyover, potentially easing the commute for individuals and businesses. It might also be in proximity to industrial zones given its location near Korangi, providing a strategic point for businesses.
Regent Plaza Hotel is strategically located on the main Shahrah-e-Faisal, one of the major boulevards in Karachi, ensuring easy accessibility. It’s also close to various amenities and attractions, including shopping malls and parks. Its proximity to Jinnah International Airport (13 km away) and the Railway Station (2.9km or an 8-minute drive away) provides notable advantages in terms of connectivity and transit, especially for travellers and tourists.
Size and area wise analysis
HBL Tower has a gross area of 485,000 sq ft and a rentable area of 247,000 sq ft. It’s built on a plot of 3,700 sq. yd. and stands notably tall at 327′-6″ with a total of 30 floors (27 above ground and 3 underground).
Centrepoint provides 197,810 square feet of rentable space and is built on a 26,226-square-foot plot. It stands taller than the HBL Tower at 385 feet and has 28 stories.
Regent Plaza Hotel spans an area of 13,200 square yards with a multi-story building covering a total area of 47,034 square yards. The exact height and floor count are not specified in the provided information.
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A charity organization should use its funds prudently. It’s difficult to understand why SIUT is throwing money into a luxury property to build a charity hospital, when it can buy much cheaper properties elsewhere.
The traffic flow on Share Faisal is adversely affected whenever Regent Plaza is used as an exam center resulting in loss of manhours and wastage of fuel. Therefore before such a transaction is approved a proper EIA study should be done.