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Nearing its sixth year into operations, Dolmen City REIT (PSX: DCR) announced its financial performance for 9MFY21 last week on the stock exchange where the company was seen posting a moderate decline in its earnings for the period amid the unrelenting covid-19 pandemic. The company also announced an interim cash dividend of Rs0.33 in addition to Rs0.58 already paid.

DCR is not the only Real Estate Investment Trust listed on the stock exchange, but also the only REIT in the country operating as of now. A look back at the REIT’s financial performance shows that FY19 was a good year for Dolmen City REIT as the country’s retail as well as business environment was better. The real estate investment trust closed FY19 on a high note with revenue and earnings growth both in double digits. Things started to take a worse turn for the global economy in FY20 as the global coronavirus pandemic hit and disrupted not only health but also business and economy. Retail was particularly impacted due lockdowns and restrictions. Compared to the occupancy rate of 97.96 percent in FY19, occupancy at DCR by June 2020 was 92.78 percent – still above ninety percent. DCR’s rental income particularly saw a decline in the last quarter of FY20 as it introduced rent waivers to provide relief to the tenants affected by the slowdown in economy. Average monthly footfall in FY20 was also down by almost 14 percent with significant decline in monthly visitors from March till June 2020. However, the unrealised gain from the change in the fair value of the property lifted earnings for FY20 by over 18 percent.

So far in FY21, the same economic and retail conditions have been affecting the REITs operations. DCR reported a decline of 14 percent in its rental income on a year-on-year basis, and a decline 26 percent in marketing income resulted in overall income to be down by 14.7 percent, year-on-year. Administrative expenses remained flat year-on-year, taking net operating income up down by 16.8 percent. Profit for the period that consist of income from operations and change in fair value of investment property based on the valuation was down by 15 percent year-on-year percent for 9MFY21. While the occupancy rates for 9MFY21 are not available yet, numbers from DCR’s 1HFY21 report show that the occupancy level of the property at the end of December 2020 was 91.04 percent.

Being the only REIT in the country, DCR enjoys the benefits that the government regulations have promised. Remember that the REITs enjoy tax advantage, and hence Dolmen City REIT is not liable to income tax provided it meets certain conditions. In FY19, there were hopes pinned to SECP’s newly promulgated amendments in the regulations governing REITs that allowed REITs to borrow. However, the pandemic brought all activities to a standstill. Though this is the short-term impact of the pandemic where it has been affecting the consumption pattern and the retail segment, the monetary policy stance, extension of construction package and tax incentives for the real estate sector will hopefully build momentum in the sector going forward.


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