Dolmen City REIT – Recovery in FY22

Dolmen City REIT (PSX: DCR) announced its financial performance for FY22last week, completing its seventh year into operations. The REIT announced FY22 result on the stock exchange where the company was seen posting an increase of 13.4 percent year-on-year. A Real Estate Investment Trust (REIT) is an entity that professionally manages a pool of money from individuals and institutions to buy developed properties for rent, or to develop real estate and sell or rent it. The proceeds from rent or sale of the property are distributed to the unit holders

The growth in earnings come afterthechallenging times faced during thepandemic and its lasting repercussions in FY20 and FY21. 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 better retail sector and better business environment have played a key role in the scheme’s financial performance. 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 turn in FY20 as the global Coronavirus pandemic significantly affected in-store retail and foot fall. Occupancy ratethat remained above 90 percent for DCR even duringthe pandemic, improved in FY21. As measure against the pandemic, DCR introduced rental waivers, which affected the rental income. In FY21, DCR reported a decline of 14 percent in its rental incomein 9MFY21, which recovered in the fourth quarter to take full year rental income up by 4 percent year-on-year. In FY22 however, the rental income was seen improving significantly by 22 percent year-on-year.

Rise in administrative expenses as well as impairment loss on rent receivables recorded in FY22 restricted the growth in operating margins. Profit for the period that consists of income from operations and change in fair value of investment property based on the valuation was up by 13.4 percent year-on-year percent for DCR in FY22.While the occupancy rates for FY22 are not available yet, numbers from DCR’s9MFY22report show that the occupancy level of the property at the end of March 2022 was 91.04 percent.

Being the only REIT in the country, DCR enjoys the benefits that the government regulations has promised. Remember that the REITs enjoy tax advantage, and hence Dolmen City REIT is not liable to income tax provided it meets certain conditions. FY22 was considered to be a year of normalcy as the world started coming out of the pandemic and retail activity picked its earlier pace. FY23 is finally likely to see new REITs listingon the stock exchange However, the current economic downturn in the country and inflation have again cast shadows of uncertainty over the business climate, which will be shown in cut in consumption and demand in FY23.