Expanding Horizons. Growing Stronger. ANNUAL REPORT 2024
INSIDE THIS REPORT The cover of Al-`Aqar’s Annual Report 2024 reflects our commitment to expanding our potential and building a stronger, more resilient future, ensuring lasting value for our stakeholders. We continue to grow in the healthcare real estate sector by exploring new opportunities, optimising our portfolio and enhancing our properties to support industry growth. Therefore, strengthening our partnership with sponsor and stakeholders remains a priority. In addition, we focus on maintaining high-quality assets and effective management to support steady growth and consistent returns. Hence, Al-`Aqar is dedicated to meeting the evolving needs of the healthcare sector and building a strong foundation for the future. RATIONALE SECTION 2 08 Letter to Stakeholders 12 Five-Year Financial Performance 14 Trading Performance 16 Market Summary Report 18 Management Discussion & Analysis 18 Financial Review 23 Operations Review 28 Capital 29 Risk Management 30 Investor Relations Report BUSINESS OVERVIEW 02 Corporate Profile 03 2024 Year in Review 04 Corporate Information 05 Trust Structure & Organisation Structure 07 Salient Features SECTION 1 ABOUT US SECTION 3 SUSTAINABILITY STATEMENT 32 A Glimpse at Our Statement 34 Milestones on our Sustainability Journey 35 Our Approach to Sustainability 37 Essential ESG Performance Metrics 41 Assessing Our Materiality Matters 46 Robust Corporate Governance 50 Sustainable Trust Fund 52 Strong Social Relationships 59 Environmental Stewardship 62 Our Sustainability Journey Onwards 63 Performance Data Table 66 Independent Limited Assurance Report 68 GRI Content Index
DIGITAL REPORT AVAILABLE IN Al-`Aqar is committed to making difference in the enviroment. Play your part by opting to download a softcopy our annual report at www.alaqar.com.my or by scanning the QR code. CONTACT AND FEEDBACK Stakeholder insights are invaluable to us, enabling continuous improvement in our reporting practices. We welcome feedback on this report and invite stakeholders to direct their comments or inquiries to www.alaqar.com.my NAVIGATION ICONS This icon tells you where you can find related information in this Report. This icon tells you where you can find related information in this Report. 71 The Board of Directors 80 The Shariah Committee 82 The Management Team 85 Corporate Governance Overview Statement 95 Board Audit and Risk Committee Report 100 Board Investment Committee Report 103 Board Nomination and Remuneration Committee Report 106 Board Sustainability Committee Report 109 Statement on Risk Management and Internal Control 123 Additional Compliance Information 124 Shariah Adviser’s Report 125 Trustee’s Report SECTION 4 CORPORATE GOVERNANCE 126 Analysis of Unitholdings 128 List of Properties SECTION 5 OTHER INFORMATION 141 Manager’s Report 147 Statement by the Directors of the Manager 147 Statutory Declaration 148 Independent Auditors’ Report 151 Statement of Comprehensive Income 153 Statements of Financial Position 155 Statement of Changes in Net Asset Value 157 Statements of Cash Flows 159 Notes to the Financial Statements SECTION 6 FINANCIAL STATEMENTS INSIDE THIS REPORT
2 ABOUT US Al-`Aqar Healthcare REIT | Annual Report 2024 17 HOSPITALS 3 WELLNESS/ HEALTH CENTRES 2 COLLEGES 1 AGED CARE & RETIREMENT VILLAGE CORPORATE PROFILE Al-`Aqar Healthcare REIT (‘’Al-`Aqar”) was established on 10 August 2006 and is listed on the main market of Bursa Malaysia. From its humble beginnings with a portfolio of just six properties, Al-`Aqar has steadily evolved and transformed into a reputable player in the Malaysian REIT landscape. Today, it boasts an extensive portfolio of 23 properties strategically diversified across several key segments, with a notable focus on healthcare assets. The portfolio now comprises 17 hospitals, three wellness/ health centers, two colleges, and an aged care facility, underscoring Al-`Aqar’s robust position in the healthcare real estate sector. This diverse mix of properties not only highlights the fund’s adaptability but also its ability to cater to the growing demand for specialised healthcare and wellness services in Malaysia. Al-`Aqar’s growth trajectory has been driven by the expertise and strong leadership of JLG REIT Managers Sdn Bhd (JRM) (formerly known as Damansara REIT Managers Sdn Berhad), which serves as the fund manager. JRM is a wholly-owned subsidiary of Johor Corporation and is further supported by KPJ Healthcare Berhad (‘’KPJ”), both of which provide a solid foundation for Al-`Aqar’s strategic direction and operational success. JRM’s dedicated efforts in asset management, operational efficiency, and portfolio optimisation have been instrumental in the fund’s continued success and expansion. As of 31 December 2024, Al-`Aqar’s portfolio is valued at RM1.65 billion, with a market capitalisation of RM1.14 billion.
3 ABOUT US SECTION 1 Al-`Aqar Healthcare REIT | Annual Report 2024 2024 YEAR IN REVIEW MILLION GROSS REVENUE RM117.2 MILLION NET REALISED INCOME RM62.2 OCCUPANCY RATE 100% BILLION MARKET CAPITALISATION RM1.14 BILLION PROPERTY VALUE RM1.65 NO OF ASSETS 23 DISTRIBUTION YIELD 5.35% TOTAL RETURN 15.03% DISTRIBUTION PER UNIT (DPU) 7.27SEN
4 ABOUT US Al-`Aqar Healthcare REIT | Annual Report 2024 CORPORATE INFORMATION JLG REIT MANAGERS SDN BHD (formerly known as DAMANSARA REIT MANAGERS SDN BERHAD) (200501035558) Registered Office: Suite 1, Level 17, Menara Komtar, Johor Bahru City Centre, 80888 IIBD, Johor Tel : (+607) 226 7692 / 226 7476 Fax : (+607) 222 3044 Principal Place of Business: Unit 1-19-02, Level 19, Block 1 VSQUARE, Jalan Utara, 46200 Petaling Jaya, Selangor. Tel : (+603) 7932 1692 / 7932 3692 Fax : (+603) 7932 0692 MANAGER LARKIN SENTRAL PROPERTY BERHAD Lot S8, Podium 1, Menara Ansar, 65, Jalan Trus, 80000 Johor Bahru, Johor. Tel : (+607) 297 2521 Fax : (+607) 223 3275 REGISTRAR Main Market of Bursa Malaysia Securities Berhad Stock Name : ALAQAR Stock Code : 5116 LISTING ERNST & YOUNG PLT (LLP0022760-LCA) (AF 0039) Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur. Tel : (+603) 7495 8000 Fax : (+603) 2095 5332 Website : www.ey.com AUDITOR HEALTHCARE TECHNICAL SERVICES SDN BHD (199501012909) Level 17, Menara KPJ, No. 238, Jalan Tun Razak, 50400 Kuala Lumpur. Tel : (+603) 2681 6222 IM GLOBAL PROPERTY CONSULTANTS SDN BHD (200501019108) No. 47-2, 2nd Floor, Wisma IMG, Jalan 3/76D, Desa Pandan, 55100 Kuala Lumpur Tel : (+603) 9284 8884 Fax : (+603) 9281 1884 Email : info@img.com.my Website : www.img.com.my PROPERTY MANAGER www.alaqar.com.my WEBSITE ABDUL RAMAN SAAD & ASSOCIATES C-2-1, Pacific Place Commercial Centre, Jalan PJU 1A/4, Ara Damansara, 47301 Petaling Jaya, Selangor. Tel : (+603) 7859 9229 Fax : (+603) 7734 5777 Email : arsakl@arsa.com.my Website : www.arsa.com.my KADIR ANDRI & PARTNERS Suite A-38-8, Level 38, Menara UOA Bangsar, 5, Jalan Bangsar Utama 1, 59000 Kuala Lumpur. Tel : (+603) 2780 2888 Fax : (+603) 2780 2833 Email : partner@kaaplaw.com Website : www.kaaplaw.com ALBAR & PARTNERS Suite 14-3, Level 14, Wisma UOA Damansara II, No. 6 Changkat Semantan, Damansara Heights, 50490 Kuala Lumpur. Tel : (+603) 7890 3288 Fax : (+603) 7890 3266 Email : albar@albar.com.my Website : www.albar.com.my SOLICITOR AMANAHRAYA TRUSTEES BERHAD (200701008892) Level 30 & 31, Vista Tower, The Intermark, 348, Jalan Tun Razak, 50400, Kuala Lumpur Tel : (+603) 2036 5129 Fax : (+603) 2072 0323 Email : art@arb.com.my Website : www.artrustees.my TRUSTEE 1. Dato’ (Dr) Haji Nooh Bin Gadot 2. Professor Madya Dr Abdul Halim Bin Muhammad 3. IBFIM (200701005076) Level 5, Bangunan AICB, No. 10, Jalan Dato’ Onn, 50480 Kuala Lumpur. Tel : (+603) 2031 1010 Fax : (+603) 2026 9988 Email : info@ibfim.com / shariah.advisory@ibfim.com Website : www.ibfimonline.com SHARIAH COMMITTEE RAHIM & CO. INTERNATIONAL SDN BHD (201501001265) (1126597-X) Level 10, Menara Perak, No. 24, Jalan Perak, 50450 Kuala Lumpur. Tel : (+603) 2691 9922 Fax : (+603) 2691 9992 Email : kl@rahim-co.com Website : www.rahim-co.com/ INDEPENDENT PROPERTY VALUER MOHAMED RIDZA & CO Penthouse, Menara I&P, No. 46, Jalan Dungun, Damansara Heights, 50490 Kuala Lumpur. Tel : (+603) 2092 4822 Fax : (+603) 2092 5822 Email : mrco@ridzalaw.com.my Website : ridzalaw.com.my
5 ABOUT US SECTION 1 Al-`Aqar Healthcare REIT | Annual Report 2024 TRUST STRUCTURE • Healthcare Technical Service Sdn Bhd • IM Global Property Consultant Sdn Bhd TRUSTEE UNITHOLDERS SHARIAH ADVISORY MANAGER REIT PROPERTIES PROPERTY / MAINTENANCE MANAGER Holding of units Net Property Income Distributions Ownership of Properties Shariah Advisor’s Fees Property / Maintainance & Management fees Property / Maintainance & Management fees Management Fees Act on behalf of unitholders Advise on Shariah related matters Manager Services Trustee’s fees
6 ABOUT US Al-`Aqar Healthcare REIT | Annual Report 2024 ORGANISATION STRUCTURE Board Audit and Risk Committee Board Investment Committee Board Nomination and Remuneration Committee Board Sustainability Committee Head, Corporate Services Head, Governance & Legal Head, CEO’s Office, Investor Relations & Strategy Chief Financial Officer Chief Operating Officer Company Secretaries Head, Human Resource Compliance Officer BOARD OF DIRECTORS Chief Executive Officer Chief Investment Officer
7 ABOUT US SECTION 1 Al-`Aqar Healthcare REIT | Annual Report 2024 SALIENT FEATURES NAME OF FUND Al-`Aqar Healthcare REIT LISTING DATE 10 August 2006 OCCUPANCY RATE 100% STOCK CODE 5116 MANAGER’S FEE Up to 0.3% per annum of the Fund’s Total Assets Value INITIAL PUBLIC OFFERING PRICE Retail Price RM0.95 Institutional Price RM1.00 REVALUATION POLICY Annually by independent registered valuer CATEGORY OF FUND Islamic healthcare real estate and healthcare related assets TYPE OF FUND Income and growth STOCK NAME ALAQAR LISTING Main Market of Bursa Malaysia Securities Berhad INVESTMENT POLICY To diversify its Shariah-compliant real estate portfolio, with a strategic emphasis on healthcare-related properties. The Fund focuses on expanding its holdings across various properties and locations, while continuously seeking opportunities that offer attractive and sustainable returns. INVESTMENT OBJECTIVE To deliver stable and sustainable distributions per unit to unitholders, with the potential for consistent growth in both distributions and net asset value (‘’NAV’’) per unit over the long term. INVESTMENT MANAGEMENT STRATEGY To increase cash flow and enhancing unit value through selective acquisitions. Additionally, the Fund aims to preserve and enhance the value of its property portfolio via portfolio diversification and combination of: • Capitalising on acquisition growth opportunities; and • Identifying assets that are approaching or have reached their optimal returns for potential disposal consideration. OPERATING STRATEGY To continously improve the performance of its properties by improving yields and returns. This is achieved through a combination of strategies, including: • Meeting the needs of the tenants; • Maintaining the quality and physical conditions of the properties; • Minimising disruptions to rental income and operational costs; • Implementing enhancement initiatives such as repositioning or repurposing underperforming or underutilised properties CAPITAL MANAGEMENT STRATEGY To optimise its capital structure and minimise the cost of capital while adhering to the financing limits prescribed by REIT Guidelines. Al-’Aqar intends to fund future acquisitions and asset enhancement initiatives (AEI) works through a balanced approach, combining both debt and REIT units to maintain financial flexibility and support long-term growth. FUND SIZE 839,597,757 units FINANCIAL YEAR END 31 December TRUSTEE FEE 0.04% per annum of the Fund’s net assets value DISTRIBUTION POLICY At least 95% of distributable income GEARING POLICY Not exceed 50% of the Fund’s total asset value
BUSINESS OVERVIEW 8 Al-`Aqar Healthcare REIT | Annual Report 2024 LETTER TO STAKEHOLDERS We entered 2024 with measured optimism, mindful of the evolving global and domestic economic landscape. Amid shifting macroeconomic conditions and rising operational costs, Al-`Aqar Healthcare REIT continued to focus on delivering sustainable value to our unitholders. Our strong foundation in healthcare real estate, supported by our long-standing partnership with KPJ Healthcare Berhad has allowed us to navigate industry challenges while maintaining steady growth. Anchored by our Strategic Plan we continue to refine our portfolio, deploying capital effectively and strengthening stakeholder collaboration, both of which are critical to maintaining momentum in an evolving healthcare landscape. This commitment to stability is reflected in our performance for FY2024. DATUK HASHIM BIN WAHIR Chairman, Independent Non-Executive Director I am pleased to present the Annual Report for FY2024 highlighting a total distribution per unit (“DPU”) of 7.27 sen. While this is slightly lower than the 7.90 sen recorded in 2023, which was the highest DPU pay-out in a decade, last year’s exceptional performance set an unusually high benchmark. Despite the marginal decline, our pay-out percentage remained consistent, and the reduction in DPU was primarily due to a modest dip in distributable income from lower earnings. REVIEWING 2024 - SUPPORTIVE OPERATING ENVIRONMENT Malaysia’s economy experienced stronger growth in 2024, expanding by 5.1% compared to 3.6% in 2023, driven by resilient domestic demand, particularly household spending and investments. This positive momentum, coupled with the Central Bank’s decision to maintain the benchmark interest rate at 3.00%, created a stable financial environment. For the healthcare real estate sector, sustained economic growth and steady interest rates support investor confidence, tenant stability and long-term demand for healthcare assets. Our local private healthcare sector remains a key growth driver, supported by demographic shifts, rising demand for specialised treatments and government initiatives. The increased allocation to the Ministry of Health in Budget 2025 highlights efforts to enhance public healthcare, with private hospitals playing a crucial role in alleviating patient congestion. These developments bode well for Al-`Aqar, as the expansion of privately operated medical centres drives demand for quality healthcare facilities, ensuring stable rental income and reinforcing the REIT’s long-term growth prospects. Boosted by the resurgence of medical tourism, Malaysia’s health services sector showed strong growth in 2024. The Malaysia Healthcare Travel Council projected international patient arrivals to reach nearly 1.5 million by the end of 2024 (2023: 1.39 million), further solidifying Malaysia’s position as a leading regional hub for healthcare travel. This growing influx of patients seeking treatment abroad has bolstered private hospital occupancy rates, driving stronger financial performance across the sector. Together with supportive government policies and structural healthcare reforms, these trends continue to create a favourable environment for investments in medical facilities and health-related assets
BUSINESS OVERVIEW SECTION 2 9 Al-`Aqar Healthcare REIT | Annual Report 2024 LETTER TO STAKEHOLDERS These broader economic and industry drivers have positively impacted Al-`Aqar, supported by its close partnership with KPJ, Malaysia’s leading private healthcare provider. As of December 2024, KPJ reported a robust financial performance, with revenue increasing by 15% to RM3.92 billion (FY2023: RM3.42 billion) - and profit before tax rising 40% to RM530.96 million. (FY2023: RM377.94 million). KPJ’s bed occupancy rate also improved to 69% in 2024 (2023: 67%), reflecting the continued demand for quality medical services. This growth strengthens Al-`Aqar’s rental stability, supported by higher patient volumes and KPJ’s expansion. 2024 –STEADY PERFORMANCE AMID PORTFOLIO ADJUSTMENTS Al-`Aqar delivered a stable performance in 2024, successfully navigating a dynamic operating environment while implementing strategic portfolio adjustments. Despite external pressures such as rising operational costs and rental realignments, the REIT maintained its equilibrium, supported by its defensive asset class and long-term lease structures. To further strengthen its financial position, Al-`Aqar focused on capital efficiency and portfolio optimisation, executing strategic divestments under its capital recycling strategy. These moves streamlined the holdings, enhancing operational agility and long-term sustainability. At the same time, a 100% occupancy rate reaffirmed the strong demand for healthcare real estate, reflecting the value of Al-`Aqar’s long-term lease agreements and established tenant relationships. The Fund’s total investment properties was at 23 (FY2023:24) following the successful disposal of Damai Wellness Center on 6 June 2024. Following fair value adjustments, facility upgrades, and forex-related impacts on the Australian property, the portfolio’s value increased to RM1.65 billion as of 31 December 2024, (FY2023 : RM1.64 billion). M-REITS IN A GRADUAL REBOUND AMID CAUTIOUS OPTIMISM The Malaysian Real Estate Investment Trusts (‘’M-REITs”) sector saw a strong recovery in 2024, with the Bursa Malaysia REIT Index rising by 11.4%, a marked improvement from 1.2% in 2023. This growth was in line with the FTSE Bursa Malaysia (‘’FBM’’) KLCI’s 12.9% increase, supported by the start of the US Federal Funds Rate easing cycle, which enhanced the appeal of M-REITs to investors. Despite the recovery, the sector remained cautious amid ongoing uncertainties, such as fluctuating interest rates and global economic challenges. Meanwhile, the total market value of M-REITs continued to grow, facilitated by new property acquisitions and capital-raising efforts. STRONG TOTAL RETURNS AMID EARNINGS ADJUSTMENTS While our total return strengthened, distribution yield declined slightly from 6.37% in 2023 to 5.35% in 2024. This was partly due to slightly lower earnings, as reduced contributions from the Australia segment affected overall income although cost savings helped offset some of the earnings impact. The strengthening of Al-`Aqar’s share price of RM1.36 (FY2023: RM1.24) had also contributed to the lower distribution yield. Al-`Aqar delivered a commendable total return of 15.03%, significantly outperforming the broader M-REITs market. This achievement reflects our strategic focus and the strength of our healthcare asset portfolio which continues to benefit from longterm leases with established healthcare operators. Our continuing collaboration with principal tenant KPJ is key to our portfolio’s stability and performance, ensuring consistent rental income and portfolio resilience. AL-`AQAR REIT PERFORMANCE 8.01% 2023 2023 5.35% 2024 2024 6.37% 15.03% Total Return Distribution Yield Table 2 – comparison of Al-`Aqar’s performance in 2024 and 2023 TOTAL RETURN (FY2024) 10.45% 15.03% Trading Performance of M-REITs Trading Performance of Al-`Aqar DISTRIBUTION YIELD (31 DECEMBER 2024) Table 1 – comparison of M-REIT and Al-`Aqar’s performance in 2024 5.6% 5.35% Trading Performance of M-REITs Trading Performance of Al - ‘Aqar
BUSINESS OVERVIEW 10 Al-`Aqar Healthcare REIT | Annual Report 2024 2024 – AL-`AQAR INITIATIVES CAPITAL MANAGEMENT With the Overnight Policy Rate (‘’OPR’’) holding steady at 3%, Al-`Aqar maintained stable financing costs of RM38.6 million in FY2024, with a weighted average finance cost of 5.06%, slightly higher than 4.86% in FY2023. The Fund continued active gearing management, maintaining a 41% gearing level, with long term plans to gradually reduce it to 35% in align with M-REIT industry average. INVESTMENT MANAGEMENT As part of its capital recycling strategy, Al-`Aqar executed strategic divestments to optimise its portfolio. Key initiatives include the successful disposal of Damai Wellness Centre for RM13.0 million, completed on 6 June 2024, and the ongoing disposal of Jeta Gardens Aged Care Facilities for AUD24.4 million (approximately RM74.9 million), which is expected to be finalised in 2025. These initiatives free up capital for further yield accretive acquisitions, unitholder distributions and debt reduction. ASSET MANAGEMENT Al-`Aqar maintained a 100% occupancy rate across its property portfolio, providing a steady rental income and long-term lease stability. Additionally, the Fund undertook asset maintenance enhancement measures worth RM8.1 million, focusing on mechanical, electrical and civil upgrades to enhance the quality and functionality of its healthcare properties. 2024 AL-`AQAR FINANCIAL PERFORMANCE In 2024, Al-`Aqar recorded gross revenue of RM117.2 million, a 3.1% decline from RM121.0 million in FY2023, primarily due to rental adjustments in its Australian assets. Net property income stood at RM110.7 million (FY2023: RM114.5 million), reflecting a 3.3% decrease, while realised profit declined slightly to RM62.2 million from RM63.2 million in the previous year. Following the adjustments, the Fund declared a DPU of 7.27 sen, meeting its 95% distribution policy requirement and maintaining returns to unitholders. LETTER TO STAKEHOLDERS 2024 STRATEGIC ROADMAP UPDATE Strategic Pillar Objective 2024 Progress Enlarge Tenant Base Expand beyond KPJ Healthcare by securing new healthcare operators. Initiated discussions with existing and new operators; evaluating lease opportunities. Grow Complementary Assets with KPJ Strengthen portfolio through targeted asset enhancements with KPJ. Ongoing 6 lease renewals; exploring AEIs for selected hospitals. Diversify Across the Healthcare Value Chain Invest in adjacent healthcare real estate segments (e.g., medical offices, rehabilitation centres). Conducted feasibility study on new asset types and innovative business models; identifying potential acquisition targets. Capitalise on Aged Care Markets Expand into senior living and aged care facilities. Divested Jeta Gardens in Australia; assessing local aged care investment opportunities. CHAMPIONING SUSTAINABILITY FOR FUTURE GROWTH At Al-`Aqar, we emphasise sustainability as a key driver of longterm value creation. As a steward of healthcare real estate, we understand the importance of embedding environmental, social and governance (‘’ESG’’) principles into our business to ensure our assets continue to support strong, sustainable healthcare ecosystems. In 2024, we strengthened our sustainability agenda by advancing energy efficiency, resource conservation and responsible governance. Through strategic collaborations, we introduced renewable energy solutions, enhanced water and waste management and worked closely with tenants to foster sustainable operations within our properties. These initiatives not only align with our Shariah-compliant framework but also reinforce our commitment to ethical and responsible investing. Please refer to page 32 in our Sustainability Statement for more information. HISTORICAL DPU 7.70 2016 7.70 2017 7.70 2018 7.75 2019 7.80 2021 8.10 2022 7.90 2023 7.27 2024 6.81 2020
BUSINESS OVERVIEW SECTION 2 11 Al-`Aqar Healthcare REIT | Annual Report 2024 LETTER TO STAKEHOLDERS Malaysia’s economy is projected to grow between 4.5% and 5.5% in 2025, creating a favourable environment for the healthcare sector. Rising demand for specialised treatments and an ageing population will continue to drive private healthcare expansion, with inpatient and outpatient visits expected to grow. As healthcare expenditure increases, at a CAGR of 8.7% from 2023 to 2028, demand for healthcare real estate will rise, benefitting Al-`Aqar. KPJ’s expanding bed capacity and new service offerings further support occupancy growth across its hospital network. The Manager is confident about Al-`Aqar’s prospects, focusing on strategic acquisitions, capital optimisation and tenant diversification to sustain long-term portfolio value and deliver stable returns for unitholders. BUILDING FOR THE FUTURE As we enter the next phase of our strategic plan, a key priority is expanding and diversifying our portfolio through strategic acquisitions from KPJ Healthcare Berhad and third-party sponsors. A recent example is the ongoing RM241 million purchase of KPJ Ampang Puteri Specialist Hospital (New Wing) and KPJ Penang Specialist Hospital (New Wing) from KPJ These properties will be leased back to KPJ subsidiaries for 11 and 15 years, respectively with a 15 year renewal option. This demonstrates our confidence in the resilience of the healthcare sector, securing long term recurring income for Al-`Aqar. We will also continue capital recycling efforts by divesting non-core or underperforming assets, allowing us to reallocate capital toward higher-yielding investments. This disciplined approach supports our long-term goal of lowering borrowing costs by reducing reliance on debt and enhancing income stability through a stronger tenant mix. To future-proof our portfolio, we are advancing smart asset management initiatives, incorporating digital solutions to improve operational efficiency, resource optimisation and tenant experience. We will continue implementing energyefficient upgrades, enhancing our properties towards achieving the green building certification. These improvements will enhance our value proposition resulting in increased customer satisfaction. 2025 – OUTLOOK With new leadership and an updated organisational structure, we are streamlining processes to boost productivity and enhance strategic agility. The Manager is on track to grow the Group’s investment properties value to around RM2.6 billion by 2028, supported by a stronger asset base and prudent capital management, while ensuring steady, long-term growth in the DPU. APPRECIATION AND ACKNOWLEDGEMENT As we close another year, I would like to express my deepest gratitude to our unitholders, tenants, business partners and stakeholders for their continued trust and support. Your confidence in Al-`Aqar has been instrumental in driving our success and resilience amid a dynamic operating landscape. I am thankful to my fellow Board members for their insight and leadership, which have been instrumental in steering Al-`Aqar toward sustainable growth. My appreciation also goes to the management team and employees, whose dedication and commitment have enabled us to navigate challenges, seize opportunities and create long-term value for our stakeholders. I would also like to take this opportunity to welcome newly appointed Chief Executive Officer, Zulhilmy bin Kamaruddin and Board Members, Dato’ Mohammed Ridha Bin Dato’ Haji Abd Kadir, Datin Ungku Suseelawati Binti Ungku Omar and Goh Tian Sui. Their expertise will bring fresh perspectives to guide Al-`Aqar forward. We also extend our heartfelt thanks to John Ng Yan Chuan for his invaluable contributions during their tenure. I am confident that Al-`Aqar will continue to deliver resilient financial performance, drive sustainable growth and create long-term value for all stakeholders. I sincerely appreciate your continued support and confidence in Al-`Aqar. In addition to our environmental initiatives, we engage in meaningful stakeholder communication and uphold strong governance standards. In 2024, we strengthened co-operation with our tenants, integrating sustainability within our leasing agreements while maintaining an 86% tenant satisfaction score. Our governance framework reflects global best practices, ensuring transparency, accountability and ethical conduct.
BUSINESS OVERVIEW 12 Al-`Aqar Healthcare REIT | Annual Report 2024 FIVE-YEAR FINANCIAL PERFORMANCE 117.2 110.2 121.0 115.7 114.1 2020 2021 2022 2023 2024 GROSS REVENUE (RM MILLION) RM117.2 million 3.1% 1,053.5 971.2 1,072.3 943.5 945.0 2020 2021 2022 2023 2024 NET ASSET VALUE (RM MILLION) RM1,053.5 million 1.8% 62.2 67.8 63.2 57.0 65.2 2020 2021 2022 2023 2024 PROFIT FOR THE YEAR (REALISED) (RM MILLION) RM62.2 million 1.6% 5.35 6.64 6.37 5.20 6.72 2020 2021 2022 2023 2024 ANNUALISED DISTRIBUTION YIELD (%) 5.35 % 16.0% 15.03 11.81 8.01 4.44 (4.73) 2020 2021 2022 2023 2024 ANNUAL TOTAL RETURN (%) 15.03 % 87.6% 7.27 8.10 7.90 6.81 7.80 2020 2021 2022 2023 2024 DISTRIBUTION PER UNIT (SEN) 7.27 sen 8.0%
BUSINESS OVERVIEW SECTION 2 13 Al-`Aqar Healthcare REIT | Annual Report 2024 FIVE-YEAR FINANCIAL PERFORMANCE FINANCIAL HIGHLIGHTS - GROUP 2020 2021 2022 2023 2024 Gross revenue (RM’000) 115,710 114,072 110,239 121,022 117,216 Net property income (RM’000) 109,614 108,222 104,199 105,441 101,543 Profit before tax (RM’000) 13,624 72,781 60,036 60,554 58,075 Profit for the year - realised (RM’000) 56,984 65,218 67,766 63,246 62,223 - unrealised (RM’000) (44,413) 8,331 (7,627) (2,552) (3,948) Earnings per unit - realised (sen) 7.74 8.86 9.20 7.76 7.41 - unrealised (sen) (6.03) 1.13 (1.03) (0.31) (0.47) Investment properties (RM’000) 1,534,501 1,538,210 1,721,281 1,643,220 1,654,401 Total asset value (RM’000) 1,647,986 1,664,733 1,867,066 1,855,984 1,835,937 Net asset value (RM’000) 943,490 945,002 971,215 1,072,297 1,053,543 NAV per unit - before distribution (RM) 1.2819 1.2840 1.2839 1.2772 1.2548 - after distribution (RM) 1.2474 1.2660 1.2629 1.2572 1.2391 FINANCIAL HIGHLIGHTS - FUND 2020 2021 2022 2023 2024 Gross revenue (RM’000) 103,918 104,245 104,588 115,250 116,249 Net property income (RM’000) 97,974 98,405 98,610 102,033 102,477 Profit before tax (RM’000) 50,126 46,602 58,083 66,378 45,718 Profit for the year - realised (RM’000) 55,137 64,400 66,707 64,694 64,171 - unrealised (RM’000) (7,545) (17,030) (8,521) 1,824 (18,254) Earnings per unit - realised (sen) 7.49 8.75 9.06 7.94 7.64 - unrealised (sen) (1.02) (2.31) (1.16) 0.22 (2.17) Investment properties (RM’000) 1,446,376 1,451,912 1,636,015 1,632,750 1,645,085 Total asset value (RM’000) 1,647,844 1,664,797 1,867,100 1,854,869 1,836,154 Net asset value (RM’000) 967,599 945,419 971,209 1,072,316 1,053,585 NAV per unit - before distribution (RM) 1.3147 1.2846 1.2838 1.2772 1.2549 - after distribution (RM) 1.2802 1.2666 1.2628 1.2572 1.2392 Market Capitalisation (RM’000) 964,140 853,743 922,913 1,041,101 1,141,853 Distribution Per Unit (sen) 6.81 7.80 8.10 7.90 7.27 Annualised Distribution Yield (%) 5.20 6.72 6.64 6.37 5.35
BUSINESS OVERVIEW 14 Al-`Aqar Healthcare REIT | Annual Report 2024 TRADING PERFORMANCE MARKET CAPITALISATION, UNIT PRICE AND UNITS IN CIRCULATION 736 964 736 756 840 840 854 923 1,041 1,142 2020 2021 2023 2022 2024 1.31 1.16 1.22 1.24 1.36 Units in circulation (million units) Market Capitalisation (RM million) Closing Unit Price (RM/Unit) TRADING SUMMARY 2020 2021 2022 2023 2024 Closing Unit Price (RM) 1.31 1.16 1.22 1.24 1.36 52-week Highest Traded Price (RM) 1.42 1.37 1.25 1.35 1.42 52-week Lowest Traded Price (RM) 1.19 1.09 1.09 1.22 1.23 Price Movement (%) -0.8 -11.5 5.17 1.64 7.94 Annual Total Return (%) 4.44 -4.73 11.81 8.01 15.03 Number of Units In Circulations ('000) 735,985 735,985 756,486 839,598 839,598
BUSINESS OVERVIEW SECTION 2 15 Al-`Aqar Healthcare REIT | Annual Report 2024 TRADING PERFORMANCE FY2024 TRADING PERFORMANCE Jan Feb Jun Apr Aug Nov Mar Jul Oct May Sep Dec 1.36 1.40 1.42 1.30 1.31 1.31 1.29 1.27 1.31 1.26 1.27 Average Daily Trading Volume (‘000 units) Closing Market Price (RM/unit) 89,029 96,516 385,445 169,735 271,857 79,445 311,230 75,900 97,941 89,877 275,368 116,590 1.26 Source: Bank Negara Malaysia, Maybank, Employee Provident Fund, JRM
BUSINESS OVERVIEW 16 Al-`Aqar Healthcare REIT | Annual Report 2024 MARKET SUMMARY REPORT ECONOMIC OVERVIEW Malaysia’s economic performance remained robust in 2024, with GDP growing at 5.1%, supported by strong domestic demand, resilient private-sector investments, and sustained expansion in key industries. The outlook for 2025 remains positive, with GDP growth projected at 4.5%-5.5%, driven by continued household spending, wage growth, and public-private infrastructure investments. According to Bank Negara Malaysia (BNM), the economy is expected to sustain its momentum, benefiting from higher disposable incomes following minimum wage adjustments and civil servant salary increases, as well as an improving tourism and investment landscape. However, while domestic economic fundamentals remain sound, downside risks persist. Trade tensions and geopolitical uncertainties continue to pose external risks, which could impact Malaysia’s export sector. Additionally, global commodity price volatility remains a concern, with potential implications for inflation and financial market stability. Despite these risks, Malaysia’s economic outlook remains largely resilient, with strong investment pipelines and proactive fiscal measures supporting long-term growth. DATE OPR Level (%) Changes in OPR 20-Jan-21 1.75 - 11-May-22 2.00 +0.25 06-Jul-22 2.25 +0.25 08-Sep-22 2.50 +0.25 03-Nov-22 2.75 +0.25 03-May-23 3.00 +0.25 24-Jan024 3.00 - 22-Jan-25 3.00 - Source: Bank Negara Malaysia Overnight Policy Rate Decisions BNM has maintained the Overnight Policy Rate (OPR) at 3.00%, reinforcing a pro-growth stance while ensuring macroeconomic stability. Inflation averaged 1.8% in 2024, with projections indicating continued containment in 2025, aided by stable global commodity prices and ongoing government interventions, including targeted subsidies and tax incentives. The ringgit is expected to remain stable, underpinned by stronger foreign direct investment (FDI) inflows and structural economic reforms that support capital market growth. For Malaysian REITs, the stable interest rate environment is expected to remain favourable, ensuring manageable financing costs and supporting property valuations. The healthcare real estate sector, in particular, continues to be a key beneficiary of economic stability, given its defensive nature and consistent demand drivers. MEDICAL AND HEALTHCARE TRENDS IN MALAYSIA The private healthcare sector continues to be a key driver of Malaysia’s healthcare industry, supported by an ageing population, increasing prevalence of chronic diseases, and advancements in medical technologies. Private hospital operators are expected to sustain their growth trajectory in 2025, benefiting from rising patient volumes and demand for specialised treatments. The government’s commitment to enhancing healthcare accessibility and quality is reflected in Budget 2025, which has allocated RM45.3 billion towards healthcare, marking a 10% increase from Budget 2024’s RM41.2 billion. This allocation will support hospital expansions, digital health infrastructure, and medical research advancements, further strengthening Malaysia’s healthcare system. Malaysia’s private hospitals continue to experience rising patient volumes, reinforcing growing demand for medical services. This trend is driving increased pharmaceutical consumption, particularly for chronic conditions such as diabetes, cardiovascular diseases, and cancer. The expansion of private healthcare facilities and treatment capabilities is also accelerating demand for specialised medications and advanced medical equipment, enhancing growth prospects for the pharmaceutical and healthcare real estate sectors. Source: CEIC, BIMB Securities CPI VS CPI HEALTH TREND CPI: Health Consumer Price Index (CPI) Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jul-22 Jul-23 Jul-24 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 Apr-24 Oct-17 Oct-18 Oct-19 Oct-20 Oct-21 Oct-22 Oct-23 Oct-24 -3.0% -4.0% -2.0% -1.0% 0.0% 1.0% 4.0% 2.0% 3.0% 5.0% Inflation Rate YoY (%)
BUSINESS OVERVIEW SECTION 2 17 Al-`Aqar Healthcare REIT | Annual Report 2024 MARKET SUMMARY REPORT While the sector’s outlook remains strong, rising medical costs have been an area of focus. Malaysia’s Health Consumer Price Index (CPI) has increased steadily, reflecting higher costs for medical services, pharmaceuticals, and hospital care. Key contributing factors include technological advancements, increasing demand for quality healthcare, and an ageing population requiring more extensive medical care. The medical inflation rate is projected to reach 12.6% in 2025, surpassing the global average of 7.2%. The evolving regulatory landscape in the insurance industry is also set to have significant implications for the healthcare industry. In response to rising medical costs, BNM has tightened insurance regulations to enhance consumer protection and improve transparency in healthcare-related claims. The new policies include stricter co-payment requirements for medical insurance and takaful packages, aimed at discouraging excessive medical claims and promoting cost-sharing between insurers and policyholders. Additionally, the Malaysian government is set to address emerging challenges in the healthcare sector by reviewing regulations to ensure better cost management, improved access to medical services, and sustainable industry growth. This includes evaluating new pricing models such as the Diagnosis-Related Group (DRG) pricing system that was introduced in early 2025, which aims to provide greater cost transparency and efficiency within private healthcare facilities. The transition from a fee-for-service model to DRG pricing will require substantial upgrades to Malaysia’s healthcare data infrastructure, including medical coding systems and electronic health records. The implementation process will necessitate clear pricing structures, defined cost benchmarks, and comprehensive training for healthcare professionals. The transition will take time, and a phased approach may be necessary to ensure seamless integration. While the DRG system is expected to help contain healthcare costs in the long run, concerns remain regarding potential short-term impacts, including pressure on hospital margins and the risk of quicker discharges or reduced care for patients with complex medical needs. However, healthcare providers with well-established operational efficiencies and diverse revenue streams, are likely to adapt effectively. Medical tourism remains a key growth driver for Malaysia’s healthcare sector, offering strong revenue-generating potential for private hospitals. The post-pandemic recovery in medical tourism has been swift, with revenues reaching RM1.3 billion in 2022 and RM1.9 billion in 2023. This upward trend is expected to continue into 2025, supported by Malaysia’s reputation for high-quality, cost-effective medical services and the government’s ongoing efforts to position the country as a leading medical tourism hub. Private healthcare providers with a strong domestic presence are poised to benefit the most from this trend, particularly as medical tourists generally contribute higher margins due to the complexity of their cases and the additional services they require. Budget 2025’s increased tax reliefs for medical charges and insurance premiums are also expected to support further growth in medical tourism, reinforcing Malaysia’s appeal as a destination for international patients seeking affordable yet high-quality healthcare services. The healthcare sector continues to benefit from strong policy support, investment incentives, and increasing demand, ensuring sustained growth and resilience. While industry stakeholders are navigating regulatory changes and cost pressures, the sector is well-equipped to adapt through innovation, enhanced operational efficiencies, and strategic partnerships. Private healthcare providers, pharmaceutical firms, and healthcare REITs remain well-positioned to capture future growth opportunities, supported by a rapidly evolving and increasingly sophisticated healthcare landscape. Sources: 1. Monetary Policy Statement - Bank Negara Malaysia 2. Maybank Investment Bank Berhad. (2024). Malaysia 2025 Outlook & Lookouts: Brace Up for a Volatile Year 3. MIDF Research. (2024). 2025 Market Outlook 4. BIMB Securities Sdn Bhd. (2025). 2025 Annual Strategy: Certainty over Uncertainties 5. Kenanga Research. (2025). Market Strategy: 1QCY25 Outlook 6. Deloitte: 2025 Global Health Care Outlook Source: Malaysia Healthcare Travel Council (MHTC), Maybank IBG Research MALAYSIA INBOUND MEDICAL TOURISM-VOLUME AND REVENUE Health Tourism Revenue (MYR’m) Health Tourism Volume (# ‘000) (RHS) 2023 1,900 1,076 2015 914 859 2019 1,700 1,220 2018 1,500 1,200 2017 1,300 1,050 2016 1,123 921 2020 800 689 2021 600 561 2022 1,300 850
Al-`Aqar Healthcare REIT | Annual Report 2024 BUSINESS OVERVIEW MANAGEMENT DISCUSSION & ANALYSIS MALAYSIAN SEGMENT The Malaysian segment was the Group’s main revenue source, contributing 99.2% in FY2024 (FY2023: 95.2%). This segment reported revenue of RM116.2 million which is an increase of 0.9% (FY2023: RM115.2 million). The increase was attributed to the annual increment on rental income. The Net Property Income (NPI) contributed by the Malaysian segment was RM103.8 million, which translated to a increase of 1.8% (FY2023: RM102.0 million). 18 KEY FINANCIAL RESULTS THE GROUP FY2023 RM’000 FY2024 RM’000 GROWTH % Gross revenue 121,022 117,216 (3.1) Net property income 105,441 101,543 (3.7) Profit for the year (realised) 63,246 62,223 (1.6) EPU (realised) (sen) 7.76 7.41 (4.5) THE FUND Income available for distribution 64,694 64,171 (0.8) DPU (sen) 7.90 7.27 (8.0) PERFORMANCE BY SEGMENT Al-`Aqar operates across two geographical segments based on the location of its customers and assets: • Malaysia – The core market, contributing the majority of revenue and earnings. • Australia – A smaller segment, primarily represented by aged care assets, with performance influenced by local market conditions. Management closely monitors the operating results of each segment separately to guide strategic decisions on resource allocation and performance assessment. Segmental performance is evaluated based on operating profit, ensuring a focused approach to growth and sustainability in both markets. REVENUE FY2023 RM’000 FY2024 RM’000 GROWTH % Malaysia 115,250 116,249 0.9 Australia 5,772 967 (83.2) NET PROPERTY INCOME (NPI) FY2023 RM’000 FY2024 RM’000 GROWTH % Malaysia 102,033 103,833 1.8 Australia 3,408 (2,290) (167.2) SECTION 1: FINANCIAL REVIEW
Al-`Aqar Healthcare REIT | Annual Report 2024 BUSINESS OVERVIEW SECTION 2 MANAGEMENT DISCUSSION & ANALYSIS 19 AUSTRALIAN SEGMENT The Australian segment contributed 0.8% to the Group’s total revenue in FY2024 (FY2023: 4.8%). Revenue fell by 83.2% to RM1.0 million from RM5.8 million the previous year due to a reduction in rental income after the lessee revised rental terms upon completion of the Business Sales Agreement (“BSA’’). The segment also recorded net property loss of RM2.3 million (FY2023: RM3.4 million). PROFIT FOR THE YEAR In FY2024, the Group recorded a profit of RM58.3 million (FY2023: RM60.7 million), made up of realised profit of RM62.2 million (FY2023: RM63.2 million) and an unrealised loss of RM3.9 million (FY2023: a loss of RM2.5 million). This slight 1.6% reduction was caused by the rental adjustments relating to the Jeta Gardens property in Australia, offset against lower professional fees as well as other trust expenditures. The increase in unrealised loss for the year was mainly due to fair value adjustments in the REIT’s Australian asset. NPI stood at RM101.5 million, reflecting a 3.7% decline from the previous year, (FY2023: RM105.4 million) primarily due to lower revenue following rental adjustments in the Australian property which were made after the lessee finalised the BSA. During the financial year 2024, Al-`Aqar’s main cost drivers were refinancing costs, property expenses and repair and maintenance. The finance cost variance of 1.4% was mainly due to the redemption of RM100.0 million in Revolving Credit-i in April 2023, which led to lower financing expenses. Operational and property expenses remained stable with no significant fluctuations. In contrast, repair and maintenance costs rose compared to FY2023, driven by repainting and replacement works carried out during the year. Al-`Aqar Malaysian healthcare portfolio provides a solid foundation amid evolving market conditions, with stable lease income supporting sustainable returns as the REIT navigates the dynamic industry landscape. INCOME AVAILABLE FOR DISTRIBUTION In the financial year 2024, Al-`Aqar the total income available for distribution was RM64.2 million. The Fund distributed three interim income distributions from January to September 2024, totalling 5.70 sen per unit, amounting to RM47.9 million. On 24 January 2025, the Fund declared a final income distribution of 1.57 sen per unit, totaling RM13.2 million, for the period from October to December 2024. This distribution was paid on 28 February 2025. The total DPU for FY2024 was 7.27 sen, an 8.0% decrease from 7.90 sen in FY2023.
BUSINESS OVERVIEW 20 Al-`Aqar Healthcare REIT | Annual Report 2024 STATEMENT OF FINANCIAL POSITION Al-`Aqar’s total asset value declined by 1.1% to RM1.8 billion as of end-FY2024, mainly due to fair value losses on REIT’s Australian asset. Gearing stood at 41% in 2024 following the completion of a private placement exercise in April 2023, which raised RM100 million through the issuance of 83 million new units. The net proceeds were used to redeem the outstanding amount under a revolving credit facility. Al-`Aqar aims to reduce its gearing level, aligning with the average gearing level of Malaysian REITs. The Fund is currently exploring various financial arrangements to effectively manage gearing levels and enhance financial flexibility. STATEMENT OF CASH FLOWS PERFORMANCE BENCHMARK BENCHMARK FY2023 FY2024 COMMENTARY Management expense ratio (%) 0.58 0.54 The ratio improved driven by a higher average total asset base as well as lower expenses. Total return (%) 8.01 15.03 Total return increased due to higher closing price (RM1.36 vs RM1.24). Average annual total unit price return - 5 years (%) 5.23 6.91 The 5-year average annual total return increased due to higher closing price in FY2024. Average annual total unit price return - 3 years (%) 5.03 11.62 The 3-year average annual total return increased due to higher closing price in FY2024. Distribution Yield (%) 6.37 5.35 Distribution yield was decreased due to higher closing price of RM1.36 and lower DPU of 7.27 sen in FY2024. NAV per unit (RM) 1.2772 1.2548 NAV per unit declined by 1.7%, reflecting the total comprehensive income for 2024 (RM45.9 million) and the distribution of RM16.8 million as the final income payout for FY2023, along with RM47.9 million in interim distributions for FY2024. MANAGEMENT DISCUSSION & ANALYSIS OPERATING ACTIVITES Net cash generated from operating activities stood at RM96.0 million in FY2024, compared to RM101.2 million in FY2023. The decrease was in line with a lower NPI. INVESTING ACTIVITIES Investment income increased by 26.7% to RM1.9 million (FY2023: RM1.5 million), primarily driven by higher returns from fixed deposits. The Group also recorded proceeds of RM13.0 million from the disposal of the Damai Wellness Centre. Meanwhile, RM2.2 million was utilised for investment property enhancements. FINANCING ACTIVITIES A total of RM100.6 million was used for financing activities in FY2024. This included income distributions totaling RM66.1 million. Islamic financing costs paid were RM34.5 million, slightly lower than the previous year. A point to note is that there were no repayments made to Islamic Financing in FY2024, compared to RM100 million paid in 2023. As a result, cash and cash equivalents increased to RM87.3 million as at the end of-FY2024, up from RM84.3 million in FY2023.
BUSINESS OVERVIEW SECTION 2 21 Al-`Aqar Healthcare REIT | Annual Report 2024 DESCRIPTION OF PROPERTIES INVESTMENT PROPERTIES FY2023 Fair Value RM’000 FY2024 Fair Value RM ‘000 KPJ Ampang Puteri Specialist Hospital 137,000 140,000 KPJ Damansara Specialist Hospital 140,000 140,000 KPJ Johor Specialist Hospital 122,000 124,000 KPJ Ipoh Specialist Hospital 90,000 91,000 KPJ Puteri Specialist Hospital 40,000 40,000 KPJ Selangor Specialist Hospital 84,000 85,000 Kedah Medical Centre 60,000 61,000 KPJ Perdana Specialist Hospital 40,000 40,000 KPJ Kuantan Care & Wellness Centre 16,000 16,000 KPJ Sentosa KL Specialist Hospital 31,000 32,000 KPJ Kajang Specialist Hospital 57,000 58,000 Taiping Medical Centre 22,500 22,000 KPJ International College Penang 14,000 14,000 Tawakkal Health Centre 46,000 44,000 KPJ Healthcare REIT University, Nilai 102,000 102,000 KPJ Penang Specialist Hospital 65,000 66,000 KPJ Tawakkal KL Specialist Hospital 139,000 141,000 KPJ Haemodialysis Kluang 4,800 5,000 KPJ Klang Specialist Hospital 104,000 106,000 KPJ Batu Pahat Specialist Hospital 80,000 81,000 KPJ Pasir Gudang Specialist Hospital 90,000 91,000 Jeta Gardens Aged Care & Retirement Village 10,470 9,316 KPJ Seremban Specialist Hospital 160,000 160,000 Total Portfolio based on valuation report 1,654,770 1,668,316 Less: Unbilled rental income (11,550) (13,915) Total Portfolio Properties as at 31 December 1,643,220 1,654,401 FAIR VALUE OF INVESTMENT PROPERTIES INVESTMENT PROPERTIES FY2023 RM’000 FY2024 RM’000 At 1 January 1,721,281 1,643,220 Enhancements - 2,201 Transfer to assets classified as held for sale (76,700) - Fair value adjustment (5,151) 10,134 Foreign exchange differences 3,790 (1,154) Total investment properties as at 31 December 1,643,220 1,654,401 MANAGEMENT DISCUSSION & ANALYSIS
BUSINESS OVERVIEW 22 Al-`Aqar Healthcare REIT | Annual Report 2024 MANAGEMENT DISCUSSION & ANALYSIS 0 % List of properties RM ‘ Million 8.9 10.4 5.2 6.0 6.9 8.1 7.9 9.3 6.5 7.6 8.4 9.9 6.5 7.6 7.4 8.7 6.2 7.2 0.3 0.4 6.1 7.1 0.3 0.3 12 10 8 6 4 2 KPJ Seremban Specialist Hospital KPJ Healthcare University, Nilai KPJ Damansara Specialist Hospital KPJ Ampang Puteri Specialist Hospital KPJ Klang Specialist Hospital Damai Wellness Centre KPJ Tawakkal Specialist Hospital KPJ Selangor Specialist Hospital KPJ Batu Pahat Specialist Hospital KPJ Johor Specialist Hosptal KPJ Ipoh Specialist Hospital KPJ Haemodyalisis Kluang 0.7 1.0 Jeta Gardens Aged Care & Retirement Village 3.8 4.4 4.7 5.5 3.0 3.5 3.4 4.0 1.5 1.8 4.0 4.7 KPJ Penang Specialist Hospital KPJ Sentosa KL Specialist Hospotal KPJ Kajang Specialist Hospital Kedah Medical Centre KPJ Pasir Gudang Specialist Hospital Tawakkal Health Centre 2.5 2.9 KPJ Perdana Specialist Hospital 2.6 3.0 KPJ Puteri Specialist Hospital 1.4 1.6 Taping Medical Centre 0.9 1.0 0.9 1.0 Kuantan Wellness Centre KPJ International College, Penang ANNUAL LEASE CONTRIBUTION (RM’MILLION) AND PERCENTAGE CONTRIBUTION (%) IN FY2024
BUSINESS OVERVIEW SECTION 2 23 Al-`Aqar Healthcare REIT | Annual Report 2024 MANAGEMENT DISCUSSION & ANALYSIS During fiscal year 2024, Malaysia's healthcare sector continued its strong growth trajectory, fuelled by rising patient volumes, greater demand for specialised medical services and a surge in medical tourism. The country welcomed 1.08 million inbound patients in 2023, signalling a robust post-pandemic recovery, with numbers expected to grow further in 2024. This influx has reinforced Malaysia’s position as a regional medical hub, particularly among patients from neighbouring countries. Demographic shifts such as an ageing population and the increasing prevalence of chronic diseases have contributed to sustained demand for private healthcare. With public hospitals nearing full capacity, private providers are stepping in to meet healthcare needs by expanding infrastructure and adopting more advanced medical capabilities. KPJ has effectively capitalised on these developments, delivering a solid performance and strengthening its position in the sector in 2024. As Al-`Aqar’s sole lessee, KPJ’s growth directly supports the REIT’s stable rental income and supports the longterm value of its healthcare-focused property portfolio. Al-`Aqar maintained full portfolio occupancy in FY2024, securing stable rental income throughout the year. ASSET ENHANCEMENT INIATIVES (‘’AEI’’) A proactive approach is taken towards facility improvements, prioritising the maintenance of efficient and sustainable healthcare facilities that align with evolving industry standards. In FY2024, asset enhancement initiatives totaled RM8.1 million, with key upgrades and refurbishments undertaken in collaboration with tenants to enhance functionality, safety and long-term value. These included retrofitting works, lift replacements, improved water piping systems and external repainting, aimed at optimising building performance and tenant satisfaction. In line with growing sustainability expectations, the Manager continues to integrate environmentally friendly solutions and operational efficiencies into asset management strategies. Key initiatives include the installation of solar panels at selected properties, implementation of EV charging stations and enhancements to energy and water conservation systems. By aligning with industry best practices and sustainability trends, these efforts not only reduce environmental impact but also improve operational efficiency and long-term asset viability, supporting both tenant needs and stakeholder expectations. The Manager has identified further asset enhancement initiatives, focusing on infrastructure, the tenant’s requirements and sustainability. The projects are under negotiation and will be rolled out in phases, pending required approvals and regulatory clearance. This approach supports operational excellence and long-term value creation. LEASE RENEWALS Al-`Aqar remains committed to ensuring long-term portfolio stability through timely lease renewals with its principal tenant. Under the lease arrangement, the contractual lease term is 15 years, with an option to renew for an additional 15 years. The term is structured into five rental periods of three years each, subject to renewal upon expiration. Six master lease agreements were originally set to expire in 2024. However, the leases for all six properties, namely KPJ Penang Specialist Hospital, KPJ Seremban Specialist Hospital, Taiping Medical Centre, Tawakkal Health Centre, KPJ Healthcare University in Nilai and KPJ International College in Bukit Mertajam, have been extended until December 2024, ensuring continued tenancy and income. The lease renewal process is expected to conclude in 2025, supporting long-term tenant retention and operational continuity. These renewals represent 24% of the Group’s total rental income and are part of the Manager’s ongoing strategy to strengthen tenant relationships and ensure consistent revenue generation. Master Lease Renewal No of Properties % of Total Rental FY2025 7 33% FY2026 2 2% FY2027 2 7% SECTION 2 – OPERATIONS REVIEW CATEGORY AMOUNT (RM) Completed Civil & structural 1,194,000 Mechanical & Electrical 1,497,970 Repainting 925,000 Expansion Nil Sub Total 3,616,970 Ongoing Civil & structural Nil Mechanical & Electrical 4,490,741 Repainting Nil Expansion Nil Sub Total 4,490,741 TOTAL 8,107,711
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