AL-SALAM REIT ANNUAL REPORT 2017

AL-SALĀM REIT ANNUAL REPORT 2017 43 OPERATIONAL REVIEW FOOD & BEVERAGE : NON-RESTAURANT SEGMENT INDUSTRIAL PREMISES OVERVIEW OF PROPERTIES The industrial properties support the food and beverage operations of QSR, specifically in relation to the operations of fast food brands of KFC and Pizza Hut. Al-Salām REIT is leasing all of the QSR Properties, the restaurant and non- restaurant properties to QSR Group of Companies. The industrial properties are comprising of 5 properties with a current total market value of RM133.8 million. RENTAL RENEWAL As stipulated in the master lease agreements, the Properties are leased based on a Triple Net Lease for a term of 3 years. The rental is renewable every 3 years up to a maximum of 15 years (Lease Term) with an option to renew for a further period of 15 years (Extended Lease Terms). The rental term is as below: OPERATIONAL REVIEW FOOD & BEVERAGE : NON-RESTAURANT SEGMENT MALAYSIAN COLLEGE OF HOSPITALITY & MANAGEMENT OVERVIEW OF PROPERTY The property is a 4-storey building known as Malaysian College of Hospitality & Management (MCHM) — formerly known as KFCH International College — located in Bandar Dato’ Onn, a residential township located 12 km from Johor Bahru.The 597-hectare (1,474 acre) township of Bandar Dato’ Onn will be self-contained township and home to more than 90,000 residents when completed. The table below sets out a summary on MCHM as at 31 December 2017. MAJOR ASSET ENHANCEMENT INITIATIVE The properties are on a Triple Net Lease arrangement and there was no major asset enhancement initiative undertaken for year 2017. The Fund will continue to enhance the relationship with the tenants and proactively attend to tenants’ need and requirements. LEASE EXPIRY The lease for MCHM shall be for a term of 3 years commencing on 8 October 2010 and expiring on 7 October 2013. The lease is subject to a compulsory renewal for 2 terms of 3 years each, of which the third term shall expire on 7 October 2019. There was a rental renewal on 8 October 2016. MAJOR ASSET ENHANCEMENT INITIATIVE There will be no major expansion or renovation on the property since the building is still in good condition and there is no requirement from the existing tenant to expand their operation which will necessitate a major asset enhancement initiative. CHALLENGES AND PROSPECTS The tenancy of the property will only expire in end 2019 and the Fund does not expect any change in respect of the renewal or occupancy of the property since it is located strategically in the fast growing well-planned residential township of Bandar Dato’ Onn. Existing Use Office Building GFA (sq. ft.) 92,157 NLA (sq. ft.) 87,178 Number of Car Park Bays 131 Market Value RM29 million Occupancy Rate 100% F&B Properties (outlet) 2 3 First Rental Term 6 May 2015- 5 May 2018 29 Sept 2015- 28 Sept 2018 D scription Industrial Premises No. of Properties 5 Market Value (RM) 133,800,000 F&B Properties (outlet) 11 11 First Rental Term 6 May 2015- 5 May 2018 29 Sept 2015- 28 Sept 2018 Description Restaurant located at shophouses/ offices Single-storey restaurants building with drive-through outlets Restaurant at mall outlets TOTAL No. of Properties 9 9 4 22 Market Value (RM) 29,270,000 111,800,000 20,600,000 161,670,000 Existing Use Office Building GFA (sq. ft.) 92,157 NLA (sq. ft.) 87,178 Number of Car Park Bays 131 Market Value RM29 million Occupancy Rate 100% F&B Properties (outlet) 2 3 First Rental Term 6 May 2015- 5 May 2018 29 Sept 2015- 28 Sept 2018 Description Industrial Premises No. of Properties 5 Market Value (RM) 133,800,000 F&B Properties (outlet) 11 11 First Rental Term 6 May 2015- 5 May 2018 29 Sept 2015- 28 Sept 2018