AL-SALAM REIT ANNUAL REPORT 2018

AL-SALĀM REIT ANNUAL REPORT 2018 44 2017 2018 RM RM Current: Commodity Murabahah Revolving Credit-i 3,100,000 - Non-current: Commodity Murabahah Term Financing-i 350,000,000 350,000,000 Transaction costs (2,301,033 (1,407,021) 347,698,967 348,592,979 Sukuk Ijarah Programme - 162,785,000 Transaction costs - (1,850,383) - 160,934,617 Total Islamic Financing 350,798,967 509,527,596 FY2017 FY2018 Total Borrowings (RM Mil) 350.8 509.5 Average Cost Of Debts (%) 4.99 5.38 Fixed/Floating Ratio 100% Floating 100% Floating Average Maturity Period (years) 2 1 Financing Service Coverratio (times) 3.00 2.62 Gearing ratio (%) 35.5 44.1 Al-Salām REIT’s current inancing relates to Commodity Murabahah Revolving Credit-I (“CMRC-i”) dated 14 June 2017 where the facility amount is up to the aggregate principal limit of RM10 million from RHB Islamic Bank Berhad. Currently, no amount has been drawn down from the CMRC-i. The CMRC-I is secured against an investment property of RM15.5 mil. The average efective proit rate for the CMRC-i is 5.49%. Al-Salām REIT’s non-current inancing is a Commodity Murabahah Term Financing-i (“CMTF-i”) dated 14 April 2015 amounting to RM350.0 million from RHB Islamic Bank Berhad and Maybank Islamic Berhad to part inance the acquisition of the investment properties of the Fund in 2015. Thenominal valueof theCMTF-i comprisedTranche 1 andTranche2, amounting toRM136.04millionandRM213.96million, respectively. The CMTF-i proit is payable over a period of 60 months from the date of irst disbursement with full repayment of principal sum on the 60th month. The efective proit rates for the CMTF-i will be based on COF + 1.35% per annum for the irst 16 months, COF + 1.40% per annum for the next 8 months, COF + 1.50% per annum for the next 7 months and COF + 1.65% per annum for the remaining duration of the CMTF-i. The COF is based on each respective Banks’ COF. The average efective proit rate for the CMTF-I is 5.38% (2017: 4.99%). On 24 August 2018, ALSREIT Capital Sdn Bhd established a Sukuk Ijarah Programme comprising Islamic Medium Term Notes (“IMTN”) of up to RM1.5 billion in nominal value and issued RM162,785,000 in nominal value of IMTNs (“Issue 1”) Given that the CMTF-i is on a loating inancing basis, the Manager is considering few options to mitigate the inancing risk which include establishing ixed rate inancing via Sukuk programme and/or proit rate swap. This capital management initiative will enable Al-Salām REIT to enjoy a lower blended yield with ixed inancing rate on longer tenure. The gearing of Al-Salām REIT as at 31 December 2018 is 44.1 %, leaving a debt headroom of approximately RM120 million to fund its capex plans and future acquisitions before reaching the statutory limit of 50%. . TheManager’s ongoing capital management strategy involves adopting and maintaining an appropriate gearing level and adopting an active inancing rate management strategy to manage the risks associated with changes in inancing rates. By doing so, the Manager intends to maximise Al-Salām REIT’s Distributable Income while maintaining an appropriate level of risk associated with debt inancing. The Manager intends to implement this strategy by; Capital Management • diversifying sources of debt funding • maintaining a reasonable level of loan service capability • securing the most favourable terms of funding • managing its inancial obligations • where appropriate, managing the exposures arising from adverse market inancing rates • actively manage the range of maturities to reduce reinancing risk and optimize the cost of capital Al-Salām REIT’s inancing currently comprises the following: