AL-SALAM REIT ANNUAL REPORT 2019

KOMTAR JBCC’s rental return whilst creating a more diversified trade profile and enhance the property’s overall ambience. In doing this, Al-Salām REIT will redefine the Fund's key retail asset to capture the ever changing demands of shopping mall patrons. Other retail assets of the Fund had managed to deliver sustained and increased performance on the back of their respective competitive edge. Mydin Hypermart Gong Badak remained as the biggest shopping mall in Gong Badak with the absence of direct competitors allowing the property to exploit its large catchment area. @Mart Kempas is expected to maintain almost full occupancy and retaining income resilience by virtue of being a community mart that targets the lower and middle income market and offer shoppers a wide range of necessary household products. The lingering office property supply overhang had weighted heavily upon yield performance within this segment. Nonetheless, the long-term tenancies by Johor Corporation which forms majority of the current 91% occupancy positions at Menara KOMTAR provides uniquely a defensive asset in a challenging sector. The strategy of relying on related party tenancies provides income security and lowers occupancy risks for the property. For 2019, I am proud to acknowledge the fund’s achievement in completing the acquisition of 17 new QSR properties at a total value of RM87 million. These along with other current food and beverage F&B assets operated by QSR Brands (M) Holdings Bhd (QSR) provides income stability on the back of triple net lease arrangement and of the fact that F&B scene in Malaysia has been quite resilient despite the slowing domestic economy and uncertainty in the global economic environment. Al-Salām REIT is confident on QSR’s continued operational excellence and market dominance and the fund is positioned to benefit from QSR’s plans to adopt an asset-light strategy as the group has a sizeable number of outlets across four countries in the region. 8 ANNUAL REPORT 2019 The year 2019 had witnessed Malaysia’s tepid economic growth as lingering global trade uncertainties continued to cloud over domestic market performance. On the country’s property market, sizeable surplus overhang remained a persistent challenge with rising costs of living weighing upon consumer’s discretionary spending for real estate. This is especially the case where most of our investments are in the southern peninsular of Malaysia. We anticipate market activities to maintain at moderate levels all across residential, retail, commercial and industrial property for the immediate and medium term. However, as Malaysia undergoes a restructuring of its economy especially within public spending, we believe that the country will be in stronger footing to weather any global headwinds going forward. Amidst the challenging environment, Al-Salām REIT remains confident in the Fund's ability for continuous improvement in performance and to unearth value for delivery to unitholders. KOMTAR JBCC being the cornerstone asset of Al-Salām REIT, remains a favourite mainstay for Singaporeans and local patrons due to it’s strategic location in the heart of Johor Bahru city centre and minutes away from the Johor Bahru Customs, Immigration and Quarantine Complex (CIQ). The shopping mall is poised to benefit from increased customer volume with the recently completed Menara JLand and the upcoming Holiday Inn Hotel as well as the development of Ibrahim International Business District (IIBD). A marked shift in consumer spending habits had resulted in waning demand for departmental store forcing operators to rethink their offering space. The exit of KOMTAR JBCC anchor tenant had thus presented us the opportunity to undertake asset enhancement initiatives (AEI) in reconfiguring current commercial mix by creating more spaces for mini anchors and specialty tenants. We believe this retail realignment exercise will bring in a greater variety of quality trades and brands that would improve AL-SALĀM REIT • Stakeholders Letter To Dato’ Hj. Mohd Redza Shah Bin Abdul Wahid Chairman/Independent Non-Executive Director Dear Valued Stakeholders, On behalf of the Board of Directors of the Manager (the Board), it is my utmost pleasure to present Al-Salām REIT’s (the Fund) Annual Report and Audited Financial Statements for the financial year ended 31 December 2019. “ “