AL-SALAM REIT ANNUAL REPORT 2019

35 ANNUAL REPORT 2019 Retail Segment KOMTAR JBCC OPERATIONAL REVIEW AL-SALĀM REIT • iii. Tenancy Expiry Profile (Occupied NLA) TENANCY EXPIRY PROFILE 2020 63% 2022 24% 2021 13% The majority of the tenancies were renewed in FY2017 and will expire from FY2020 onwards. The Service Provider has managed to retain the existing tenants albeit with increase competition from other malls. MAJOR ASSET ENHANCEMENT INITIATIVE Metrojaya exited KOMTAR JBCC as anchor tenant at the end of 2018. Following this, KOMTAR JBCC has commenced AEI on the ground floor level of the vacated former anchor tenant space at total cost of RM3.3 million: a) Newly created commercial space to be potentially occupied by mini anchors/specialty stores / F&B tenants in catering to shopper’s shift in demand for experiential retail experience b) a large area of common space with potential for casual leasing and temporary retail rentals. c) direct access from the recently completed Menara JLand’s lobby into the shopping mall, resulting in potential footfall increase whilst generating marketing synergy to promote the tower’s office space and Skyscape@Menara JLand. STRATEGIES As Al-Salām REIT’s cornerstone asset, KOMTAR JBCC contributes substantially to the Fund’s yield performance. Strategically located on the doorstep of Singapore-Malaysia gateway and amidst Johor Bahru’s burgeoning central point of commerce, the property’s inherent competitive edge would ensure it’s present flow of consumer traffic to only increase in periods to come. Positioned to capitalize on the property’s location advantage and established market reputation, KOMTAR JBCC will proceed: • To continue to tap upon the strength and brand recognition of high end retailers to Johor Bahru ie: Marks & Spencer • Increase in marketing and advertising campaigns showcasing KOMTAR JBCC’s unique selling proposition as the premier Johor Bahru shopping outlet by focusing on key brands such as Sephora, Chanel, Dior, Kiehl’s in the retail space and the likes of 4 Fingers Crispy Chicken, Arashi Shabu Shabu, Tony Roma’s and The Angry Bird Activity Park in the f&b and family entertainment space. • Undertaking AEI on the current space previously vacated by the anchor tenant by realigning KOMTAR JBCC’s commercial space mix and to allow an increased presence of experiential trade offerings for shoppers going forward. • Ramping up volume of Singaporean shoppers by placing new advertisements at the Immigration Entry point from the Causeway to Johor Bahru whilst easing access into KOMTAR JBCC from the crucial traffic gateway. • Ramping up volume of Singaporean shoppers by focusing on marketing campaigns curated specifically for the target group. • To become more actively engaged with all tenants specifically key businesses e.g. The Angry Birds Activity Park and Marks & Spencer to ensure that the shopping mall becomes a crucial enabler for their success. • To leverage on social media connectivity as an effective and interactive tool of campaigns, promotional highlights and events. • Establish strategic relationships with current and upcoming hotels and other businesses operating within KOMTAR JBCC’s surrouding vicinity to develop mall-wide campaigns aimed at increasing customer spending through rewards or redemptions. CHALLENGES AND PROSPECTS Al-Salām REIT’s retail assets represent the majority of the fund’s portfolio composition, and the increase in competition coupled with dampened consumer spending had impacted it’s performance in 2019. While prime shopping malls in prominent locations have sustained their revenues deriving from stable footfall, tenant occupancy and reversion rates, nonetheless players operating within smaller scale and neighbourhood mall space will be most affected by the continuous crowding of retail landscape. This scenario will be further magnified from the rising threat of e-commerce encroaching upon physical store performance. The said factors are bearing upon Johor Bahru’s retail scene as new shopping malls continue to offer various incentives to attract tenants. By virtue of KOMTAR JBCC’s well known strategic location and strong brand value, these competitive strengths are key drivers to attract new retailers whilst retaining existing operators that are due for lease renewals. With the upcoming completions of developments within the city center, KOMTAR JBCC will only prosper on the backs of increasing local captive shopper volume and Singaporean patrons flocking towards the nearest and most accessible Malaysia shopping haven.