AL-SALAM REIT ANNUAL REPORT 2020

41 ANNUAL REPORT 2020 MANAGEMENT DISCUSSION AND ANALYSIS OPERATIONAL REVIEW (ASSET PERFORMANCE) Retail Segment - KOMTAR JBCC ASSET PERFORMANCE In FY2020, KOMTAR JBCC saw a reduced financial contribution to the Fund. Due to the extended MCO and prolonged Malaysia- Singapore border closure, rental performance for the asset was subdued for FY2020. While tenant occupancy rates were comparatively stable at 57% (FY2019: 60%), the COVID-19 pandemic and the subsequent MCO had impacted overall footfall to the mall, resulting in reduced business for the mall’s tenants. With less customers and reduced revenue, many tenants faced difficulties in paying their rents. In retaining these long-standing tenants, the mall management opted to provide rental rebates and the rebates have impacted the mall’s overall contribution to Al-Salām REIT. The strategy has been effective in retaining tenants in light of the challenging environment. Other factors that impacted overall performance in FY2020 included the continued lack of specialty tenant. Although the completion of the shopping mall’s vacant ground floor renovation works is expected to field new tenants, nonetheless, progress to fill up space was hampered by medium term leasing headwinds due to the current environment. The Manager’s intention to enhance the mall’s tenant mix towards including more experiential retail tenants such as F&B and wellness brands had to be deferred due to the pandemic. The focus in FY2020 was on retaining existing tenants to ensure stable occupancy rates across the financial year. ASSET ENHANCEMENT INITIATIVES In FY2020, several Asset Enhancement Initiatives (AEIs) totalling RM3.26 million were undertaken at KOMTAR JBCC. This included renovation of the ground floor and refurbishment of empty lots. The purpose for undertaking these AEIs were to enhance the value proposition of the vacant lots towards increasing rental viability, and to allow for a more conducive events space for marketing and promotional activities. Given the present pandemic period, the true impact of these AEIs will be felt in the second half of FY2021.