DRIVING SUSTAINABLE GROWTH THROUGH REJUVENATION INTEGRATED ANNUAL REPORT 2025
INSIDE THIS REPORT COVER RATIONALE DRIVING SUSTAINABLE GROWTH THROUGH REJUVENATION As markets evolve and assets mature, Al-Salām REIT embraces rejuvenation as a catalyst to unlock renewed potential and strengthen its growth trajectory. “Driving Sustainable Growth Through Rejuvenation” reflects the REIT’s focused strategy to enhance asset performance and deliver sustainable value to unitholders. The properties are depicted in refined architectural line art to symbolise disciplined management and transformation, while the Rainbow Foil Effect adds vibrancy and renewed energy, representing value uplift through active rejuvenation. The interplay of teal and dark blue within the tagline reinforces a balance of progressive momentum and enduring stability, creating a cohesive narrative of revitalised assets and resilient, sustainable growth. Introduction 3 Basis of Preparation 3 Reporting Scope and Boundary 4 Limitations & Exclusions 4 Audit & Assurance 4 Forward-Looking Statements 4 Feedback 5 1 Section ABOUT THIS REPORT 2 Value Creation Model 32 Financial Capital 34 Five-Year Financial Performance 34 Trading Performance 36 Financial Review 38 Performance Benchmark 39 Capital Review 39 Portfolio Capital 40 Portfolio Overview 40 Segmental Highlights 42 5 Section APPROACH TO VALUE CREATION 31 About this Report 76 Stakeholder Engagement Report 77 Materiality Assessment 80 Sustainability Strategy 84 Sustainability Targets & Performance 89 Risk Management 91 Climate Change and Decarbonisation 93 Governance 100 Economic 106 Value for the Environment 112 Values for Employees and Community 117 Membership and Awards 134 Continuous Improvement 134 Appendices 135 6 Section SUSTAINABILITY STATEMENT 75 2025 Highlights 7 Corporate Profile 8 Trust Structure 10 Organisational Structure 11 Salient Features 12 2 Section ABOUT AL-SALĀM 6 Letter to Stakeholders 14 Business Review 18 Operating Environment 24 3 Section BUSINESS OVERVIEW 13 AL-SALĀM REIT 4 Section INVESTOR RELATIONS REPORT 28 Financial Calendar 29 Investor Relations Report 30
Risk Assessment & Identification 225 Risk Management 226 8 Section RISK MANAGEMENT 224 Board of Directors 148 Shariah Committee 160 The Management Team 162 Corporate Governance Overview Statement 164 Board Audit and Risk Committee Report 176 Board Investment Committee Report 182 Board Nomination and Remuneration Committee Report 186 Board Sustainability Committee Report 190 Statement on Risk Management & Internal Control 193 Additional Compliance Information 219 Shariah Adviser’s Report 222 Trustee’s Report 223 7 Section CORPORATE GOVERNANCE REPORT 147 10 Section OTHER INFORMATION 298 Analysis of Unitholding 299 Corporate Information 302 Integrated Annual Report 2025 9 Section FINANCIAL STATEMENTS 229 Manager’s Report 230 Statement by Directors of the Manager 237 Statutory Declaration 237 Independent Auditors’ Report 238 Statements of Comprehensive Income 242 Statements of Financial Position 244 Statements of Changes in Net Asset Value 246 Statements of Cash Flows 247 Notes to the Financial Statements 249 DIGITAL REPORT AVAILABLE This report can be accessed online via our website: www.alsalamreit.com.my If you wish to obtain a printed copy of the Integrated Annual Report 2025, kindly email us at jlgrm.investorrelations@jlandgroup.com.my As part of our commitment to environmental stewardship, stakeholders are encouraged to access the digital version where practicable.
Introduction 3 Basis of Preparation 3 Reporting Scope and Boundary 4 Limitations & Exclusions 4 Audit & Assurance 4 Forward-Looking Statements 4 Feedback 5 1 Section ABOUT THIS REPORT AL-SALĀM REIT
pg. 3 About this Report Integrated Annual Report 2025 ABOUT THIS REPORT Introduction Al-Salām Real Estate Investment Trust (“Al-Salām REIT” or “the REIT”) presents its Integrated Annual Report for the financial year ended 31 December 2025 (“IAR2025”). This IAR2025 document provides expanded disclosures on the financial, business, and operational performance of Al-Salām REIT, including its business model, value creation approach, risks and mitigation measures, and future estimates of the REIT’s prospects and plans. In essence, this IAR2025 document has been prepared to provide capital providers and stakeholders with a clear view of how Al-Salām REIT creates and sustains value. Board Statement of Responsibility: The Board of Directors (“Board”) of Al-Salām REIT acknowledges its responsibility for ensuring the integrity, accuracy, and completeness of the data and disclosures contained in this IAR2025 document. BASIS OF PREPARATION This IAR2025 document has been developed based on the recommendations of the Integrated Reporting Framework of the International Financial Reporting Standards (“IFRS”) through the International Sustainability Standards Board (“ISSB”). Overall, the report is structured around: Six Capitals Seven Guiding Principles Eight Content Elements Financial Capital Portfolio Capital Intellectual Capital Human Capital Social Capital Natural Capital • Strategic focus and future orientation • Connectivity of information • Conciseness • Reliability and completeness • Consistency and comparability • Materiality • Stakeholder relationships • Organisational overview and external environment • Governance • Business model • Risks and opportunities • Strategy and resource allocation • Performance • Outlook • Basis of preparation and presentation • Securities Commission Guidelines on Listed Real Estate Investment Trusts (“Listed REIT Guidelines”) • Malaysian Code on Corporate Governance (“MCCG”) • Bursa Malaysia Corporate Governance Guide (4th Edition) • Malaysian Financial Reporting Standards (“MFRS”) • Bursa Malaysia Main Market Listing Requirements (“MMLR”) • Securities Commission Licensing Handbook • Securities Commission Guidelines on Corporate Governance for Capital Market Intermediaries • Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities (Amendment) Act 2025 • Capital Market and Services Act 2007 • Companies Act 2016 • National Sustainability Reporting Framework (“NSRF”) • Bursa Malaysia Sustainability Reporting Guidelines 3rd Edition (“SRG3”) • FTSE4Good Bursa Malaysia Index • Sustainability Accounting Standards Board (“SASB”) Standards • Global Reporting Initiative (“GRI”) Standards • United Nations Sustainable Development Goals (“UN SDGs”) All disclosures within this IAR2025 document have also been developed based on the disclosure requirements of the following reporting frameworks:
SECTION 01 pg. 4 AL-SALĀM REIT ABOUT THIS REPORT LIMITATIONS & EXCLUSIONS Al-Salām REIT is committed to transparency and enhancing the comprehensiveness of its disclosures. The REIT acknowledges that certain gaps remain and shall continue to strengthen its data collection processes to refine future reporting. All data and disclosures within this IAR2025 document are guided by the principles of proportionality, with limitations determined by the applicability, relevance, and accessibility of data available at the time of reporting. Material, accessible, and cost-effective disclosures are prioritised to ensure that the IAR2025 remains both meaningful and practical. AUDIT & ASSURANCE All financial information disclosed within this IAR2025 document has been audited in accordance with applicable auditing standards. Selected material non-financial disclosures, particularly those relating to sustainability performance, have also been subject to independent assurance to enhance credibility and data accuracy. Al-Salām REIT maintains an internal review and data validation system. Data owners and the REIT’s Senior Management actively verify the accuracy and completeness of all reported information. FORWARD-LOOKING STATEMENTS This IAR2025 document may contain forward-looking statements relating to Al-Salām REIT’s operational and financial performance. These statements are based on reasonable assumptions and information available at the time of reporting. While every effort has been made to ensure their accuracy, actual outcomes may differ due to changes beyond the REIT’s control. As such, readers are advised to exercise discretion when interpreting any such future-oriented disclosures. REPORTING SCOPE AND BOUNDARY The disclosures in this IAR2025 cover Al-Salām REIT’s operations across the Retail, Office, Food and Beverage (“F&B”), and Industrial & Others sectors. All data and disclosures presented are derived from operations under the REIT’s direct control, ensuring consistency with its financial statements, sustainability statements, and audited accounts. This includes assets directly managed and operated by the REIT, including common areas in leased facilities. Operational boundaries are defined by the level of control Al-Salām REIT maintains over its assets and are disclosed within this IAR2025 as follows: Entities and assets in the reporting entity Information considered and included the reporting boundary Assets owned and managed by the REIT 100% of operational data and disclosures investment properties under the REIT fund Assets leased by the REIT 100% of operational data and disclosures from leased spaces, including administrative spaces the REIT Manager requires to function As a REIT, Al-Salām REIT only retains operational control over common areas for non-master leased assets. The GHG emissions from assets or lots that are leased by the REIT to its tenants are not included in the IAR2025. This reporting scope extends, where necessary, to Al-Salām REIT’s value chain, which includes JLG REIT Managers Sdn Bhd, tenants, property managers, and third-party suppliers/vendors.
pg. 5 About this Report Integrated Annual Report 2025 ABOUT THIS REPORT This icon indicates where more detail can be accessed online. This icon indicates where more detail can be accessed elsewhere in this report. NAVIGATION ICONS The inclusion of navigation icons in IAR2025 serves to enhance readers’ experience by providing a more intuitive approach to explore Al-Salām REIT’s integrated reporting narrative. These icons are designed to highlight key areas of the business, illustrating the interconnectedness and interrelationship of various segments, capitals, strategies and stakeholders across the business. Cross References Capitals Retail Segment F&B Segment Office Segment Industrial & Others Segment Business Segments Stakeholders Financial Capital Portfolio Capital Intellectual Capital Human Capital Social Capital Natural Capital FEEDBACK The Manager welcomes feedback from stakeholders as part of our ongoing efforts to enhance the quality and transparency of our reporting For any enquiries, comments or suggestions, please contact us at jlgrm.investorrelations@jlandgroup.com.my Investors Regulatory Agencies and Statutory Bodies Employees Property, Services, Maintenance Managers Customers and Communities Service Providers and Suppliers Tenants
AL-SALĀM REIT 2025 Highlights 7 Corporate Profile 8 Trust Structure 10 Organisational Structure 11 Salient Features 12 2 Section ABOUT AL-SALĀM
pg. 7 About Al-Salām REIT Integrated Annual Report 2025 2025 HIGHLIGHTS 19% 28% 50% 3% Units 53 Number of Properties 4.49% Distribution Yield million RM284.2 Market Capitalisation million sq. ft. 2.4 Net Lettable Area Sen2.20 Distribution Per Unit 95% Occupancy Rate 59% 8% 13% 20% 54% 16% 6% 24% Retail Office F&B Industrial & Others billion RM1.22 Property Value million RM88.8 Gross Revenue million RM61.1 Net Property Income
SECTION 02 pg. 8 AL-SALĀM REIT CORPORATE PROFILE Al-Salām REIT was established in 2015 as a Shariahcompliant real estate investment trust listed on the Main Market of Bursa Malaysia Securities Berhad. Managed by JLG REIT Managers Sdn Bhd (“JRMSB” or “the Manager”), the REIT is committed to delivering stable returns and long-term capital growth through a diversified portfolio of incomegenerating properties across Malaysia. Its unique position, supported by strong institutional sponsorship from Johor Corporation (“JCorp”), provides financial stability and access to potential future asset pipelines, while reinforcing its role in advancing Malaysia’s Islamic capital market instruments. The REITs portfolio benefits from high-traffic retail locations and an extensive network of F&B outlets, offering resilience and diversification across multiple industries. These assets are leased to tenants, with the REIT’s operations centred on the acquisition, development, and management of properties that foster commercial activity and stimulate local economies. With a total asset value of RM 1.32 billion, Al-Salām REIT owns 53 properties. These span the following: 4 Retail Properties 1 Office 41 F&B Properties 6 Industrial Properties 1 Education Property More detailed information on the REIT’s assets can be found in the Portfolio Capital section.
pg. 9 About Al-Salām REIT Integrated Annual Report 2025 Al-Salām REIT’s Strategic Pillars Achieve Share Price at Par with Net Asset Value Active Capital Management Improve Portfolio Identity More information on the REIT’s strategic pillar and the DISRUPT27 strategic framework can be found in the Business Review section. CORPORATE PROFILE East Malaysia 4 East Coast 1 Northern 15 Southern 17 Central 16 Regional Breakdown of the Properties
SECTION 02 pg. 10 AL-SALĀM REIT TRUST STRUCTURE SHARIAH COMMITTEE REIT PROPERTIES Advise on Shariah related matters Net Property Income Shariah Adviser’s Fees Ownership of Properties Act on behalf of unitholders Trustee’s Fees Management Fees Property Management Service UNITHOLDERS Property Management Fees PROPERTY MANAGER Distributions Holding of units SERVICE MANAGER JLG PROPERTY MANAGEMENT SDN BHD EXASTRATA SOLUTIONS SDN BHD AMANAHRAYA TRUSTEES BERHAD JLG REIT MANAGERS SDN BHD Management Services TRUSTEE MANAGER
pg. 11 About Al-Salām REIT Integrated Annual Report 2025 ORGANISATIONAL STRUCTURE For more information of Board of Directors please refer pages 148 to 159. For more information of The Management Team please refer pages 162 and 163. Our Board Committees: BOARD AUDIT AND RISK COMMITTEE BOARD NOMINATION AND REMUNERATION COMMITTEE BOARD INVESTMENT COMMITTEE BOARD SUSTAINABILITY COMMITTEE For more information, please refer page 176. For more information, please refer page 182. For more information, please refer page 186. For more information, please refer page 190. BARC BIC BNRC BSC HEAD, CEO’S OFFICE, INVESTOR RELATIONS & STRATEGY BOARD OF DIRECTORS CHIEF EXECUTIVE OFFICER COMPLIANCE OFFICER COMPANY SECRETARY CHIEF OPERATING OFFICER CHIEF INVESTMENT OFFICER CHIEF FINANCIAL OFFICER HEAD, GOVERNANCE & LEGAL HEAD, CORPORATE SERVICES
SECTION 02 pg. 12 AL-SALĀM REIT Name of Fund Al-Salām Real Estate Investment Trust Type of Fund Income and Growth Category of Fund Real Estate Investment Trust Listing Main Market of Bursa Malaysia Securities Berhad Listing Date 29 September 2015 Stock Name and Code ALSREIT (5269) Fund Size 580,000,000 units Initial Public Offering Price RM1.00 Financial Year End 31 December Trustee Fee Up to 0.02% per annum of the Fund’s Net Asset Value Manager’s Fee Up to 1% per annum of the Fund’s Total Asset Value Distribution Policy At least 90% of distributable income Revaluation Policy Annually by independent registered valuer Gearing Policy Not exceeding 50% of the REIT’s Total Asset Value SALIENT FEATURES The Manager will seek to optimise the rental rates, occupancy rates and net lettable area of the subject properties in order to improve the returns from Al-Salām REIT’s property portfolio. OPERATING STRATEGY The Manager will endeavour to employ an appropriate mix of debt and equity in financing acquisitions, seek to manage financing and refinancing risk to adopt an active financing rate management strategy to manage the risks associated with changes in financing rates. CAPITAL MANAGEMENT STRATEGY The Fund’s key objective is to invest in Shariah-compliant properties, providing unitholders with regular and stable income distributions, sustainable long term unit prices and distributable income and capital growth, while maintaining an appropriate capital structure. INVESTMENT OBJECTIVE Al-Salām REIT is an Islamic REIT established with the principal investment policy of investing, directly and indirectly, in a diversified shariah-compliant portfolio with income producing real estate which are used primarily for commercial retails, office and industrial purposes in Malaysia as well as real estate-related assets. INVESTMENT POLICY The Manager will source for and acquire properties that fit within AlSalām REIT’s investment strategy to enhance return to the Unitholders and capitalise on opportunities for future income and Net Asset Value (“NAV”) growth. INVESTMENT MANAGEMENT STRATEGY
Letter to Stakeholders 14 Business Review 18 Operating Environment 24 3 Section BUSINESS OVERVIEW Integrated Annual Report 2025
SECTION 03 pg. 14 AL-SALĀM REIT LETTER TO STAKEHOLDERS Dear Valued Stakeholders, It is my pleasure to present our first Integrated Annual Report for the financial year ended 31 December 2025 (“FY2025”), which also marks the REIT’s 10th anniversary milestone. In this period, the REIT has successfully delivered strong financial performance while advancing our sustainability commitments with greater disclosures and transparency, among other developed initiatives. Al-Salām REIT’s progress is guided by our DISRUPT27 strategy, which guides us towards achieving several economic and sustainability milestones. DATUK HASHIM BIN WAHIR Chairman PERFORMANCE AT A GLANCE million RM88.8 Gross Revenue million RM14.1 Realised Profit million RM284.2 Market Capitalisation For more information of Financial Review please refer page 38.
pg. 15 Business Overview Integrated Annual Report 2025 LETTER TO STAKEHOLDERS 10.5% Total Return: 5.9% Average Distribution Yield: OVERVIEW OF M-REITS The M-REIT sector in 2025 experienced strong growth, supported by resilient fundamentals and a stable interest-rate environment. The 25bps OPR cut in July boosted market sentiment, while the retail and hospitality segments drove growth, aided by strong consumer activity and tourism recovery. The 8% Sales and Services Tax on rental and leasing had minimal impact, as landlords maintained occupancy and achieved favourable rental reversions. Following the expiry of the concessional 10% withholding tax Al-Salām REIT’s FY2025 Unit Price Performance vs Benchmark Indices Dec 2024 0% Mar 2025 Jun 2025 Sep 2025 Dec 2025 31% 8% 2% -1% -6% Al-Salām REIT Al-Salām REIT Bursa Malaysia REIT Index (BM REIT) FTSE Bursa Malaysia Top 100 Index (FBM T100) Bursa Malaysia Property Index (BM Property) FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) rate on REIT distributions effective from Year of Assessment 2026, the tax treatment of REIT distributions will revert to prevailing tax rates applicable to different investor categories. This development may have implications for investor demand and market sentiment, particularly among affected investor groups. 35.2% Total Return: 4.5% Distribution Yield: AL-SALĀM REIT EXCEEDS M-REITS Al-Salām REIT exceeded M-REITs by 31%, surpassing the Bursa Malaysia REIT and Property Index and the FBM KLCI. Its total return reached 35%, reflecting the REIT’s ability to generate substantial returns for investors. Despite global economic uncertainties, Al-Salām REIT capitalised on its defensive nature, offering stability amid volatility. Al-Salām REIT Distribution Yield, Expense Ratio and Total Return FY2021 FY2022 FY2023 FY2024 FY2025 Distribution yield (%) Management expense ratio (%) Total return (%) 4.74% 0.63% -7.08% 6.76% 0.69% -16.95% 30.90% 2.53% 0.72% 1.87% 0.67% -19.19% 35.16% 4.49% 0.82% 0%
SECTION 03 pg. 16 AL-SALĀM REIT LETTER TO STAKEHOLDERS KEY MILESTONES ACHIEVED DISRUPT27 As we reflect on our past year, we are excited to share a positive turning point for Al-Salām REIT, firmly reflected in our FY2025 financial and operational performance, particularly in the retail sector, led by our flagship asset, KOMTAR JBCC. A key driver of our performance this year has been the significant financial improvement of our strategic asset, KOMTAR JBCC, which saw its Net Property Income (“NPI”) yield rise to 2.98% in FY2025. This turnaround was primarily propelled by the success of our first-phase rejuvenation efforts, which effectively boosted occupancy rates to 71% while simultaneously achieving favourable average rental reversions. In 2025, our focus was on setting the DISRUPT27 business and investment strategy for the coming years, essentially laying the foundation for Al-Salām REIT’s next phase of growth. We reviewed our portfolio against the global and domestic economic landscape, policy reforms, business environments, and internal operating factors, and the Board saw a need to establish a strong portfolio focus. With this focus in view, the management team can better execute and achieve strategic goals with clarity. In reinforcing our commitment to enhance long-term value creation for our unitholders, it is worthwhile to note our key milestones in 2025: Completed the issuance of a RM455 million Sukuk Wakalah Programme as part of a RM3.0 billion programme in November 2025, achieving an oversubscription of approximately five-fold despite a tight liquidity window, thereby reducing our borrowing costs; Improvement in DPU of 214% to 2.20 sen from 0.70 sen in FY2024; 205% improvement in NPI yield of KOMTAR JBCC, directly impacting our profitability and Distribution Per Unit (“DPU”); Successful first phase tenant and layout reconfiguration of KOMTAR JBCC, with G floor tenants near 100% secured. 1 2 3 4 SETTING THE STAGE FOR FUTURE GROWTH Our near-term strategy is to optimise the positioning of our flagship assets, KOMTAR JBCC and Menara KOMTAR, which are strategically located within the Ibrahim International Business District (“IIBD”) of Johor-Singapore Special Economic Zone (“JS-SEZ”). This provides us with a stellar opportunity to capitalise on the economic spillover from infrastructure catalysts, such as the cross-border Rail Transit System (“RTS”), slated for completion in 2027. The completion of the final phase of Electrified Double Track Project (“EDTP”) are also expected to enhance accessibility, driving increased visitor inflows from the northern region and southern Thailand. This underscores our confidence in the growth trajectory of our flagship assets, supported by rising tourism and crossborder business demand, as well as domestic retail resilience. Apart from our sukuk issuance to reduce borrowing costs, we have also implemented a disciplined approach to capital management, allowing us to pursue opportunistic, highly synergistic, yield-accretive acquisitions for our portfolio. This is essential to be conducted in tandem with our portfolio review, where we intend to realise our investments in mature and/or non-core assets. As part of our portfolio review, we have disposed of the KFC Kuchai Lama Drive Thru for RM14.7 million, with a gain on disposal of RM0.1 million in June 2025. Looking ahead, we remain mindful of global trade restrictions and potential cost escalations that may impact consumer purchasing power. However, we view the upcoming years with confidence as Al-Salām REIT is strategically positioned to capitalise on major infrastructure catalysts like the RTS Link, projected for completion by 2027, and the JS-SEZ. These developments are expected to drive a significant and sustained increase in footfall to our flagship assets, Menara KOMTAR and KOMTAR JBCC, effectively offsetting external macroeconomic volatility. By maintaining a disciplined approach to cost management and capital stewardship, we are setting the stage for sustainable margin protection and long-term growth as we transition into a premier transit-oriented retail destination.
pg. 17 Business Overview Integrated Annual Report 2025 LETTER TO STAKEHOLDERS OPERATIONS ANCHORED IN SUSTAINABILITY 2025 represents a strategic inflection point for Al-Salām REIT as we undertake our first Integrated Annual Reporting exercise, reinforcing our commitment to disciplined governance, longterm value creation, and sustainable capital stewardship. This marks an important shift in how we articulate performance and moving beyond financial outcomes to a more holistic view that integrates sustainability considerations as a core driver of resilience and growth. In response to the evolving global and national landscape, Al-Salām REIT has taken steps to align with the International Sustainability Standards Board (“ISSB”) standards, specifically IFRS S1 and IFRS S2. As the REIT falls within the second phase of Malaysia’s National Sustainability Reporting Framework (“NSRF”), our full adoption of these standards is scheduled to commence in the 2026 financial year. We view this preparation not merely as a reporting exercise but as a strategic enabler that strengthens our data quality and demonstrates our commitment to institutional excellence. Sustainability is increasingly central to our business and investment strategy. In this context, we have prioritised the development of a comprehensive Environmental, Social, and Governance (“ESG”) framework, aligned with the United Nations Sustainable Development Goals (“UN SDGs”), to guide our strategic direction. This framework enables a structured approach to identifying material sustainability risks and opportunities, strengthening risk management, informing capital allocation decisions, and supporting the long-term performance of our portfolio. Looking ahead, our sustainability agenda will continue to evolve in tandem with our DISRUPT27 strategy, ensuring that ESG considerations are embedded across asset management, investment evaluation, and operational execution. While this first year of integrated reporting establishes a foundational baseline, our focus remains on continuous enhancement by deepening disclosures, strengthening data quality, and translating sustainability commitments into measurable outcomes. Through this approach, we aim to build a resilient REIT and deliver sustainable, long-term value to our unitholders and stakeholders. ACKNOWLEDGEMENTS On behalf of the Board of Directors, I am pleased to welcome Ong Li Lee as our new Independent Non-Executive Director and Abdul Aziz bin Abdul Rasheed as our new Non-Independent Non-Executive Director, effective August 2025, bringing with them extensive knowledge and experience in real estate asset management, which will further strengthen the Board’s capabilities. I would also like to record our sincere appreciation to Lailatul Azma binti Abdullah for her valuable contributions and dedicated service during her tenure as Independent Non-Executive Director. We also extend our appreciation to Dato’ Haji Mohammed Ridha bin Dato’ Haji Abd Kadir and Shamsul Anuar bin Abdul Majid, both Non-Independent Non-Executive Directors, for their continued guidance and contributions to the Board. We wish them all the very best in their future endeavours. I express my heartfelt appreciation to our valued stakeholders, including unitholders, REIT manager, trustee, shariah advisor, property manager, management teams of various business units, our sponsor, business partners, government agencies, regulators, valued investment community, and the media. We sincerely thank you for your unwavering support and trust in the Board of Directors and management team of Al-Salām REIT in driving our business performance. Together, we are excited to scale new heights of success towards our next phase of growth. Yours sincerely, Datuk Hashim bin Wahir Chairman JLG REIT Managers Sdn Bhd for and on behalf of Al-Salām REIT
SECTION 03 pg. 18 AL-SALĀM REIT OPERATIONAL OVERVIEW FY2025 marked the start of a renewed strategy and a phase of recovery for Al-Salām REIT, as demonstrated by strong financial performance, with revenue of RM88.8 million, an improvement of 13.2% from FY2024. The delivery of Al-Salām REIT’s strong financial performance was anchored in three strategic areas, covering operations, capital management, and overall portfolio management: In FY2025, the REIT placed greater focus on its flagship assets, KOMTAR JBCC and Menara KOMTAR, which are strategically located within walking distance of the Customs, Immigration and Quarantine (“CIQ”) complex. Al-Salām REIT’s flagship assets benefit from this daily heavy traffic and footfall, driving vibrancy at the retail mall and increasing the appeal of Menara KOMTAR with excellent connectivity within the vicinity of the CIQ. In other segments, the REIT’s F&B and industrial portfolio provided income stability and earnings visibility through a master lease arrangement with QSR Brands, maintaining 100% occupancy in 2025. Al-Salām REIT takes an active portfolio management approach in reviewing the portfolio mix in preparation for the next phase of growth. The REIT regularly reviews its portfolio to ensure the relevance of its asset class and returns in the current market conditions. As part of the REIT’s realignment exercise, mature assets such as the Kuchai Lama KFC drivethru were disposed of in June 2025 for RM14.7 million, alongside the ongoing disposal of the Sunway KFC shop lot, expected to be finalised in the first half of 2026. In view of this, Al-Salām REIT will continue to strengthen its position as a retail REIT and gradually reduce exposure to non-core sectors, including the disposal of assets that have reached maturity within their investment horizons. Concurrently, the REIT will continue to actively explore acquisition opportunities for yield-accretive, core assets that align with Al-Salām REIT’s identity and commitment to the continuous improvement of its portfolio quality. BUSINESS REVIEW Improve Portfolio Identity Active Capital Management Achieve Share Price at Par with NAV Despite macroeconomic headwinds, Al-Salām REIT’s portfolio demonstrated resilience across the office, F&B, and industrial sectors, while achieving exemplary financial performance driven by the retail sector, underpinned by the successful first-phase rejuvenation of KOMTAR JBCC. More information on the REIT’s financial performance and portfolio capital management can be found in the Financial Capital and Portfolio Capital sections, respectively.
pg. 19 Business Overview Integrated Annual Report 2025 BUSINESS REVIEW DISRUPT27: BUILDING A RESILIENT PORTFOLIO WITH A CLEAR FOCUS Al-Salām REIT’s DISRUPT27 strategic framework is an ongoing strategy that serves as a transformative business model, focused on enhancing human experience. This strategy aims to build a high-quality, yield-accretive, and resilient portfolio. DISRUPT27 This strategic framework is further supported by Al-Salām REIT’s growth and strategic pillars, as shown below: STRATEGIC PILLARS GROWTH PILLARS Improve Portfolio Identity • Review of asset class • Establishment of flagship asset to anchor identity of the portfolio • Acquisitions aligning with investment direction and portfolio identity • Reduction of exposure to non-core segments and mature assets Total Asset Value (“TAV”) Growth • Acquisitions of core, quality assets • Value creation through Asset Enhancement Initiatives (“AEIs”) DPU Growth • Rejuvenation of KOMTAR JBCC, improve NPI yield • Effective, value enhancement of AEIs • Asset recycling and yield-accretive acquisitions Active Capital Management • Managing gearing to create headroom for acquisitions • Positioning improvement for speedy acquisitions Achieve Share Price at Par with NAV • Long-term value creation, DPU growth, TAV growth • Clear portfolio identity and strategic goals • Transparency to investors • Improved share liquidity Improving portfolio focus and identity in the retail segment by leveraging on the REIT’s flagship assets Improving asset quality and NPI yield Building in-house capabilities to strengthen operational efficiencies of flagship assets Building longterm income resilience through economic cycles Growing portfolio size and distributable income
SECTION 03 pg. 20 AL-SALĀM REIT BUSINESS REVIEW • Pre-pandemic occupancy stood at 60%. • The mall recorded total revenue of RM38.1 million, translating into NPI of RM21.0 million. • Tenant mix was primarily anchored by fashion retailers. ROADMAP TO A SUCCESSFUL TURNAROUND • The onset of the pandemic in March 2020 significantly disrupted operations. • Revenue declined to RM27.5 million, with NPI impacted at RM4.8 million. • Occupancy moderated to 57%. • The mall was largely closed during the peak of the pandemic. • Revenue fell further to RM12.8 million. • A Net Property Loss of RM1.2 million was recorded for the year. • Performance stabilised, supported by tenants with established online retail presence. • Revenue stood at RM12.1 million, with NPI recovering to RM0.4 million. • Occupancy improved to 62%, reflecting gradual recovery in leasing activity. • Occupancy improved to 63% as operations recovered following post-pandemic reopening. • Recorded a revenue of RM17.0 million, translating into NPI of RM1.8 million. • Fashion tenants accounted for approximately 30% of occupancy, though performance remained subdued during the recovery phase. • F&B and wellness segments demonstrated stronger resilience over the same period. 2019 2023 2020 2021 2022
pg. 21 Business Overview Integrated Annual Report 2025 BUSINESS REVIEW • Recovery momentum strengthened, with revenue reaching RM20.7 million and NPI improving to RM4.2 million, alongside occupancy of 64%. • New management was established, introducing stronger retail expertise and a transit-oriented strategy to capture demand from upcoming infrastructure developments. • Tenant mix was actively curated to align with evolving market demand, including price-arbitrage, transit-driven and city-centre retail offerings. • AEIs were initiated to enhance mall experience, aesthetics and overall configuration. • The Pedestrian Overhead Bridge (“POB”) connecting to the future RTS Link was announced, strengthening longterm connectivity. 2024 RM20.7 million Revenue: RM4.2 million NPI: 64% Occupancy: This strategy also aligns with the six value creation capitals, focusing on improved transparency in business operations, governance, stakeholder engagement, and data integrity, in line with the REIT’s efforts to promote investor confidence and stakeholder feedback. Through this framework, the REIT aims to expand its investment property portfolio while narrowing the gap between its share price and NAV. 2025 • AEI initiatives continued, with new brands secured and progressive improvements in occupancy. • The final phase of the EDTP commenced operations in 4Q2025, supporting increased footfall and tenant activity. 2026 • Completion of the POB and RTS Link, together with ongoing AEIs, is expected to strengthen asset positioning and enhance connectivity. • Expected to drive sales uplift, support NPI growth and increase portfolio occupancy to above 80%. 2027 • Completion of the RTS Link is expected to drive increased footfall and activity. • Portfolio occupancy is projected to exceed 90%. • Higher traffic from the RTS, EDTP, Grab-and-Go and F&B offerings is expected to support stronger portfolio performance. • Post-RTS, the REIT will undertake further AEIs to refine the portfolio and enhance the overall tenant and visitor experience.
SECTION 03 pg. 22 AL-SALĀM REIT BUSINESS REVIEW Achieve Share Price at Par with NAV - AEIs on KOMTAR JBCC STRATEGY Results • NPI yield improved to 2.98% in 2025 vs 0.98% in 2024 • Occupancy improved to 71% in 2025 vs 64% in 2024 Financial Impact • Revenue and NPI improved • DPU improved by 214% to RM2.20 sen in 2025 from RM0.70 sen in 2024. Non-Financial Impact • Improved tenant demand and positioning of the portfolio as a whole Capitals Enhanced: Active Capital Management STRATEGY Results • Completed the issuance of a RM455 million Sukuk Wakalah Programme as part of a RM3.0 billion programme in November 2025 Financial Impact • Borrowing costs reduced by 1% in 2025. Non-Financial Impact • Improved investor confidence • Enhances the REIT’s capacity for future capital raising Capitals Enhanced: Improve Portfolio Identity - Portfolio Review STRATEGY Results • Successful first phase KOMTAR JBCC AEIs with improved tenant mix, higher occupancy and strengthened retail positioning. • Completion of disposal of KFC Kuchai Lama • Undergoing disposal of KFC Sunway Financial Impact • Revenue and NPI improved • Disposal of KFC Kuchai Lama at RM14.7 million, with a gain on disposal of RM0.1 million in June 2025. Non-Financial Impact • Improved portfolio focus and identity Capitals Enhanced:
pg. 23 Business Overview Integrated Annual Report 2025 KOMTAR JBCC’s NPI yield rose from 0.98% in FY2024 to 2.98% in FY2025, with AEIs successfully attracting tenant profiles intended for a transit-oriented mall, in anticipation of the completion of the RTS Link in 2027. These AEIs, developed to ensure the REIT is sufficiently prepared to capitalise on its cross-border shoppers and daily commuter demographic, primarily include upgrading of common areas to provide an updated look and feel to improve shopper and tenant appeal, alongside key reconfigurations of layout and tenant mix that are aligned with the position of KOMTAR JBCC as a transitoriented mall. As a result, KOMTAR JBCC achieved a strong occupancy of 71%, with a refreshed al-fresco dining area that enjoys high traffic exposure to Jalan Wong Ah Fook, successfully attracting cross-border F&B and medical services tenants. Common area upgrades were also completed on the first and second floors of KOMTAR JBCC. A major tenant mix and layout reconfiguration was also completed on the second floor of KOMTAR JBCC, aimed at attracting grab-n-go and F&B tenants. The second floor now features an updated design, with improved footfall from pedestrians alighting from the Customs, Immigration and Quarantine (“CIQ”) complex, which is connected via a POB to the second floor of KOMTAR JBCC. The completion of the cross-border RTS will enhance KOMTAR JBCC’s accessibility via a direct POB connection from the Bukit Chagar RTS station, positioning the asset to capture stronger pedestrian traffic flows. This spillover is expected to enhance the appeal of Menara KOMTAR as one of the few office buildings with unparalleled connectivity to the Bukit Chagar RTS station, whilst also benefiting other developments situated strategically on the same integrated plot, creating a vibrant commercial space within the immediate area. BUSINESS REVIEW OPERATIONAL HIGHLIGHT: STELLAR PERFORMANCE FROM THE RETAIL SEGMENT Among Al-Salām REIT’s portfolio, the retail segment achieved strong results throughout FY2025, supported by the success of asset enhancements at KOMTAR JBCC, which attracted strong tenant demand and improved rental reversion rates. KOMTAR JBCC’s 2.98% NPI Yield 71% Occupancy Rate
SECTION 03 pg. 24 AL-SALĀM REIT OPERATING ENVIRONMENT Global growth is expected to be largely supported by emerging economies at an estimated 4.0% for 2026 and 2027, while growth in advanced economies is projected at 1.8% in 2026 and 1.7% in 2027. Nonetheless, the US economy is expected to expand by 2.4% in 2026, supported by lower policy rates, fiscal policies, and the continued momentum from a betterthan-expected second half of 2025. Subsequently, global headline inflation is projected to decline to 3.8% in 2026 and 3.4% in 2027 from 4.2% in 2025. On the domestic front, Malaysia recorded stronger-thanexpected Gross Domestic Product (“GDP”) growth of 4.9% in 2025, surpassing various official estimates of 4.0% - 4.8%, including those from Bank Negara Malaysia, the International Monetary Fund, the World Bank, and other sources. Key economic metrics showed positive signs according to the Malaysian Department of Statistics, including a drop in unemployment rate to an 11-year low of 2.9% in November 2025, steady headline inflation at 1.4% and the Ringgit emerging as the best-performing Southeast Asian currency with gains of ~ 9.0% versus the greenback as of December 2025. Continuing the positive momentum from 2025, growth in 2026 is expected to remain steady, with a slight moderation compared to 2025, primarily due to uncertainties arising from geopolitical tensions and tariff implementations. While these uncertainties pose downside risks to the economy, domestic growth is projected to remain resilient, with headline inflation expected to range between 1.3% and 2.0% in 2026, according to the Ministry of Finance’s Outlook 2026. Fiscal consolidation and structural reforms in policy also continue to drive investor sentiment and confidence, with Foreign Direct Investments (“FDI”) expected to remain strong, especially in data centres, tech, and Electrical and Electronics (“E&E”) related sectors. Export growth is expected to be supported by the resilience of the E&E sector and Malaysia’s role in the global E&E value chain. Throughout FY2025, Al-Salām REIT faced key macroeconomic and external factors that affected its operations. Global output was estimated at 3.3% in 2025, with activity picking up in the second half of the year, compared with a bleaker outlook at the start of 2025. Looking forward, the International Monetary Fund (“IMF”) projects global growth to remain steady at 3.3% in 2026 and moderate slightly to 3.2% in 2027. Trade tensions remain a risk and could weigh on global supply chain activities, potentially affecting the vibrancy of financial markets and global fiscal policies. REAL ESTATE OUTLOOK In view of the Malaysian government’s structural reforms, growth in the real estate sector is expected to be defined by adaptation to policy and infrastructure changes, including the promotion of industrial sectors and tourism, sustainabilityled policies, a proposed carbon tax, revisions to electricity tariffs, tax structures, and fiscal reforms. With a focus on key topics in affordable housing, urban regeneration, and green building practices, the real estate sector is well-positioned for strategic growth in support of national development. Broad sector demand is also supported by policy promotion, attracting FDIs in the industrial, logistics, and E&E sectors, with expected spillover to the commercial and office sectors, while transportation line expansions and infrastructure catalysts are expected to improve cargo and commuter connectivity and uplift land values along these routes, even extending to cross-border linkages with the soon-to-be completed RTS link in 2027. Promotion of Visit Malaysia Year 2026 is also expected to boost tourism and the hospitality and retail sectors. In terms of investments, real estate investors are increasingly cautious and are employing a disciplined approach to selecting assets for yield generation, aligning with structural reforms, long-term fundamentals for income resilience, and the flexibility of asset use.
pg. 25 Business Overview Integrated Annual Report 2025 OPERATING ENVIRONMENT RESIDENTIAL In the near term, the residential sector is expected to experience moderate buyer demand, with buyers being more selective in their criteria, including locations offering connectivity, products with optimised layouts suited to evolving home buyers’ needs, and integrated developments with lifestyle appeal. The uptick in residential properties enhances communities, increasing local footfall and providing a consistent customer base and workforce that benefits both tenants and REITs. Klang Valley: Overall residential supply recorded a y-o-y 9M increase of 3.8% in the Klang Valley. While highrise transaction volume decreased by 4.0%, transaction value increased by 4.7%; landed transaction volume and value decreased by 6.7% and 3.1%, respectively. Overall, overhang levels decreased, driven by the highrise segment, which saw improved absorption, while the landed segment saw a 28.2% y-o-y increase in overhang levels for the nine months ending September 2025. Highrise overhang is concentrated in Kuala Lumpur due to land scarcity, while landed overhang is concentrated in Selangor. With an emphasis on housing affordability, mid-range properties under RM500,000 continue to receive steady interest from first-time homebuyers, young families, and urban professionals. Nonetheless, buyers are generally exhibiting a more cautious approach, carefully evaluating their choices in terms of location, convenience, the relevance of space use, lifestyle amenities, and security, among others, when making their purchase. This is expected to continue into 2026, when developers will need to adopt layouts and create community and experiential spaces to meet buyer demand for space use and lifestyle, differentiating themselves from competitors. This is also expected to drive the development of integrated components, such as retail, commercial, and office areas around residential developments. Johor: The Johor residential market recorded a y-o-y increase of 2.9% in total supply for the 9M ending 2025, led by expansion of the high-rise segment of 4.5% and an increase of 2.3% in the landed segment. In the near term, the Johor residential market is expected to be characterised by city-centre demand and demand arising from the RTS corridor, particularly from investor and cross-border commuter interests. With the completion of the RTS, the time taken for the cross-border journey will be reduced to approximately five (5) minutes, redefining cross-border connectivity between Johor Bahru and Singapore. The immediate vicinity surrounding the CIQ complex is already experiencing strong demand, with developers snapping up land for mixed development to capitalise on this infrastructure catalyst. In Iskandar Malaysia, landed residential homes continue to perform well, where transaction values recording y-o-y 9M increases up to 22.0% in the cluster home segment. The residential segment in Johor is expected to sustain its performance. However, investment-led buyers may be wary of oversupply risks and overpricing in fringe areas with less cohesive last-mile connectivity. For more information on the macroeconomic impacts and future outlooks of the REIT’s portfolio segments, please refer to the respective segments in the Segmental Highlights of the Portfolio Capital section of this IAR2025.
SECTION 03 pg. 26 AL-SALĀM REIT OPERATING ENVIRONMENT PESTLE ANALYSIS To ensure the REIT remains abreast of all ongoing developments, a PESTLE analysis was employed, enabling the identification of significant external influences and opportunities shaping the REIT’s performance and strategic direction. These include: Al-Salām REIT is expected to experience a significant positive impact on foot traffic and revenue generation on KOMTAR JBCC due to the upcoming Johor Bahru-Singapore RTS Link, projected for completion by 2026 or 2027 with a capacity of 10,000 travellers per hour, alongside the Elevated Autonomous Rapid Transit (“E-ART”) slated for completion in the coming years. This is further enhanced by the construction of a POB connecting the station directly to KOMTAR JBCC, positioning the REIT as an entry point for visitors arriving from and departing to Johor Bahru and Singapore. These developments are expected to be a primary driver of a significant increase in footfall from Singaporean cross-border shoppers and local commuters. While short-term traffic congestion during construction remains a challenge, the REIT proactively responds through AEIs to improve e-hailing and public transport infrastructure and ensure flagship assets are positioned as premier transit-oriented retail destinations. This is also expected to increase Menara KOMTAR’s appeal as a choice office space, especially for cross-border businesses seeking to establish a presence in both Malaysia and Singapore requiring frequent travelling between both locations. With favourable economic policies such as the JS-SEZ, the demand for quality office space in the city centre is expected to remain strong, leading to rents holding stable in the coming years. The working crowd from Menara KOMTAR is also expected to translate to improved footfall in KOMTAR JBCC, reinforcing the synergies within the REIT’s flagship assets. Catalytic Infrastructure Development and Connectivity Global tariff threats and trade restrictions have indirect consequences on the REIT’s overall financial, business, and operational performance. With these uncertainties, global supply chains are being redefined, where suppliers and consumers alike are forced to adapt to this new order, taking into account cost escalations. Based on recent studies, 55% of Malaysian companies cited rising costs due to trade uncertainty, leading some to pass costs on to customers and other downstream consumers, ultimately impacting retail spending and consumer purchasing power. Despite these risks, the Malaysian economy proved resilient, showing signs of growth throughout 2025, strengthening currency, and other positive economic indicators. Regardless, the REIT remains committed to implementing fail-safes, primarily through continued cost management at both the property and fund levels to ensure margins remain sustainable despite these external geopolitical developments. Global Tariff Threats The monetary environment throughout FY2025 was characterised by interest rate volatility, even as Bank Negara Malaysia (“BNM”) maintained the Overnight Policy Rate (“OPR”) at 2.75%. While stable rates can support consumer discretionary spending, the REIT remains exposed to fluctuating financing costs due to the reliance on floatingrate debt. To safeguard unitholder value, the REIT prioritises prudent capital management, including active efforts to refinance existing facilities and restructure debt to secure more favourable and sustainable terms. Monetary Environment and Interest Rate Volatility In addition to the positive national macroeconomic outlook, the REIT stands to gain by potential financial capitals provided through the 13th Malaysia Plan, offering RM430 billion between 2026 to 2030 in development expenditures, alongside the Visit Malaysia 2026 (“VM2026”), a governmentled initiative targeted to attract 47 million foreign visitors and generate RM329 billion in tourism revenue, compounded with the Visit Johor 2026 campaign set to attract 12 million additional visitors, present a positive outlook Al-Salām REIT, particularly KOMTAR JBCC. In view of KOMTAR JBCC’s proximity to the CIQ, KOMTAR JBCC is expected to benefit from the spillover of tourism campaigns and visitors from VM2026 and Visit Johor 2026 (“VJ2026”). The renewed tenant mix of KOMTAR JBCC is also expected to attract more visitors, in line with consumer preferences from the crossborder tourist demographic. Tourism Policy and Campaign Developments
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