A L - S A L Ā M R E I T A N N U A L R E P O R T 2 0 2 1 38 MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL AND BUSINESS REVIEW OVERVIEW OF AL-SALĀM REIT Al-Salām REIT is a diversified Malaysian REIT with a total portfolio asset value of RM1.18 billion. The asset portfolio comprises retail, office, and F&B restaurants and non-restaurant properties. The aggregate gross floor area of its investment properties as at 31 December 2021 is 2.70 million sq ft, with 1.96 million sq ft of net lettable area. FINANCIAL REVIEW Table 1: Key Financial Highlights FY2020 FY2021 Variance RM`000 RM`000 (%) Gross revenue 86,101 71,543 (16.9) Net Property Income 64,970 54,994 (15.4) Trust Expenses 46,445 39,396 (15.2) Profit for the Year (Realised) 14,555 14,643 0.6 Income Available for distribution (Realised) 12,596 14,643 16.3 EPU (Sen) – Realised 2.51 2.54 1.2 DPU (Sen) - Realised 2.08 2.30 10.6 On the back of reductions in revenue by 16.9%, Al-Salām REIT registered a lower net property income (NPI) of RM55.0 million (FY2020: RM65.0 million). The reduction in revenue and net property income were mainly recorded from the retail segment particularly KOMTAR JBCC due to the continuous impact of the COVID-19 pandemic but the adverse scenario was mitigated by the performance of other segments. Given the weaker economic climate and reduced consumer consumption especially in the retail segment in FY2021, a vast majority of the Fund’s tenants had suffered a slump in business operations since FY2020. As such, the Manager has opted to continue to provide selective rental assistance totalling RM9.5 million and was recognised in the trust expenses. However, this was mitigated by lower trust expenses of RM4.2 million and lower Islamic financing costs of RM2.9 million. As a result, AlSalām REIT registered higher realised earnings per unit (EPU) of 2.54 sen for FY2021 (FY2020: 2.51 sen). SEGMENTAL PERFORMANCE The retail segment reported total revenue of RM34.5 million and net property income of RM22.2 million, a decrease of RM14.9 million and RM10.6 million compared to the preceding year, respectively. The decline in revenue was mainly attributable to the imposition of various MCOs and the closure of the Malaysia-Singapore border which adversely impacted the retail segment particularly KOMTAR JBCC but the decline was mitigated by lower operating expenses of RM4.3 million from all retail outlets. The office segment reported total revenue of RM8.3 million and net property income of RM4.9 million, a decrease of RM0.9 million and RM0.6 million as compared to FY2020 respectively. The decrease in net property income in FY2021 was due to a lower occupancy rate of 86% (FY2020: 89%) but was mitigated by lower operating expenses of RM0.3 million. The F&B segment recorded a total revenue and net property income of RM17.4 million and RM17.3 million in FY2021 respectively, both reflecting increases of RM1.2 million each as compared to FY2020. This was due to the full-year contribution from 5 QSR Properties acquired in September 2020 and the higher rental rate from the renewal of 22 QSR properties effective in May and September 2021. The properties are on a triple net arrangement with 100% occupancy rate (2020: 100%). The F&B non-restaurant segment recorded a slight increase of 0.4% in total revenue and 0.9% in net property income for FY2021. The increase in NPI was mainly due to higher rental rate from the renewal of 5 QSR properties effective in May and September 2021 and lower operating expenses at MCHM.
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