12 AL-SALAM REIT ECONOMIC LANDSCAPE As Malaysia transitioned into the endemic phase, the government allowed businesses to reopen with more relaxed standard operating procedures. Business operating hours were no longer restricted, the 50% capacity limit for event venues were lifted and international borders reopened for travel into Malaysia in April 2022. The full opening of borders between Malaysia and Singapore also led to an upswing in cross-border travellers, particularly Singaporeans crossing over to shop in Johor. The return of foreign shoppers to Johor had a significant stimulating effect on the state’s retail sector. This paved the way for the retail sector to emerge from the worst performing period in its history. Nonetheless, mall occupancy rates and rents had not recovered to pre-pandemic levels despite a significant improvement in footfall and expenditure. The office sector continued to record a decline in occupancy rates due to the substantial increase in supply without any corresponding increase in demand. Nevertheless, rental rates which registered a drop in 2020 appeared to have stabilised in 2021/2022 with the reopening of the economy and return to normality. More office workers returned to work in their offices although some companies continued to adopt a hybrid system of work from home/work in the office. BUSINESS HIGHLIGHTS Al-Salām REIT’s diversified asset portfolio enabled us to remain resilient during this challenging time. Performance of the Fund’s retail properties coincided with a recovery in consumer sentiment. @Mart Kempas and Mydin Hypermart continued to demonstrate their resilience as community-centric hypermarkets that provide daily essentials. In addition, the Fund’s sizable triple nett lease assets portfolio (comprising Mydin Hypermart Gong Badak and F&B related properties) continued to contribute to Al-Salām REIT’s core earnings. The reopening of the Singapore-Johor Causeway has improved the performance of KOMTAR JBCC, which was previously affected by the border closure. Despite the setback, the mall was able to endure the situation thanks to its prime location in the heart of Johor Bahru. Menara KOMTAR expects to maintain its position as a strategic office space in Johor Bahru’s central business district as well as having a continuous strong tenancy by JCorp Group of Companies. Assets operated by QSR Brands (M) Holdings Bhd ("QSR") LETTER TO STAKEHOLDERS continued to provide income stability on the back of a triple net lease arrangement with Al-Salām REIT. QSR continued to persevere by virtue of their time-tested operational excellence and sustainable market share amidst the challenging business environment. The Fund’s sole education asset, the KPJ International College of Nursing and Health Sciences ("KPJIC"), also generated a steady income from a master lease agreement with KPJ Group’s education arm. On the back of the ongoing recovery, Al-Salām REIT witnessed notable bottom line improvement as the Fund’s total income available for distribution rose by 7.2% year-on-year to RM15.8 million (FY2021: RM14.7 million) mainly derived from lower rental support. Correspondingly, distribution per unit also improved by 8.7% to 2.50 sen (FY2021: 2.30 sen) with distribution yield increased from 4.74% to 6.76% due to higher DPU and lower closing price. ENSURING SUSTAINABILITY Sustainability is the key to long-term value creation for our various stakeholders, so it was especially important during this challenging time to ensure sustainability across all aspects of the Fund in the economic, environmental, social and governance ("ESG") contexts. To demonstrate our commitment towards ESG principles and the promotion of environmental sustainability in our operations, the Fund has implemented ESG initiatives such as the installation of solar panels at @Mart Kempas and EV charging stations at KOMTAR JBCC. We will continue to adopt appropriate sustainability practices into our daily operations to achieve our strategic business objectives while minimising our environmental footprint. At the same time, we are committed to providing our employees with a balanced, safe and healthy workplace. FUTURE PROSPECTS Going into 2023, we believe that retail spending momentum will continue, starting with the festive seasons in Q1 2023 (Chinese New Year) and Q2 2023 (Aidilfitri). Footfall in our mall will continue to be encouraging. To this, Al-Salām REIT expects the surge in cross-border activity to continue to have a positive impact on KOMTAR JBCC’s performance as the mall primarily caters to shoppers from across the strait. ESG Initiatives REVENUE RM71.8million REALISED PROFIT RM15.8million FY2022
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