Al-`Aqar Healthcare REIT Annual Report 2019

OPERATIONS REVIEW The Manager is focusing on the active asset management and acquisition growth strategy in order to: • provide regular and stable distributions to unitholders • ensure capital growth • improved return from its property portfolio Despite the challenging operating environment, the Manager’s active asset management continued the strong operational performance into FY2019. The portfolio maintained 100% committed occupancy, with a positive rental increment. ASSET ENHANCEMENT INITIATIVES Optimisation of stakeholder value is the core focus and prime objective of Al-`Aqar. This is achieved via asset enhancement strategy. We aim to improve our performance through constantly upgrading our properties and services. Since listing, the Manager has devoted substantial efforts to implement asset enhancement initiatives with the aim to develop our properties to their full potential. The Manager has implemented asset enhancement initiatives worth up to RM6.2 million in 2019. CATEGORY AMOUNT (RM) Completed - Civil and structural 232,500 - Mechanical & Electrical 740,380 - Repainting 1,140,900 Sub Total 2,113,780 Ongoing - Repainting 322,000 - Civil and structural 66,340 - Mechanical & Electrical 398,338 - Expansion 3,307,200 Sub Total 4,093,878 TOTAL 6,207,658 RENTAL RENEWALS Under the lease arrangement, the contractual lease term is 15 years with an option to renew for a further 15 years. The contractual lease term is divided into 5 rental term of 3 years which shall be renewed upon expiry of each rental term. Based on the Manager’s records, the lessees have continuously committed to their rental obligations. RENTAL REVIEW Al-`Aqar’s rental review is as follows:- Year No. of Properties % of Total Properties FY2020 6 26.09 FY2021 14 60.87 FY2022 2 8.69 FY2024 1 4.35 BUSINESS REVIEW For the year under review, Al-`Aqar had registered a moderate increase in revenue growth of 3.4% to RM106.1 million from RM102.6 million in 2018. This was attributable to income derived from the full rental income received upon settlement of the KPJUC Balance Purchase Consideration in November 2018 as well as annual increment on rental income. As at 31 December 2019, Al-`Aqar has 22 properties in Malaysia comprising 17 hospitals, 3 wellness/health centres and 2 colleges and 1 aged care & retirement village in Australia. It represents 91.6% of the total property value and contributes 89.1% and 88.7% to the revenue and net rental income of Al-`Aqar respectively. Jeta Gardens Aged Care and Retirement Village in Australia is the sole foreign asset owned by Al-`Aqar. The property represents 8.4% of the total property value and contributes 10.9% and 11.3% to the revenue and net rental income of Al-`Aqar respectively. THE PORTFOLIO MAINTAINED 100% COMMITTED OCCUPANCY, WITH A POSITIVE RENTAL INCREMENT Al-`Aqar Healthcare REIT 03 STRATEGIC PERFORMANCE 43