Al-`Aqar Healthcare REIT Annual Report 2019

RISK RISK DESCRIPTION MITIGATION PLAN Valuation Risk Risk that assets with lower Valuation will lower the Net Asset Value of the Fund. The Manager complies with the requirement of the Listed REIT Guidelines to ensure that propertyvaluation iscarriedout every year by valuers approved by the Trustee and complies with the guidelines under the Listing Requirements. This is to determine the fair and reasonableness of the value of the assets to be acquired. Financing & Refinancing Risk Risk of not being able to meet funding requirements/ covenant . Given the stable income from the assets portfolio, the Manager does not foresee any risk associated with inability to procure financing. However, the Manager will comply with the requirement to keep gearing level at 50% and take all the steps in ensuring the borrowing rates and any cost related to the financing are kept at optimal level so that the return to unitholders are also optimised. Liquidity Risk Risk that cash flows are inadequate to meet financial obl igat ion. The Manager will continuously monitor the rental income, operational cost of the assets as well as borrowing cost and related costs are within the annual budgeted plan. Profit Rate Risk Risk that adverse movements in floating profit rates will affect financial performance. Impact of risk is minimal since currently, most of Al-`Aqar’s borrowing is on fixed basis and as such, will not be materially affected by adverse movement in financing rate. Business / Market Risk Risk that the properties face decline in revenue due to declining market condition, competition and geographical concentration. Given the established healthcare business of the tenants the Manager is of the view that Al-`Aqar is not highly susceptible to business and market risk. These risk elements are also diligently addressed at the acquisition stage of the properties and will be properly mitigated to ensure rental income will not be affected. 03 STRATEGIC PERFORMANCE 48