Our management team nevertheless remains steadfast in steering the REIT towards gradual recovery in 2021 and beyond.

CEO's Letter to Unitholders from Hektar REIT's 2020 Annual Report.

Dear Valued Unitholders,

2020 has been an extremely challenging year with the unprecedented outbreak of the COVID-19 pandemic which has severely disrupted the global economy. In Malaysia, the adverse impact has been significant on businesses across different industries, including the retail industry which Hektar REIT is primarily focused on. While uncertainties continue to dominate 2021, our management team nevertheless remains steadfast in steering the REIT towards gradual recovery in 2021 and beyond.

Market Review

Just a year ago, no one would have predicted the depth of the impact of the COVID-19 pandemic outbreak, which resulted in lifestyle-changing experiences for everyone. The extent of the economic disruption from the pandemic is the worst the world has experienced since World War 2. The International Monetary Fund (IMF) has forecasted the global Gross Domestic Product (GDP) to contract by 3.5% in 2020. For perspective, the global GDP fell 1.7% in 2009, at the height of the global financial crisis. For this COVID-19 pandemic, almost every major country in the world is expected to report a deep recession in 2020, save for China, whose economy is projected to grow by 2%.

In Malaysia, the imposition of the Movement Control Order (MCO) leading to the introduction of mobility restriction measures and closure of businesses nationwide caused massive disruption to the economy. The Malaysian economy contracted by 8.3% in the first half of 2020 due to the COVID-19 pandemic, with a contraction of 17.1% recorded in the second quarter of 2020.

The retail industry meanwhile suffered its worst decline since 1987, recording a negative growth rate of 30.9% year-on-year in the second quarter of 2020 as the MCO imposed in mid-March led to a standstill in retail activity for most of the quarter.

To mitigate the economic impacts of the movement restrictions, the Government implemented several stimulus packages worth RM320 billion to revive the economy, while Bank Negara Malaysia (BNM) slashed the Overnight Policy Rate (OPR) by 125 bps to a record low of 1.75% in 2020 to support a more sustained recovery.

The movement restrictions under MCO were subsequently eased under the Conditional Movement Control Order (CMCO) and later the Recovery Movement Control Order (RMCO) with the reopening of the economy and resumption of business operations which saw partial recovery in malls’ footfall and tenant sales in the third quarter. However, the reintroduction of CMCO in several states in October 2020 and the recent reimplementation of the MCO on the back of a third-wave of increase in COVID-19 cases in the country has derailed the recovery of the retail sector for now. For the first time in 22 years, Malaysia’s retail sales are expected to contract by as much as 15.8% in 2020. Even an established and renowned premium departmental store operator which had been in business for over a century has gone into liquidation and as a result has shut its doors in Singapore and Malaysia for good in November 2020 while many other retail stores throughout the country have similarly suffered the same fate. The Malaysian Association of Film Exhibitors (MAFE) meanwhile collectively decided to temporarily suspend their cinemas’ operations in November 2020 though some have subsequently reopened briefly in December.

The COVID-19 pandemic has indeed created massive disruptions globally and is still raging. However, it has been encouraging to note that there has been a steady roll-out of vaccination programs across the globe, in countries such as the United States of America, China, the European Union member states, the United Kingdom, and Singapore amongst others. Progressive vaccination of the world’s population will underpin the global economic recovery, being a key catalyst for the relaxation of mobility restrictions and normalisation of economic activities including eventually the reopening of international borders to investments, travel and tourism.

The IMF forecasts global GDP growth to be at 5.5% in 2021, which will be the strongest in more than four decades. Despite the recent implementation of MCO 2.0, the Finance Minister has maintained Malaysia’s Gross Domestic Product (GDP) growth target of between 6.5% and 7.5% for 2021 after a 5.6% contraction in 2020 due to the COVID-19 pandemic.

Portfolio review

Despite this extremely difficult period, overall portfolio occupancy remained a healthy 88% in 2020 with Mahkota Parade, Wetex Parade and Kulim Central maintaining commendable occupancy rates of above 90% each. The fact that our portfolio is geographically well diversified with our malls being either the dominant mall or the only mall operator in a particular town has also helped to cushion the overall impact on Hektar REIT’s portfolio occupancy. Visitor traffic declined to 19.2 million visits in 2020 on the back of the implementation of the various phases of movement control order. Meanwhile, the portfolio overall rental reversion rate was a negative 28% on the back of interim rental reviews and rebate offers implemented by the REIT to support eligible tenants.

Subang Parade

Subang Parade’s occupancy declined to 84% at the end of 2020 as a number of tenants opted for early termination of their tenancy due to the challenging retail environment. However, we welcomed the opening of Village Grocer, a premium supermarket at Subang Parade in September 2020 and the reopening of Parkson in the same mall after refurbishment of its lower ground floor space which now reflects the store’s latest contemporary brands and trends in homeware and electrical products. February 2020 also saw Best Denki reopening at the East Wing of the mall with a revamped and refreshed outlook.

We are pleased to update that our rejuvenation plans for Subang Parade are on track and we are positive that having good anchor tenants and the right tenancy mix in our mall will help to attract visitor traffic to Subang Parade which in turn will provide the mall with a strong foundation for recovery in 2021 once economic activities are normalised.

Mahkota Parade

Mahkota Parade, the leading mall in Melaka, achieved an occupancy rate of 92% in 2020 while visitor traffic dipped to 4.5 million. Despite market uncertainties, Parkson, our longstanding departmental store anchor tenant, renewed its tenancy for a further term of 3 years. Meanwhile, the Management also continued to enhance the tenancy mix of the mall in 2020 with the introduction of new retailers such as Hummer, Pandora, and Wonderlab as well new F&B tenants such as Rollseriez, Koi, Fuji Sushi and Llao Llao in 2020. Mahkota Parade remains as the main shopping destination in Melaka with a traffic count of 4.5 million visits in 2020.

Wetex Parade & Classic Hotel

Wetex Parade, the only mall in Muar ended the year 2020 with its occupancy at 94% and total visitor traffic recorded at 2.5 million visits. Overall rental reversion was commendable at 8%.

We are pleased to update that The Store, our anchor tenant at Wetex Parade, has recently signed a new tenancy agreement effective 1 January 2021 for a period of 3 years, with options to renew for a further 4 terms of 3 years. The Store’s continued support and confidence in the mall is driven by the mall’s leading market positioning, future prospects and strong management team which has delivered continuous success to the mall and its tenants for many years.

Meanwhile, Wetex Parade also saw the entry of Switch, the authorised Apple reseller which opened in August 2020 with much fanfare, offering Muarian shoppers access to the much sought after Apple products as demand for laptops, tablets and smartphones increased tremendously due to the Government’s encouragement for more people to work from home and students to undergo virtual or online learning under the new normal trends or procedures. Indeed, Switch recorded strong sales for the first few months since its opening, which has exceeded initial expectations.

Being the largest hotel in Muar with the largest ballroom facilities, Classic Hotel Muar recorded overall occupancy of 27% in 2020 with an average room rate of RM125. As you are aware, the hospitality sector is one of the hardest hit industries in Malaysia during the COVID-19 pandemic, where more than 100 establishments in the hotel sector have closed permanently or temporarily since the COVID-19 pandemic broke out last year. Notwithstanding, we are cautiously optimistic that the hotel’s performance will improve in 2021 once travelling restrictions are lifted and economic activities normalised.

Central Square

The leading mall in Sungai Petani recorded visitor traffic of 2.8 million in 2020 while occupancy dipped marginally to 88% as the Management is continuing initiatives to upgrade the quality of the tenant mix and positioning of the mall, as reflected by the entry of a new mini-anchor tenant i.e. Ipoh Bowl and Empire Sushi, a new food & beverage tenant in 2020. Our anchor tenant, The Store, has also recently signed a new tenancy agreement for a period of 3 years, with options to renew for a further 4 terms of 3 years.

Kulim Central

The only mall in Kulim continues to maintain occupancy of above 90% for 2020, with an occupancy rate of 94% being recorded as at end 2020. Visitor traffic was about 3 million while tenancy reversion remained positive at 0.6%. The positive effects from the asset enhancement initiative in 2017 continues till today with new middle-class brands such as Watsons, AEON Wellness and FOS making their entry into Kulim Central in late 2019, adding to the vibrancy of the tenancy mix in the mall. One of our anchor tenants, The Store, has also recently signed a new tenancy agreement for a period of 3 years, with options to renew for a further 4 terms of 3 years.

Segamat Central

Segamat Central’s occupancy remained stable at 78% with visitor traffic at 1.5 million visits in 2020. The Management remains focused on an “occupancy first“ strategy by executing a rental revision strategy to retain existing tenants as well as attract specialty anchors and more F&B retailers to the mall.

Given the anticipated challenging market environment post-COVID-19, the Management is of the view that the revision in rental rates to improve Segamat Central’s occupancy is the right strategy and necessary to ensure the sustainability of the Mall in the short to medium term.

Financial review

The REIT recorded revenue of RM111 million in 2020, down 19% compared to 2019 whilst operating expenses reduced by 6% to RM58 million. Meanwhile Net Property Income declined to RM53 million, down by about 30% from 2019 while realised net income before tax was RM14 million. There was a net loss before tax of about RM24 million due to the fair value decline of the portfolio.


Hektar REIT’s current financing includes debt facilities of up to RM581million, with 92% of the amount due in 2024-2025.

Hektar REIT’s gearing ratio stood at 46.2% as at end 2020, well below the increased 60% gearing limit announced by the Securities Commission, on 11 August 2020, an increase of 10% from the 50% limit previously. The increased gearing limit is effective until 31 December 2022.

The unprecedented impact of the COVID-19 outbreak on the global economy has also led to Bank Negara Malaysia (BNM) cutting the Overnight Policy Rate (OPR) to a record low of 1.75% in July 2020. The accommodative interest rate environment as well as the higher gearing limit will provide the REIT with more flexibility to run our debt and capital structures more efficiently amid the COVID-19 pandemic.


The COVID-19 pandemic has impacted the retail industry significantly and the REIT has also not been spared. However, we remain committed to maintaining a distribution policy of at least 90% of our distributable income and have declared a fourth quarter/total DPU of 0.90 sen for the year 2020 reflecting a total distribution pay out of approximately RM4.2 million. Based on the final price of RM0.63 on 31 December 2020, the DPU represents a yield of approximately 1.4%. At the end of 2020, Hektar REIT had over 5,600 unitholders.


Hektar REIT is committed to fulfill our obligation to ensure that all our business activities are performed to high standards of Environmental, Social and Governance (ESG). Hektar REIT is a constituent member of the FTSE 4Good Bursa Malaysia Index and in its latest December 2020 evaluation, its ESG conduct has been recognised with a 3-star ESG rating by FTSE Russell.

As an extension of our ongoing energy efficiency initiative since 2017, the Management is planning to embark upon a 20-year Renewable Energy Programme by commissioning the installation of Solar Photovoltaic (PV) systems on the rooftop of Hektar’s shopping malls by the end of 2021. The proposed Solar PV systems are estimated to have a combined generation capacity of over 6,000 kWp. The Solar PV systems are estimated to generate a total output of about 157 million kWh of energy over a period of 20 years which potentially translates to carbon emission reduction of about 109 million kg CO2 or the planting of about 654,000 trees on planet earth.

While 2020 has been an extremely challenging year for the REIT, we strived to remain relevant to our communities by working with local organisations to address the needs in our communities. Through the “1 Ringgit Feed 5” campaign, we collaborated with The Lost Food Project (TLFP), a non-profit organisation which rescues surplus quality, nutritious food and other essential goods and redistribute them to those in need. The campaign successfully raised funds to feed over 7,000 people.

Our malls also initiated the “Hektar Helping Hand” campaign after the Movement Control Order (MCO) was lifted in June 2020, serving as a community hub to generate donations either in monetary form or contribution of essential items for those who are affected and struggling to cope with the COVID-19 pandemic.

Steering towards recovery

The recent reimplementation of MCO in January 2021 to curb the alarming increase of COVID-19 cases in the country is expected to dampen the recovery of the economy, in particular the retail sector, in the short-term.

However, in the longer-term, we are hopeful that the planned vaccine roll-out by the first half of 2021 and the eventual lifting of the MCO will aid the recovery of the economy. We are encouraged by the firm pledge by our government to begin mass vaccination by the first half of the year and with countries such as China, Singapore, United Kingdom, and the United States having started their vaccine rollout programmes, this seems achievable. Malaysia is expected to need a year to achieve herd immunity for the coronavirus through the National COVID-19 Immunisation Plan. This will hopefully kick-start the normalisation of economic activities and eventually allow for a recovery, especially for the retail sector. We hold steadfast in our view that at the end of the day, malls can offer social and retail experiences to shoppers which cannot be replicated by online shopping platforms. As such, given the preference for physical social and retail experience, there is bound to be pent-up demand for shopping, dining and entertainment once sentiment improves.

Notwithstanding the market uncertainties moving forward, we remain focused in steering our portfolio towards recovery in 2021 by ensuring the sustainability of our tenants through the provision of rental assistance to eligible tenants and ensuring the safety of shoppers by adopting stringent COVID-19 standard operating procedures (SOPs) at our shopping malls. In addition, we intend to implement strategic marketing initiatives to drive traffic back to our malls as well as ensure our malls remain relevant through various tenancy remixing and other optimum asset enhancement initiatives.

To ensure that we have a good foundation for recovery, we have also actively reduced or deferred nonessential operational and capital expenditures to contain costs and conserve cash, while strengthening the balance sheet via continued prudent and proactive capital management.


On behalf of the Board of Directors of Hektar Asset Management, I would like to express our thanks and appreciation to our alternate Director, Mr. Alex Chia Soon Ren who retired from our Board in the past year. We sincerely appreciate his dedication and support over the years. We also welcome his successor, Miss Pauline Lim Poh Noy and look forward to working with her.

Finally, I would also like to acknowledge the dedication and perseverance of our team and the guidance from the Board of Directors during this difficult period. We will continue to work hard and look forward to the continued support of all our stakeholders’ as we strive to steer Hektar REIT towards recovery in 2021.

Dato’ Hisham bin Othman
Executive Director and Chief Executive Officer