Our management team remains committed in weathering the challenges and driving Hektar REIT’s turnaround in 2022 and beyond.

CEO's Letter to Unitholders from Hektar REIT's 2021 Annual Report.

Dear Valued Unitholders,

The COVID-19 pandemic, which began in December 2019, has continued to disrupt lives and livelihoods through waves of new infections in Malaysia and globally, necessitating the reinstatement of containment measures to prevent its spread in 2021.

In Malaysia, the adverse impact has been significant on businesses across different industries, including the retail industry of which Hektar REIT is primarily focused on. While headwinds is expected to continue to persist, our management team remains committed in weathering the challenges and driving Hektar REIT’s turnaround in 2022 and beyond.

Market Review

The Government declared a temporary state of emergency in January 2021 as well as implemented the second Movement Control Order (MCO 2.0) for 14 days initially from 13 to 26 January 2021 in 6 states across Malaysia to curb the spread of COVID-19. MCO 2.0 was subsequently extended until 4 March 2021 for Kuala Lumpur (KL), Selangor, Penang and Johor while other states (with the exception of Perlis) were placed under Conditional MCO (CMCO). The movement restrictions under MCO 2.0 for the four states were subsequently eased under the CMCO from 5 March 2021.

The whole of Malaysia was however placed again under a third Movement Control Order (MCO 3.0) in early May as the country grappled with rising Covid-19 infections. This was followed by the imposition of a full nationwide lockdown (FMCO) in June 2021 as well as implementation of the Enhanced MCO (EMCO) at most districts in Selangor and 14 localities in KL.

The Government also announced a transitionary four-phase National Recovery Plan (“NRP”) in June 2021 with key indicators dependent on a certain threshold of average daily cases, reduced ICU bed occupancy and percentage of the population that had to be vaccinated for the states to progress from one phase to another which will allow certain sectors to operate with reduced restrictions. These thresholds were further adjusted in line with the accelerated vaccination amongst adults.

The objectives of these measures centred around saving lives and relieving the pressure on Malaysia’s public health system. The enforcement of various control measures such as domestic and international travel restrictions as well as the prohibition of operations for contact-intensive services industries affected most economic sectors.

The retail industry was not spared with retail sales declining by 27.8% from a year earlier in 3Q21 while cumulative nine-month retail sales contracted 11.9% compared to the same period in 2020, as reported by Retail Group Malaysia (RGM). RGM had projected a full-year retail industry sales growth forecast of 0.5% for 2021.

The Malaysian economy contracted by 4.5% in 3Q21 2021 (2Q 2021: +16.1%). Consequently, the GDP growth forecast for 2021 was revised downwards to between 3% and 4%. To cushion the shock, the Government implemented several assistance and economic stimulus packages totalling RM530 billion since the COVID-19 outbreak, with RM225 billion or 14.8% of GDP allocated in 2021 via four assistance and stimulus packages – PERMAI, PEMERKASA, PEMERKASA+ and PEMULIH – comprising fiscal and non-fiscal measures while Bank Negara Malaysia (BNM) maintained the Overnight Policy Rate (OPR) at 1.75% in 2021 to support a more sustained recovery.

The acceleration in the country’s vaccination rates in 3Q21 led to a decline in in the number of new daily infections, hospitalization as well as fatality rates. Against this backdrop, the Government decided to allow certain non-essential businesses that were prohibited to operate under MCO 3.0 to resume operations from mid-August 2021 while adhering to the standard operating procedures (“SOPs”) implemented by the Government. The Government also relaxed further restrictions, including allowing dine-in at restaurants & cafes from August 2021 for fully vaccinated individuals for states that met certain criteria. Inter-state and overseas travel were recently allowed for fully vaccinated individuals. Cinemas were also allowed to reopen in September 2021, albeit with the implementation of strict physical distancing measures in place.

Economic activity has picked up as the whole country has transitioned into Phase 4 of the NRP in early January 2022 with less restrictive containment measures and most of the retail trades have been allowed to operate. At the time of writing, Malaysia has also achieved a vaccination rate of almost 98% and 90% for adults and adolescents respectively. The high rate of vaccination in the community has increased consumer confidence which has resulted in shoppers and patrons gradually returning to the shopping malls.

BNM reported in its latest quarterly economic report on 11 February 2022 that the Malaysian economy registered a positive growth of 3.6% in the fourth quarter of 2021 (3Q 2021: -4.5%), as economic activities resumed with the easing of containment measures. With the turnaround in growth in the fourth quarter, the economy grew by 3.1% in 2021 as a whole with the unemployment rate declining to 4.6%.

Nevertheless, the progress and efficacy of vaccinations, compliance with standard operating procedures as well as the ability to effectively contain outbreaks from any new Covid-19 variants of concern will be key to the expected recovery of the retail sector and our economy at large.

Portfolio review

Despite the continued challenging market conditions, Hektar REIT’s overall portfolio occupancy remained a healthy 85% in 2021 with Kulim Central maintaining a commendable occupancy rate of above 90%. The fact that our portfolio is geographically well diversified with our malls being either the dominant mall or the only mall in a particular town has also helped to cushion the overall impact on Hektar REIT’s portfolio occupancy. Visitor traffic declined to 13.2 million visits in 2021 on the back of the continued implementation of the various phases of movement control order. Meanwhile, the portfolio overall rental reversion rate was a negative 7% on the back of rental reviews and rebate offers implemented by the REIT to support eligible tenants.

Subang Parade

Subang Parade recorded an occupancy rate of 83% at the end of 2021 as a number of tenants opted for early termination of their tenancies as their respective businesses succumbed to the harsh realities of an immensely tough and challenging retail environment. However, we are pleased to have welcomed the opening of Golden Screen Cinemas (GSC) at the mall in early January 2022 subsequent to GSC’s successful acquisition of the MBO outlet in Subang Parade in 2021.

Meanwhile, 2021 also saw the entry of new retailers such as Eco Shop, Marina Nail Spa and Original Classic, in line with the tenancy rejuvenation plans for Subang Parade which would refresh its offerings of daily shopping, services, entertainment and F&B.

Mahkota Parade

Mahkota Parade’s occupancy dropped to 87% in 2021. Despite market uncertainties, the Management continued to enhance the tenancy mix of the mall with the introduction of new retailers such as Skechers, Llao Llao and Gatti Sports in 2021. Although footfall at Mahkota Parade has declined in 2021 due to the various movement restrictions and closure of international borders, the shopping mall remained the main shopping destination in Melaka with a traffic count of 2.8 million visits in 2021. Of the malls in Hektar REIT’s portfolio, it is anticipated that the mall would benefit the most from the return of tourists to Melaka once Malaysia reopens its borders to international travellers in 2022.

Wetex Parade & Classic Hotel

Wetex Parade, the only mall in Muar ended the year 2021 with its occupancy at close to 90% with total visitor traffic recorded at 1.9 million visits. Despite the difficult market conditions, overall rental reversion remained commendable at 6%. Wetex Parade saw the entry of EEK Mart, Carlo Rino, Original Classic and Boost Juice in 2021.

Being the largest hotel in Muar with the largest ballroom facilities, Classic Hotel Muar recorded a commendable overall occupancy of 23% with an average room rate of RM131 in 2021 despite being heavily impacted by the various mobility restrictions. Notwithstanding, we are cautiously optimistic that the hotel’s performance will improve in 2022 with the lifting of travelling restrictions and normalisation of economic and tourism activities.

Central Square

The leading mall in Sungai Petani recorded visitor traffic of 1.9 million in 2021 while occupancy dipped marginally to 86%. We welcomed the opening of GSC at the mall in January 2022 after GSC’s successful acquisition of the MBO Cinema outlet in Central Square in 2021. Meanwhile, the Management is continuing initiatives to upgrade the quality of the tenant mix and positioning of the mall, as reflected by the entry of Original Classic and 7-Eleven in 2021. Rental reversion for 2021 remained commendable at about 4%.

Kulim Central

The only mall in Kulim continues to maintain an occupancy rate above 90% for 2021, with an occupancy rate of 94% being recorded as at end 2021. Visitor traffic was about 1.9 million while tenancy reversion remained positive at 6%. The positive effects from the asset enhancement initiative in 2017 continues till today with new brands such as sports and lifestyle retailer, Original Classic and international premium coffee specialist retailer, The Coffee Bean & Tea Leaf as well as Mi Store making their entries into Kulim Central in 2021, thereby enhancing the vibrancy of the tenancy mix in the mall.

One of our anchor tenants, Giant Superstore, which was relaunched in 2019, has also renewed its tenancy agreement for the next 3 years.

Segamat Central

Segamat Central’s occupancy dropped to 67% with visitor traffic at around 700,000 visits in 2021. Notwithstanding, the Management remains steadfast 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. Meanwhile, we welcomed the opening of Original Classic and the authorised Apple reseller, Switch in 2021, offering shoppers with a new shopping experience and access to the much acclaimed Apple products. We also recently introduced an exciting new grocer, KS Mart Signature and a new F&B tenant, Siam Restaurant in January 2022.

Financial review

The REIT recorded revenue of about RM97 million in 2021, down 13% compared to 2020 whilst operating expenses reduced by 15% to about RM50 million. Meanwhile Net Property Income declined to RM47 million, down by about 11% from 2020 while realised net income before tax was about RM13 million. There was a net loss before tax of about RM32 million due to the fair value decline of the portfolio.


Hektar REIT’s current financing includes debt facilities of up to RM581 million, with 92% of the amount due in 2024-2025.

Hektar REIT’s gearing ratio stood at 47.2% as at end 2021, 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.

Meanwhile, BNM has continued to maintain the Overnight Policy Rate (OPR) at 1.75% since 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 2.53 sen for the year 2021 reflecting a total distribution pay out of approximately RM11.9 million. Based on the final price of 50.5 sen on 31 December 2021, the DPU represents a yield of approximately 5%. At the end of 2021, Hektar REIT had close to 5,500 unitholders.

Corporate proposal

We had on 15 November 2021 announced that Hektar REIT had proposed to undertake a private placement of up to 23,098,000 new units of Hektar REIT (“Proposed Private Placement)”, representing up to 5% of its total issued Units of 461,960,178 Units as at 12 November 2021, being the latest practicable date prior to the announcement (“LPD”). As at to-date, the actual number of Placement Units issued under the Proposed Private Placement was 9.3 million Units.

The Proposed Private Placement will mainly allow Hektar REIT to raise the necessary funds for working capital and capital work in progress to help to facilitate Hektar REIT’s existing day-to-day operations as a whole by providing more flexibility in terms of cash flow management.

In addition, the Proposed Private Placement will also strengthen the capital base of Hektar REIT and allow Hektar REIT to have greater focus on prioritising its business strategy to overcome the economic and business challenges in light of the current economic situation brought about by the COVID-19 pandemic. The Proposed Private Placement is expected to be completed by the 1st half of 2022.


2021 was a year of challenges, turbulence and recovery. Like many organisations, we experienced unprecedented economic volatility and disruption in our day-to-day functions due to COVID-19. The pandemic has shown that widespread and significant interruptions are entirely possible, as unfortunate as they may be. Solidifying our platform to create value and deliver sustainable, stable income for our unitholders is vital for our post-COVID-19 recovery.

Sustainability remained a key priority throughout 2021 as we emerged from the crisis. We refined our material issues, strengthened our commitment to business excellence and managed our stakeholders' most material environmental, social, and governance (ESG) aspects. We also aligned our material factors with the corresponding United Nations Sustainable Development Goals (SDG) to maximise our impact. Hektar REIT remains a constituent member of the FTSE 4Good Bursa Malaysia Index and in its latest December 2021 evaluation, its ESG conduct has been recognised with a 3-star ESG rating by FTSE Russell.

We took extra care to ensure the health, safety and well-being of employees, shoppers, guests, visitors and local communities. We also provided rental assistance to eligible tenants to support them in challenging market conditions.

Last year was indeed particularly challenging for vulnerable and disadvantaged members of society. We worked with other members of the Malaysia REIT Managers Association (MRMA) in donating RM100,000 in the form of 99-Speedmart cash vouchers which could be exchanged for food, groceries, personal hygiene products and other essential goods to alleviate the suffering of local communities in Selangor and Kuala Lumpur who were adversely affected by the COVID-19 pandemic and the various resulting lockdowns since 2020.

Despite the pandemic, reducing the environmental footprint of our assets and operations remain a priority. We managed to reduce the overall amount of CO2e emissions of our assets by about 11.6% to 18.8 million kgCO2e in 2021 from almost 21.3 million kgCO2e in 2020. Emissions intensity of our assets expressed as the amount of CO2e emitted per gross floor area (kgCO2e/sq.ft.) also improved to 4.0 kgCO2e/sq.ft. from 4.5 kgCO2e/sq.ft. in 2020.

Moving forward, we will also continue to establish measurable targets, improve and formalise our ESG priorities and include them in our decision-making process. Increasingly, tenant-customers, employees, investors and other stakeholders demand more substantial ESG commitments. We will continue to improve our ESG credentials, not just because regulations are becoming more focused on these matters, but also because it makes good business sense and – most importantly – because it is the right thing to do.

Embracing uncertainties

The global economy enters 2022 in a weaker position than previously expected. As the new Omicron variant spreads, countries have reimposed mobility restrictions. Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging market and developing economies. The ongoing retracement of China’s real estate sector and slower-than-expected recovery of private consumption also have limited growth prospects.

Based on IMF’s latest forecast, global growth is expected to moderate from 5.9% in 2021 to 4.4% in 2022, half a percentage point lower for 2022 than in the October World Economic Outlook (WEO), largely reflecting forecast markdowns in the United States and China, the two largest economies in the world.

As Malaysia transitions into an endemic phase, the country’s growth trajectory is expected to improve given resumption of economic activities, further improvement in the labour market, continued policy support and expansion in external demand. BNM has recently reiterated that the Malaysian economy will expand between 5.5% and 6.5% in 2022, underpinned by continued expansion in global demand and higher private sector expenditure, given improving labour market conditions and on-going policy support. The continuation of major investment projects in both private and public sectors will also support growth.

While new daily cases is on an increasing trend recently with the outbreak of the Omicron variant, we are cautiously optimistic that Malaysia will gradually emerge from the worst wave of the pandemic stronger and more prepared compared to the earlier waves given the acceleration in the National Covid-19 Immunization Program (NIP), with almost 79% of the population being fully vaccinated as at 15 February 2022. With the NIP coverage now being extended to children, the country is gearing itself for the lifting of Covid-19 curbs and a return to pre-pandemic normality as nearly the entire population is now eligible to receive vaccination protection from Covid-19.

The retail market is nevertheless expected to remain challenging given the prolonged disruption caused by the pandemic and uncertainties posed by the emergence of variants of concern, particularly the Omicron variant. The Management maintains a cautious outlook for the coming year and will vigilantly monitor this evolving situation and remain focused on ensuring the safety and well-being of shoppers, tenants, employees and communities at all its properties.

We also intend to explore new business formats and build on omni-channel strategies as well as incorporate experiential elements, embrace digitalisation and rethink the spatial design of our malls. We will also continue 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 non-essential operational and capital expenditures to contain costs and conserve cash, while strengthening the balance sheet via continued prudent and proactive capital management.

Awards & acknowledgements

The REIT’s community engagement efforts in 2021 were recognised with our property manager, Hektar Property Services receiving the 2021 Sustainability & CSR Awards from CSR Malaysia. We are indeed humbled by the recognition and will continue to engage closely with our communities.

I would also like to congratulate our Head of Legal and the Legal Team for being named as finalists for the Malaysia In-House Lawyer of the Year and In-House Team of the Year categories at the Asian Legal Business (ALB) Malaysia Law Awards 2022 recently. These prestigious awards pay tribute to the outstanding performance of private practitioners and in-house teams in Malaysia and around the region. Asian Legal Business, a leading provider of legal news and information for legal professionals in the Asian region, carefully considers and selects the finalists for the awards based on professional accomplishments in terms of the breadth, complexity, innovativeness, impact and significance of the work or achievements by the individual or team. We wish our Legal Team all the best for the upcoming ALB’s Virtual Law Awards Ceremony to be held on 24 March 2022.

On behalf of the Board of Directors, I would like to express our thanks and appreciation to Miss Tay Hwee Pio and Cik Rahanawati Ali Dawam who resigned from our Board on 24 July 2021 and 11 February 2022 respectively. We sincerely appreciate their dedication and contributions over the years. We also welcome our new members of the Board, Miss Tan Loo Ming, Encik Johari Shukri Jamil and Encik Hasli Hashim and look forward to working with them.

I would like to acknowledge the dedication and perseverance of our team and the guidance from the Board of Directors during this difficult period. I would also like to take this opportunity to thank all of our stakeholders for withstanding the headwinds and working together in overcoming the year's challenges.

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 2022.

Dato’ Hisham bin Othman
Executive Director and Chief Executive Officer