Hektar REIT’s overall portfolio occupancy remained stable at 82% in 2022 with Kulim Central achieving a commendable occupancy rate of 96%.

CEO's Letter to Unitholders from Hektar REIT's 2022 Annual Report.

Dear Valued Unitholders,

The year 2022 heralded a new chapter for Malaysia as the country entered the transition to the COVID-19 endemic phase on April 1 after battling the virus outbreak for two years. In line with our strategic plans, we remain focused on delivering sustainable returns to our unitholders, whilst actively pursuing growth opportunities.

Market Review

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.

Malaysia’s economy started to see green shoots in the first quarter of 2022 (1Q22) when its GDP expanded 5% year-on-year (YoY), attributable to the easing of Covid-19 containment measures which led to improving domestic demands as economic activities normalized.

Like many other countries, though the world has not declared it at the endemic stage yet, Malaysia decided to ease its restriction measures on COVID-19.

With the relaxation of restriction measures on COVID-19, including reopening of the country’s border as Malaysia transitioned into the Covid-19 endemic phase in April 2022, alongside the special one-off withdrawal up to RM10,000 from the Employees Provident Fund (EPF), the country’s GDP continued to grow strongly by 8.9% YoY in the second quarter of 2022 (2Q22), outperforming several developed and regional countries, including China (0.4%), the US (1.6%), European Union (4%) and Singapore (4.4%).

According to Bank Negara Malaysia (BNM), the 2Q22 performance was supported by the strengthening of domestic demand underpinned by the steady recovery in labour market conditions and the ongoing policy support, despite the low-base effect from the Full Movement Control Order (FMCO) in 2021.

In the third quarter of 2022 (3Q22), Malaysia’s GDP sustained a stronger rate of 14.2%, the fastest growth pace among its Asean peers, as it was fueled by continued expansion in domestic demand, robust electrical and electronics (E&E) as well as non-E&E exports, ongoing policy support and firm recovery in the labour market, whereby the unemployment rate shrank to the lowest rate of 3.6% in September 2022 from a peak of 5.3% in May 2020 during the pandemic.

BNM increased the Overnight Policy Rate (OPR) by 100 basis points (bps) in total to 2.75% in 2022 from the record low of 1.75% on the back of elevated headline and core inflation amid both demand and cost pressures, as well as any changes to domestic policy measures.

“The extent of upward pressure to inflation will remain partly contained by existing price controls, subsidies and the remaining spare capacity in the economy. The balance of risk to the inflation outlook in 2023 is tilted to the upside and continues to be subject to domestic policy measures on subsidies, as well as global commodity price developments arising mainly from the ongoing military conflict in Ukraine and prolonged supply-related disruptions,” Bank Negara explained.

The Malaysia retail industry meanwhile jumped 96% year-on-year in retail sales in the 3Q22. Retail Group Malaysia (RGM) has revised its annual retail industry growth target for 2022 to 41.6% from 31.7% previously, due to the better-than-expected growth during 3Q22 and growth revision estimates for the fourth quarter.

For the 4Q22, the growth rate estimate has been revised upwards from 1% (estimated in September 2022) to 6%. This is lower than the forecast made by members of retailers’ associations (at 13.9%).”

"Malaysia’s GDP grew by 7.0% year-on-year (y-o-y) in 4Q22, bringing 2022's full-year GDP growth to 8.7%.

The moderation in GDP from the high growth of 14.2% recorded in the third quarter of 2022 was due to waning low base effect and support from stimulus measures, said BNM."

Portfolio Review

Despite the continued challenging market conditions, Hektar REIT’s overall portfolio occupancy remained stable at 82% in 2022 with Kulim Central achieving a commendable occupancy rate of 96%. 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.

However, we recognized that there is no going back to normal for us. Returning to the way things were is no longer enough, we must move towards a sustainable recovery and equip ourselves for the future and the next generation of customers. The REIT’s strength comes from its deployment of customized and localised strategy for each asset which includes defensive community mall strategy. Majority of the assets under our portfolio benefit from recurring visits by shoppers from its immediate surrounding precinct.

Overall visitor traffic improved by 60% to about 21.1 million visits in 2022 as we intensified our marketing initiatives through sales and traffic-driven promotional campaigns at all our malls within the portfolio on the back of the lifting of the various restrictive containment measures. Meanwhile, the portfolio overall rental reversion rate was negative 11%, which we believe is a temporary dip as we balance rental reversions and occupancy levels to ensure portfolio stability as we continued our tenancy remixing exercise in Subang Parade and Segamat Central which were affected during the peak of the pandemic outbreak.

Subang Parade

Subang Parade recorded an occupancy rate of about 70% at the end of 2022, contributed by the micro market challenges faced by Klang Valley malls on the back of an oversupply of retail space. The Management decided on an “occupancy first“ strategy by executing a rental revision strategy to retain quality tenants as well as to attract new speciality anchors and more F&B retailers to the mall.

They say, “With Crisis, Comes Opportunity”. Our initial plans for Subang Parade several years ago included minor asset improvement exercise and tenancy remixing which involved mini anchors. However midway through our initiatives, the unforeseen changes and circumstances in the retail industry recently pushed us to review our strategy. The recovery of Subang Parade took longer than expected, unfortunately, but it had given us time to re-look at our plans with the valuable insights our team have collected in the last two years. While Subang Parade maintains its establishment as a suburban mall, we intend to strengthen its positioning by giving a new meaning to ‘the best neighbourhood mall’ in the area.

Our new rejuvenation plans include a stronger focus on the customers and the community through the exploration and introduction of experiential concepts, improved tenancy remixing plans, collaboration with community stakeholders and more flexible leasing strategies to attract good retailers and explore suitable niche retail offerings and services to complement their offerings. We are aggressively looking at better asset and facilities improvement initiatives that we were not able to carry out previously.

As mall conditions improved and marketing activities were boosted, visitor footfall saw an increase by 18% to 4.7 million in 2022 from 4.0 million in 2021. Our asset management team, together with the property management team on the ground, met with several key retailers to reassure our business partners that we are in this together and that we are working hard to ensure their concerns are being taken care of. We believe this is key to sustainable relationships and recovery. While the return of the market confidence and consumer sentiment contributed to the encouraging sales performance and improved visitors count, our focus on tenant relations and targeted marketing led to a rapid pick up of successful renewals during the second half of the year, affirming us that we are on the right track.

Mahkota Parade

Mahkota Parade’s occupancy remained stable at about 87% in 2022. Despite market uncertainties, the Management continues to enhance the tenancy mix of the mall with the introduction of new & refreshed retailers such as Sushi Go, Oppo, Onezo, Siam Restaurant, Gigi Coffee, Rollney, Felancy, Pierre Cardin, Vivo and Madam Croffle in 2022 and is steadily gaining interest from international brands.

The shopping mall remained the main shopping destination in Melaka, with a traffic count of 6 million visits in 2022, a fantastic 113% increase from 2021. Of the malls in Hektar REIT’s portfolio, it is anticipated that the mall would benefit the most from the return of Chinese tourists to Melaka in line with China’s reopening of its borders on 8 January 2023.

Wetex Parade & Classic Hotel

Wetex Parade, the only mall in Muar, achieved a stable occupancy rate of 88% in 2022 with entries of new retailers such as Mi Store, Premium Store, Osim and Yole Yogurt, as well as refreshed retailers like Big Apple and Lazo Diamond. Visitor traffic was 2.9 million for 2022.

The largest hotel in Muar with the largest ballroom facilities, Classic Hotel Muar, achieved a much improved occupancy rate of 46% from 23% in 2021, with a higher average room rate of RM137 in 2022 from RM131 in 2021. The encouraging results were fuelled by the lifting of travelling restrictions and normalisation of economic and tourism activities around the town.

Central Square

The leading mall in Sungai Petani recorded visitor traffic of 2.7 million in 2022, while occupancy dipped to 82%. The Management remains focused on upgrading the quality of the tenant mix and positioning of Central Square, as reflected by the entry of Machines, Tealive, Asama Thai Food and I-Serve Technology & Vacations in 2022.

Kulim Central

Since the acquisition of the mall in 2012, its valuation has been on an upward trajectory and is expected to grow further. The only mall in Kulim achieved a sterling occupancy rate above 96% for 2022. Visitor traffic was about 2.9 million, while tenancy eversion for 2022 was positive at 22%. Kulim Central has managed to achieve a positive annual reversion for five years in a row with a 12% average. The positive effects from the asset enhancement and expansion initiative in 2017 continue till today with new brands such as Switch, Daboba Go, Samsung and Myeong Dong Topokki, thereby enhancing the vibrancy of the tenancy mix in the mall. There has been a steady increase from multiple international brands who are intrigued by the success of Kulim Central's turnaround.

Segamat Central

Segamat Central’s occupancy improved to about 74% from 67% in 2021, while visitor traffic increased by about 147% to about 1.8 million visits from 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 speciality anchors and more F&B retailers to the mall. We welcomed the entry of new retailers such as Dees, In Fashion, Mi Store, Muzaina Collection, Samsung, CHK Trading and Honor in 2022.

Financial Review

The REIT recorded a much-improved revenue of RM117 million in 2022, up 22% compared to 2021, whilst operating expenses increased by about 18% to RM59 million. Meanwhile, Net Property Income improved to about RM59 million, up by 25% from 2021. The REIT reported a net profit before tax of RM78 million, of which RM36 million was realised operating net income, and the balance of RM42 million was contributed by the gain resulted from the change in the fair value of the portfolio in current year under review.


Hektar REIT’s current financing includes debt facilities of up to RM551 million, with 93% of the amount due in 2024-2025, plans were in place to partially pare down and rollover to longer tenure of maturity. Hektar REIT's gearing ratio improved to 44.6% at end 2022 from 47.2% at end 2021, within the 60% gearing limit set by the Securities Commission.

Despite the Malaysian economy’s strong performance, we remain cautious of the outlook for 2023 given the volatile economic landscape driven by hawkish monetary policy in response to inflationary pressure, uncertain consumer sentiments as well as lingering supply-chain and logistics issues stemming from geopolitical concerns. We will continue adopting prudent financial management, cost optimisation and enhancing our asset efficiencies to help cushion the impact. With emphasis on deft strategies and prompt execution, we look forward to a more solid improvement in our performance.

The REIT is actively managing our debt and capital structures more efficiently to mitigate the impact of the rise in interest rates, including ensuring robust liquidity and a diversified funding base.


We remain committed to maintaining a distribution policy of at least 90% of our distributable income and have announced on 3 January 2023, a final income distribution of 5.3 sen per unit for the fourth quarter ended December 31, 2022, taking our total distribution for the financial year 2022 to 8.0 sen per unit.

Based on the closing price of 70 sen on 31 December 2022, the DPU represents a yield of approximately 11.4%. At the end of 2022, Hektar REIT had over 5,600 unitholders.

Corporate Proposal

We have announced on 10 November 2022 that the Manager proposes for Hektar REIT to establish an Income Distribution Reinvestment Plan (IDRP) that provides unitholders of Hektar REIT ("Unitholder(s)") with an option to elect to reinvest, in whole or in part, their cash distribution declared by Hektar REIT in new units of Hektar REIT. If a unitholder elects not to participate in the IDRP, then the electable portion will be paid wholly in cash. The IDRP was subsequently approved by the unitholders at the EGM on 15 December 2022.

The IDRP will mainly allow Hektar REIT to preserve 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 IDRP will also provide Unitholders with an opportunity to reinvest in whole or in part, their income distribution in new units at a discount to the market price in lieu of receiving cash.

The IDRP will be applied to the final income distribution of 5.3 sen per unit for the fourth quarter ended December 31, 2022, with the gross electable portion has been set at 5.3 sen per unit.


Sustainability remained a key priority throughout 2022 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 the June 2022 evaluation, its ESG conduct has been recognised with a 4-star ESG rating by FTSE Russell. We are indeed inspired and encouraged to continue our efforts to improve initiatives in all three core areas of Environmental, Social & Governance and embed these core principles into our business DNA.

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 10.8% to 23.0 million kgCO2e in 2022 from almost 25.8 million kgCO2e in 2019. The emissions intensity of our assets expressed as the amount of CO2e emitted per gross floor area (kgCO2e/sq.ft.) also improved to 4.95 kgCO2e/sq.ft. from 5.53 kgCO2e/sq.ft. in 2019.

Our commitment to ESG principles is long-term, as we recognise that all of us have a responsibility to our stakeholders. Moving forward, we remain committed to further advancing our efforts in managing material sustainability matters in environmental conservation, including climate change mitigation and adaptation, water & waste management, and managing energy consumption, including incorporating renewable energy in our energy mix.


The REIT’s community engagement efforts in 2022 were recognised at the Sustainability & CSR Malaysia Awards under the Company Of The Year - Stakeholder & Community Sustainability Engagement Initiatives category. Over the years, Hektar REIT has joined hands through many partnerships and collaborations with local and international organisations, providing support to NGOs’ and charity programs to support underprivileged and marginalised communities besides advancing and empowering women to improve their financial independence for the benefit of families.

We are also pleased to announce that Hektar REIT was the proud recipient of two Silver awards at the inaugural The Edge Malaysia ESG Awards 2022 under the Most Improved Performance Over Three Years (for Market Cap below RM300M) and Property & REIT Sector Award categories on 28 November 2022. The awards seek to recognise and honour Malaysian companies for their commitment to developing and enhancing their business operations according to the Environmental, Social and Governance (“ESG”) principles.

We are humbled to be conferred with these prestigious awards, a testament and recognition of our efforts in driving Sustainability initiatives since we embarked on the core focus on the three pillars of E, S and G across the organisation in 2017.

Withstanding Headwinds

The global economy continues to face steep challenges, shaped by the lingering effects of three powerful forces: the Russian invasion of Ukraine, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China.

In addition, the aggressive monetary tightening is set to become a contributing factor to a weaker global economic outlook, with the International Monetary Fund (IMF) lowering the global growth forecast to 2.7% from 2.9% for 2023 versus 3.2% in 2022.

Nevertheless, Malaysia’s growth trajectory is expected to improve on the back of 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 4%-5% in 2023, underpinned by firm domestic demand amid continued improvements in the labour market as well as the realization of large infrastructure projects and projected higher tourist arrivals.

However, Malaysia’s growth remains susceptible to a weaker-than-expected global growth, higher risk aversion in global financial markets, further escalation of geopolitical conflicts and re-emergence of supply chain disruptions.

The retail market is also expected to remain challenging given the oversupply of retail space and volatile economic landscape. We will thus continue to work closely with tenants to navigate the challenges and support the wellbeing of our stakeholders. We are deeply heartened by our tenants’ loyalty, sincerity, and willingness to partner up amidst adversities. We remain committed to attaining a healthy portfolio occupancy and sustainable rental income, whilst actively pursuing growth opportunities.

We are also actively exploring avenues for growth by ensuring a strong portfolio of retail brands in our malls that can optimise sustainable returns and defensible income through active tenancy remixing and rejuvenation of the centres. We will continue to look for ways to enhance and improve the look and condition of our malls as part of longer-term strategies to improve our portfolio yields. To improve on revenue and debt recovery post-pandemic, our team has been consistently tracking tenants’ ongoing performance to carefully structure our new tenancies and renewals, apart from aggressively looking at strategies to manage the rental collection.

Malls are evolving into lifestyle-centric places for people to meet, socialise, interact and learn. We are confident and believe they will remain the preferred destinations for entertainment, social activities and shopping amongst Malaysians as long as the malls stay relevant. Having said that, successful future shopping centres have an intimate understanding of consumer wants and needs, given their evolving lifestyle. We are thus working towards digitalisation and understanding further consumer spending behaviour to offer the best retail experience to our loyal customers and shoppers. We are also actively working towards strengthening our Marketing and Branding initiatives to drive traffic back to our malls. This has helped our tenants significantly and most of them, in terms of their sales performance, have recovered by 90% from their pre-pandemic sales.

We will also continue to strengthen the balance sheet via continued prudent and proactive capital management. On the liquidity front, we will maintain a healthy and adequate balance sheet to meet our financial and operational obligations.


Dato’ Hisham Othman retired as Chief Executive Officer and Executive Director on 10 June 2022. We would like to express our appreciation to him for his leadership for the past 6 years and wish him well in his future undertakings.

On behalf of the Board of Directors, I would also like to express our thanks and appreciation to Puan Zarina Halim who recently resigned from our Board on 15 January 2023. We sincerely appreciate her dedication and contributions over the years.

We are also pleased to announce the recent appointment of Encik Hasli bin Hashim as Chairman of the Board which will strengthen the stewardship of our Board. We also welcome our new members of the Board, Encik Wan Kamaruddin Bin Wan Mohamed Ali and Puan Norliza Binti Suleiman and look forward to working with them and tap on their expertise in financial services and corporate finance and believe their experiences will be invaluable to the Board.

I would like to acknowledge the dedication and perseverance of our team and the guidance from the Board of Directors during this challenging period. I would also like to take this opportunity to thank all our stakeholders for withstanding the headwinds and working together to overcome 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 greater heights in 2023.

Johari Shukri bin Jamil
Executive Director & Chief Executive Officer