2025 has been defined by decisive strategic execution, accelerating portfolio diversification, embedding sustainability into our operations, and strengthening our financial resilience, all aimed at positioning Hektar REIT for the next phase of value creation. As we navigate a period of economic transition and sectoral transformation, I am pleased to present a comprehensive review of Hektar REIT’s operational and financial performance for 2025, alongside a clear roadmap for sustainable growth.

OPERATIONAL & FINANCIAL REVIEW

Steady Revenue Growth Amidst Sectoral Headwinds

• Hektar REIT delivered a resilient operational performance in 2025, with revenue growing to RM124.7 million, driven by improved rental rates and a strengthened tenancy mix across key retail assets such as Subang Parade and Mahkota Parade.
• Net Property Income stood at RM57.1 million, reflecting underlying stability when adjusted for the one-off education income recorded in the prior year.
• These figures underscore our ability to maintain operational discipline despite rising cost pressures across the retail sector.

Occupancy and Leasing Momentum

• Committed occupancy strengthened to 85.7%, supported by our proactive tenant-mix enhancement strategy. Yearto-date, we secured 176 new and renewed tenancies, with 2.5% positive rental reversion.

Notable new tenants secured across the portfolio in FY2025 include:

• Subang Parade: The Farm & Chan Rak BBQ, Mimi Guksu, Korbi Grill, Collective Coffee Roasters & Paolo Paolo Gelato, Chagee, Gajeto, Game On, Swet Fitness, Mica, Mokky’s Pizza, and Lil Ninja Dojo.
• Mahkota Parade: Oh! Some, Nautica & Thai Odyssey.
• Central Square: Dadi Cinema (new cinema operator).
• Across Portfolio: A diverse mix of F&B, lifestyle, entertainment, and specialty retail tenants.

Retail Portfolio Repositioning

• Subang Parade: The full replacement of lifts and escalators was completed in Q4 2025. Internal refurbishment of toilets and lift lobbies is on track for completion by 1H 2026. Curation of a dedicated Kids Village experiential space is ongoing and targeted for completion in 2H 2026.
• Portfolio-Wide Space Reconfiguration: Management is in the feasibility study stage for major space reconfiguration nitiatives across the portfolio as part of our tenancy remixing strategy. This will allow for the entry of stronger brands, improved tenant synergies, and higher profitability per square foot.

Diversification into Non-Retail Sector

• Our education asset, Kolej Yayasan Saad (KYS), delivered stable and predictable income under its triple net lease, contributing 6.7% of revenue (RM8.4million) and 14.7% of Net Property Income.
• The strong academic performance of KYS ranking 9th nationally in the 2024 Sijil Pelajaran Malaysia (SPM) examinations reinforces the asset’s quality and the resilience of the education sector.
• Furthermore, in 2025 we announced three strategic nonretail acquisitions, which are on track to be completed and begin contributing income by 1H 2026:
  1. Penang Factory (Bayan Lepas Free Industrial Zone)
  2. Chuping, Perlis Land via acquisition of 90% equity interest in land-backed SPV (Solar Farm Development by Lessee)
  3. KYS Adjacent Land (Ground Lease)
• Collectively, these assets are projected to contribute an additional RM5 to RM6 million with built in rental escalation in annual Net Property Income upon completion of acquisition.

MARKET OUTLOOK: NAVIGATING THE MACROECONOMIC LANDSCAPE IN FY2025 & FY2026

GDP Growth

2025 Outcome Malaysia’s economy expanded 5.2% in 2025, the fastest growth in three years, exceeding BNM’s earlier forecast range of 4.0–4.8%.
2026 Outcome Economic growth is anticipated to stabilise within a 4.0% to 5.0% range (BNM indicative projections), as structural reforms, continued investment in infrastructure, and recovering export sectors provide a foundation for steady, albeit slower, expansion. Growth continues to be underpinned by resilient domestic demand, particularly household consumption, which remains supportive of retail spending. However, the pace is expected to moderate due to global trade tensions, persistent inflationary pressures, and fiscal tightening measures.

Inflation

2025 Outcome Inflation remained manageable with the BNM noting headline inflation around 1.4% and core inflation about 2% during 2025.
2026 Outcome Inflation is projected to moderate slightly to 1.8% to 2.3% as policy adjustments normalise and supply-side efficiencies improve, though external commodity shocks and domestic wage pressures remain monitoring points.

Interest Rates (OPR)

2025 Outcome Bank Negara Malaysia maintained an accommodative stance through 2025, lowering the Overnight Policy Rate (OPR) to 2.75%. Looking ahead, the central bank is expected to maintain rates in the near term to support economic growth, though future adjustments will remain highly data-dependent, particularly in response to inflation trends and currency stability. The current rate environment supports borrowing costs for strategic acquisitions and provides a stable backdrop for consumer credit and retail spending.
2026 Outcome BNM is likely to maintain an accommodative stance, with the OPR expected to remain at 2.75%, contingent on global monetary policy trends and domestic growth-inflation dynamics. This environment should continue to support borrowing costs for strategic acquisitions and provide a stable backdrop for consumer credit and retail spending.

Private Consumption

2025 Forecast Private consumption expenditure is forecast to grow at a moderate pace of 5.0% to 6.0% (BNM), supported by favourable labour market conditions, targeted government cash transfers, and rising disposable incomes. However, spending patterns are becoming increasingly selective, with consumers prioritising essentials, value-formoney offerings, and experiential retail.
2026 Outcome Private consumption growth is expected to remain stable in the 4.0% to 4.8% range, as consumer confidence gradually improves amid steady employment and income growth, though sentiment may remain cautious amid global uncertainties.

Retail Sector Growth

2025 Forecast Retail Group Malaysia (RGM) forecasts retail sales growth of 3.6% for 2025, acknowledging ongoing challenges such as rising operating costs, higher living expenses, and competitive pressures from e-commerce.
2026 Outcome Retail sales growth is anticipated to improve modestly to 4.0% (RGM's forecast), supported by economic stabilisation, tourism recovery, and the continued evolution of omni-channel retail strategies.

Strategic Implications for Hektar REIT

The macroeconomic outlook reinforces the prudence of our diversification strategy. While retail remains a core pillar, our expansion into non-cyclical sectors such as education, industrial and ground leases provide a structural hedge against retail volatility and aligns with long-term national priorities such as energy transition and high-value manufacturing.

STRATEGY MOVING FORWARD

Reinventing our Retail Portfolio with disciplined rebalancing

Our retail portfolio remains a vital component of Hektar REIT’s identity. Hektar’s forward-looking retail strategy is about recalibrating and reinforcing our presence in markets where we hold competitive advantages, serve essential community needs, and can deliver sustainable profitability. We are committed to transforming our retail assets into vibrant, defensible, and community-embedded destinations, while prudently rebalancing our overall portfolio toward greater resilience.

Hektar REIT concentrates our retail investment and management efforts on two core, defensible formats:

• Regional Malls (Mature, ~500,000 sq ft NLA): Wellestablished regional hubs with strong catchment dominance. These assets serve as primary lifestyle and convenience anchors for their communities.
• Neighbourhood/Community Malls (<300,000 sq ft NLA, Standalone): Essential shopping centres with no major competitor within a 5–10 km radius that provide daily necessities, services, and social gathering spaces for surrounding residential catchments with fair to strong spending power.

Geographic Focus: All retail assets will be strategically located within Malaysia, in areas with demonstrated population growth, stable household incomes, and strong community cohesion.

Asset Enhancement Initiatives (AEI): Investing in Experience and Efficiency

To ensure our malls remain competitive, relevant, and profitable, we are executing a multi-year AEI roadmap focused on enhancing the shopper experience, improving operational efficiency, and increasing tenant productivity. Key initiatives include:

• Modernisation of Public Areas: Refurbishment of toilets, lift lobbies, surau and parents room to elevate hygiene, accessibility, and aesthetic appeal.
• Family & Lifestyle Amenities: Reconfiguration of space/zoning to maximise rental psf and enhance mall circulation and tenancy curation.

Tenancy Strategy: Building Community Through Curated Spaces

Our leasing approach is evolving from traditional retail leasing to community-centric tenant curation. We are actively remixing our tenant base to include:

• Essentials: Supermarkets & Pharmacies
• Daily Needs & Convenience: Food & Beverage, Leisure & Entertainment, Beauty/Cosmetics, Electronic & IT, Services
• Experiential & Lifestyle: Specialty Fashion, accessories, local homegrown F&B and fashion brands

This community-first tenant mix ensures our malls serve as daily destinations, reducing reliance on discretionary spending and increasing resilience during economic downturns.

Hektar REIT prioritise enhancing the quality and profitability of our retained retail assets over expanding the sheer number of retail properties. This means investing in AEI, tenant remixing, and operational excellence to maximise the value of each strategic retail holding.

Ultimately, Hektar REIT’s retail strategy is rooted in the belief that the most sustainable malls are those that truly serve their communities. By focusing on essential needs, fostering local engagement, and providing safe, welcoming environments, we build lasting loyalty and operational resilience. This community-centric approach not only supports our tenants and shoppers but also creates durable, socially responsible value for our unitholders.

Strategic Portfolio Diversification: Yield Accretive Acquisition Beyond Retail

2025 has been a pivotal year in the continued execution of our diversification strategy. Each investment was evaluated against Hektar REIT’s Diversification Selection Criteria, ensuring alignment with our core objective of building a resilient, future-proof portfolio:

1. Hektar REIT’s Diversification Selection Criteria
   
   • Resilient Asset Class: Targeting sectors with stable, recurring lease income to hedge against economic cycles.
   • Preferred Business Model: Sale and leaseback on a longterm basis.
   • Triple-Net-Lease Preference: Minimising operational intervention and transferring cost responsibilities to the tenant.
   • Strong Occupancy & Lease Tenure: >90% existing occupancy and commitment to long-term leases (>10 years).
   • Creditworthy Lessee: Partners with steady recurring income, healthy cash flow, and efficient cost management.
2. Sector Selection Strategy for Diversification
   
   Our sectoral focus is deliberate, targeting areas with structural demand and income resilience:
   • Education: Resilient to economic cycles, providing guaranteed mid- to long-term rental income. We focus on the underpenetrated K-12 segment, as demonstrated by our investment in Kolej Yayasan Saad.
   • Industrial: High demand driven by e-commerce and Industry 4.0, offering built-to-suit facilities with long-term lease certainty.
   • Strategic Land: Land in prime locations with ground lease arrangements provides guaranteed income under triple-net structures with minimal operational risk and capex.
   • Wellness: A defensive sector with opportunities in aged care and senior living.

   2030 Targets -> 50:50 ratio Balance mix between retail and non-retail

3. Strategic Acquisitions in FY2025 (to be completed by 1H26)
   
   We have strategically expanded into non-retail asset classes through three key acquisitions:
   
   • Penang Light Industrial Asset (Bayan Lepas Free Industrial Zone) - Hektar REIT’s first industrial acquisition, secured at a 9.1% discount to market value, delivers an attractive 7.5% yield under a triple-net lease structure. This asset caters to the semiconductor sector, a high-growth industry critical to Malaysia’s economic future.
   • Chuping Land, Perlis - Hektar REIT acquired a 90% stake in Terramark Sdn Bhd, securing 197.76 acres of land earmarked for a 60–70 MW solar farm. This marks Hektar REIT’s pioneering entry into a modern ground lease structure with exposure to renewable energy infrastructure, providing inflation-resistant, longterm income under a 25-year triple-net lease.
   • KYS Adjacent Land (Melaka) - Hektar REIT is acquiring 41.8 acres of land adjacent to Kolej Yayasan Saad for RM40 million, to be leased back to the school operator under a 30-year triplenet master lease with 10% rental escalation every three years. This supports the school’s expansion plans and strengthens our income visibility in the resilient education sector.

These acquisitions are carefully selected to provide stable, predictable, and escalating income streams while reducing dependency on traditional retail.

In line with our diversification into non-retail assets, triple-net lease arrangements are prioritised across new acquisitions. This structure transfers property-related expenses including maintenance, taxes, and insurance to the tenant, providing Hektar REIT with predictable, passive income and shielding us from operational cost volatility. This is especially critical in the current inflationary environment.

Strategic Portfolio Rebalancing: Targeting 50/50 Retail/Non-Retail Mix

Looking ahead, Hektar REIT is committed to achieving a balanced portfolio composition of 50% retail and 50% non-retail assets by Asset Under Management (AUM) value over the medium-term. This is not a departure from our retail core, but an evolution toward a more resilient, future-proof portfolio capable of delivering stable returns across economic cycles.

Our rebalancing strategy is underpinned by the following principles:

• Strategic Capital Redeployment: Divesting non-core or mature retail assets to realise capital appreciation and redeploy capital into higheryielding opportunities.
• Sector Discipline: Strict adherence to our Diversification Selection Criteria and Sector Selection to ensure each new acquisition enhances portfolio quality and income resilience.
• Building Income Stability: Prioritising assets with triple-net lease structures, long lease tenures (>10 years), and creditworthy tenants to minimise volatility and operational risk.
• Seeking Growth in Resilient Sectors: Continued focus on education, industrial and strategic land sectors with structural demand drivers and low correlation to retail cyclicality.

This strategic rebalancing is designed to:

• Reduce portfolio volatility and improve earnings visibility.
• Enhance DPU stability through contractual rental escalations.
• Position Hektar REIT as a multi-asset platform appealing to a broader base of institutional and ESG-minded investors.
• Ensure long-term relevance and competitiveness in the evolving Malaysian REIT landscape.

We are confident that this disciplined approach to diversification and rebalancing will fortify Hektar REIT against sectorspecific downturns and position us for sustainable, risk-adjusted growth in the years ahead.

Capital Redeployment: Optimising Portfolio Value

In line with our commitment to optimising portfolio quality and total returns, Hektar REIT is executing a disciplined Capital Redeployment Strategy designed to reallocate capital from mature or non-core assets into higher-yielding non-retail assets.

This disciplined approach to capital redeployment is central to our strategy of enhancing portfolio quality and unitholder returns. Through this strategy, we target:

• Portfolio Yield Uplift: Aiming to increase overall portfolio yield by 50–150 basis points over the medium-term.
• Improved DPU Stability: Enhancing income predictability through reinvestment into contractual, yearly escalation leases.
• Strengthened Balance Sheet: Potentially reducing gearing while recycling capital into higher-growth segments.
• Strategic Repositioning: Accelerating our transition toward a balanced retail/ non-retail portfolio composition.

Financing Review and Capital Management

Hektar REIT maintains a robust and strategically managed capital structure, balancing prudent leverage with cost-efficient financing to support our growth and diversification ambitions. Our financial discipline is reflected in our sustained credit strength, liquidity profile, and commitment to enhancing unitholder returns through optimised capital allocation.

RAM Ratings has reaffirmed the long-term rating of AAA(fg)/stable for Hektar MTN Satu Sdn Bhd’s guaranteed 5-year tranche of up to RM230 million (2024/2029) under our RM500 million Medium-Term Note Programme (2024/2034) reflecting superior safety for the payment of financial obligations.

Hektar REIT maintains a well-structured debt profile, balancing prudent leverage with strategic equity initiatives. Our gearing ratio improved slightly from 41.72% to 41.47% as at 31 December 2025, reflecting disciplined capital management and organic deleveraging. Effective cost of debt has reduced from 5.03% to 4.96% aligned with OPR cuts in FY2025. We continue to prioritise:

• Staggered debt maturities to enhance debt profile
• A balanced mix of debt and equity financing to optimise our capital structure
• Adherence to a sub-50% gearing limit as per SC guidelines

Our capital strategy emphasises a balanced mix of debt and equity financing:

• Debt: Utilised for income-accretive acquisitions and asset enhancements, optimised through instruments such as our RM500 million MTN Programme.
• Equity: Deployed selectively to maintain a healthy capital structure, asset enhancements and fund growth without over-leveraging.

This balanced approach ensures we maintain an optimal weighted average cost of capital while safeguarding unitholder interests. Our capital allocation framework prioritises:

• Funding yield-accretive acquisitions in non-retail sectors.
• Executing Asset Enhancement Initiatives (AEI) to drive long-term value.
• Maintaining a healthy gearing profile with a clear path to further deleveraging post new acquisitions.
• Ensuring sustainable distributions to unitholders.

ESG is part of our DNA - Embracing Sustainability

1. Solar Initiative as a Strategic Pillar
   
   

   In response to rising operational costs and increasing environmental expectations, Hektar REIT has embarked on a landmark sustainability journey. Our rooftop solar initiative across five shopping centres is progressing on schedule and is set to be fully operational by 1H26. This project, developed in partnership with Samaiden Group Berhad, is expected to generate annual energy cost savings of approximately RM2 million, while reducing carbon emissions equivalent to planting ~100,000 trees annually.

   This initiative is not merely an ESG checkbox but a strategic move to insulate our portfolio from electricity tariff volatility, enhance operational efficiency, and align with Malaysia’s net-zero roadmap. It also positions Hektar REIT as a leader in sustainable real estate, appealing to a growing cohort of ESG-focused investors.

CONCLUSION: A FORWARD-LOOKING, RESILIENT DIVERSIFIED HEKTAR REIT

Hektar REIT is no longer just a retail-focused REIT. We are transforming into a diversified real estate platform with growing exposure to retail, education, industrial, and ground lease sectors.

Our strategy is clear:

• Defend and optimise our retail portfolio through AEI and tenant remixing.
• Diversify into yield accretive non-retail sectors with triple-net lease structures.
• Embed sustainability into our operations and asset base.
• Maintain disciplined capital management and explore capital redeployment.

We remain cautiously optimistic about Malaysia’s economic trajectory and are confident that our strategic pivots will enhance income stability, support DPU growth, and deliver long-term value to our unitholders.

Thank you for your continued trust and support.

Sincerely,