2009

Dear Valued Unitholder of Hektar REIT,

Chairman's Letter to Unitholders from Hektar REIT's 2009 Annual Report.

Retrospective

One year ago, I wrote to you about the challenges ahead, facing what was then the most significant global financial crisis since the Great Depression of the 1930s. I emphasised Hektar’s focus on market fundamentals, belief in our business model and management execution. Looking back, we can see that 2009 was a year of stark contrasts – starting off the year with the global economy reeling from the financial crisis to witnessing a revival in the capital markets by year end. Despite economic uncertainties and significant volatility, Hektar REIT posted a positive performance.

We set out to create a REIT with a business model that delivers in good times and bad times and to date, our track record remains intact. Since the IPO in December 2006, Hektar REIT has provided positive growth in revenue, realised net income, net asset value and importantly for investors, dividends. Through the global financial crisis, Malaysia’s economy was also impacted. The GDP registered a decline of 3.3% for 2009 (Malaysian Institute of Economic Research forecast). However, the impact varied from region to region; while trade-related and specifically merchandise exports suffered significant declines, the overall impact on the financial sector and various segments of the service economy in Malaysia was relatively muted. In fact, retail sales performance in our various markets in Selangor, Melaka and Northern Johor showed positive growth in many areas.

In 2009, we managed to deliver what we set out to achieve: growth in a difficult year. Our performance validates our management execution, the resilience in our portfolio and the stability of our business model. Furthermore, our unit price recovered significantly over the year as the capital markets validated our efforts. We remain grateful for our unitholders’ support.

Moving into 2010, the global economic outlook continues to remain uncertain. Macroeconomic uncertainty aside, we are confident of delivering sustainable results for Hektar REIT. In the rest of this letter, we will share our thoughts on the business, outlook and our strategies.

Financial performance

For the financial year ended 31 December 2009 (FY2009), Hektar REIT delivered a dividend per unit (DPU) of 10.3 sen. This is approximately 10.9% higher than the forecast provided in the initial public offering (IPO) prospectus dated 15 November 2006. It is also 1% higher than the financial year 2008’s (FY2008) DPU of 10.2 sen.

Revenue reached RM87.7 million, up 4.3% from FY2008 while Net Property Income (NPI) reached RM53.0 million, up 0.6% from FY2008. Overall, Hektar REIT’s Net Income reached approximately RM37.1 million, which is 38% lower than FY2008’s Net Income of RM60.4 million. This is attributed to the lower unrealised gain of RM400,519 from Fair Valuation Adjustment of Investment Properties in FY2009 compared to RM24.1 million in FY2008.

Fair valuation adjustment

Fair Value Adjustment is a non-cash item and part of the Financial Reporting Standards (FRS). It is used to adjust the valuation of Hektar REIT’s property portfolio on an annual basis. Valuations are conducted by independent valuers whose reports are made on an objective basis to determine the market price of a property at that time. The smaller gain in FY2009 compared to FY2008 can be expected as the properties mature. Asset managers must constantly look for ways to enhance or refurbish properties to improve their income-generating potential and ultimately increase their property value. For FY2009’s valuation increase, it reflects that Hektar REIT’s portfolio overall held up its value during the year, which is a positive result since other industry observers were concerned about asset devaluations for investment properties.

Measure of core earnings: realised net income

To determine the real operating performance, that is the cash-related performance for FY2009, we used the net income (realised) measure. As you may note from above, the Fair Value Adjustment can increase or decrease the net income of the REIT significantly, but as it is a non-cash item, it does not tell a true picture of the operating performance of the REIT. The net income (realised) measure excludes the Fair Value Adjustment and reflects the cash-based performance, hence the term, ‘realised’. For FY2009, Hektar REIT’s net income (realised) reached RM36.7 million. In terms of net income (realised) per unit, or earnings per unit (EPU), FY2009 reached 11.48 sen versus 11.32 sen in FY2008, an increase of 1.4%.

Net Asset Value

Net Asset Value (NAV) of Hektar REIT increased to RM1.27, up from RM1.26 in FY2008, an increase of 1%. Since the IPO, Hektar REIT’s NAV has increased by 23.3%, representing a steady increase every year.

Overall, we are quite pleased with the financial results of Hektar REIT in FY2009. Initially, we had some reservations for the year, owing to the economic uncertainties and other factors: electricity tariffs which increased by 26% in July 2008 saw our utilities bill increase by over RM1.5 million in 2009 over our budget forecasts. This was more than offset by the increase in revenue, resulting from the positive performance of our portfolio, which we will elaborate in the portfolio section later. Another benefit to Hektar REIT in FY2009 was favourable financing.

Financing

While the causes of the global financial crisis will be analysed for years to come, the financial commandment remains the same: do not borrow short to invest long. Hektar REIT’s debt is secured by way of an Al-Murabahah Overdraft in 2 tranches; the first tranche of RM184 million expires in 2011 while the second tranche of RM150 million expires in 2013. The financing cost is structured on an annual basis with resets in December and April for both tranches one and two, respectively. Hektar REIT benefitted from the loosening of monetary policy by Bank Negara Malaysia in FY2009. With the Overnight Policy Rate at 2.0% for much of 2009, Hektar REIT’s interest expense for FY2009 was lower than budgeted. On a weighted average cost basis, the total debt of RM334 million is 3.28% as at end of December 2009.

Dividend payout

When we review our FY2009 numbers, we see that revenue, realised net income and NAV were all positive and we were happy to reward our unitholders with an increase in dividends. The DPU declared for FY2009 is 10.3 sen, 1% higher than FY2008 and representing a payout ratio of approximately 90% of realised net income. As in the past, we do not normally pay out all our net income (realised), reserving funds for various activities designed to further improve the REIT’s potential performance. These activities include the acquisition of sold lots (approximately 6% by area of Subang Parade & Mahkota Parade are sold lots) and asset enhancements of the property. More details of these asset enhancements are described in the Portfolio Update section.

Positive market response

In the last year, we are pleased that the capital market responded appropriately, factoring optimism for Hektar REIT’s prospects in FY2009 and beyond. Favourable coverage from investment and research houses also provided a boost to Hektar REIT’s public profile, particularly from OSK Research, AmResearch and Standard & Poor’s. OSK Research rewarded us in their annual OSK Jewels 2009 by selecting Hektar REIT as one of the Top 5 companies in their Top Malaysian Small Cap Companies Book, released in March 2009. In addition, throughout the year, Hektar REIT also presented and participated in various conferences organised by CIMB Private Banking, Asia Business Forum, LexisNexis, IR Magazine (in Singapore) and seminars at the Malaysian Investor Relations Association, Institute of Public Relations Malaysia and National University of Singapore’s Department of Real Estate. For the year, Hektar REIT’s unit price closed at RM1.12, an increase of 45.5%.

Portfolio update

Hektar REIT has assembled a quality portfolio of neighbourhood-focused shopping centres which are strategically located in mass market areas. With more than 1 million sq ft of net lettable area (NLA) under management, we use a variety of strategies and tactics including turnover rent, step-up rent and asset enhancement initiatives to deliver sustainable income growth.

Geographical diversity

The geographical diversity of our property locations benefits the REIT by reducing cyclical fluctuations in each respective market. For example, we expected the second half of 2009 to be quite challenging for our results, in part due to the current weakness in the Melaka market and the refurbishment impact (which started in July 2009) on leasing in Mahkota Parade. Fortunately, strong growth in our other markets, particularly in Subang Jaya offset the decline. The portfolio locations in Subang Jaya, Selangor, Melaka and Muar, Johor represent a diversified geographical spread for Hektar REIT. Above all, our extensive footprint throughout Malaysia allows us to capture and understand the sentiment in the respective local markets.

Steady occupancy

Overall occupancy in Hektar REIT was 95.8%, same as in FY2008. For the first time, Subang Parade was 100% occupied for the entire year. Changes in occupancy occurred in Wetex Parade, which saw an increase in occupancy to 90.1% and Mahkota Parade, whose occupancy decreased to 93.6% due to the refurbishment.

Visitor traffic

Traffic in the portfolio hit 21.3 million visits in 2009. Subang Parade recorded a slight increase of 1.8% with approximately 7.8 million visits throughout the year, while Wetex Parade recorded 5.6 million visits which are significant when compared to Subang Parade, considering that it is less than half the size in terms of NLA. Mahkota Parade recorded a decrease of 5.3% in visits to 7.9 million, in part due to impact of the refurbishment, which since July 2009 has also included large areas of the covered and open car park. In total, Hektar REIT properties receive over 58,000 visits a day.

The retailer tenancy base continues to contribute a diversified revenue base for Hektar REIT. Over 300 retail tenancies exist in Hektar REIT’s portfolio, of which the largest tenant, Parkson contributes about 11% of Hektar REIT’s monthly rental income; after Parkson, the next biggest tenant, The Store contributes approximately 3% of monthly rental income. In summary, over 85% of the monthly rental income is contributed by retailers of a national or international brand, with the remaining income coming from single-tenant stores. This tenant mix ensures a relatively resilient revenue base with a tolerable level of default risk.

For FY2009, Hektar REIT collected RM1.35 million in turnover rent from tenants versus RM1.67 million in FY2008. The main contributing segment is the health and beauty retailers. Do note that we do not budget for turnover rent in our forecasts.

Retailers as partners

Rental reversions for Hektar REIT turned negative in FY2009 with a total of 99 new or renewed tenancies at an average 5% decrease in rental rates. However, the decline was not uniform as the bulk of the decrease was attributed to Mahkota Parade with an average rental decrease of 13%. In comparison, Subang Parade’s rental reversions were flat while Wetex Parade’s rental reversions achieved an average 8% increase.

The beauty of our business model is that turnover rent and step-up rent may make up for initial rental rate decreases over time. For example, if a retailer’s occupancy cost is found to be high in 2009, we will agree to reduce their base rent to allow them to continue trading in Mahkota Parade. The turnover rent, however remains in force. As the retailer’s sales improve post-refurbishment of Mahkota Parade, turnover rent will capture all revenue that is deemed lost from the lower base rent.

Mahkota Parade’s refurbishment: maintaining market leadership

Mahkota Parade’s revitalisation remains on track. Since its opening in 1994, it has set the standard as the top shopping centre in the Melaka market. Last year, facing competition from new and upcoming developments, we felt it was time to give it a refurbishment. The revitalisation will ensure Mahkota Parade remains the leading shopping centre in Melaka in the years to come.

Our approach to the refurbishment is to minimise the impact to the business of Mahkota Parade. It will be business as usual – the shopping centre remains open while the refurbishment will take place after trading hours, usually between 10pm to 7am. As a result, we structured the refurbishment in 3 phases over a 9 month period. We commenced with the refurbishment in July 2009 with a target date for completion in April 2010.

With a budget of RM30.4 million, the refurbishment will cover a wide area. Work will include new flooring, re-painting of the walls, new ceiling, improved lighting as well as repair of the rooftop and other areas. New amenities will be created or improved, including new lifts, directory and signage system, security system and a new Guest Services Desk. The car park will be increased from 955 bays to over 1,000 car park bays, which will have the effect of increasing traffic capacity for Mahkota Parade. The overall effect will be a brighter, cleaner look and a more comfortable experience for shoppers.

We are experienced at engineering the refurbishment with minimal disruption to business. We had accomplished a similar feat at Subang Parade in 2006 with the result of a brand new look to the centre. At that time, we also conducted the refurbishment at night while keeping the centre open during the day. The track record from that project resulted in no business loss claims from tenants, no injuries to staff and above all, delivery within budget. The same experience and team are currently at work in Mahkota Parade’s refurbishment. A communications programme with a focus on safety coupled with shopper promotional campaigns are designed to keep shoppers engaged during the refurbishment. To date, phases 1 and 2 of the refurbishment have been completed with the last phase due for completion in April 2010. It is good to note, that despite the refurbishment work in the latter part of 2009, Mahkota Parade was still awarded the Melaka Tourism Award 2008/2009 for ‘Best Shopping Centre’ by Kerajaan Negeri Melaka.

For all those data-hungry readers out there, please turn to the Portfolio Performance section following this letter for more statistics on our property operations.

Revisiting our strategy

Hektar REIT remains the sole retail-focused REIT in Malaysia. We continue to innovate and improve retail environments to ensure it is conducive to our retailers and shoppers.

The retail REIT is unique compared to REITs in other property sectors, in that we must focus on two sets of customers – tenants and their shoppers. Our business model is focused on treating our customers, the retailers and tenants that contribute to our top-line revenue as business partners. We also need to look further and take care of our customers’ customers – the shoppers. The shopping experience is thus derived from a mix of contributions – the retailers, offering exciting products and services to the shopper and the landlord / manager, providing the ambience and environment conducive for shoppers to play, shop, rest and relax. These are the elements of the formula needed to ensure that the overall property performs well.

We believe the key driver for our performance is the quality of our management execution. A quality portfolio with poor management will deteriorate over time. Hektar REIT possesses a quality portfolio and to maintain its quality, we need quality management execution. Our management approach is driven from the ground-up, while our objectives are driven by a top-down strategic approach, more of which I will share below. Hektar is blessed with a team that contributes in both areas.

Managing from the ground

We spend a lot of time managing by walking around. We are constantly looking at ways to improve the retail tenant mix, in line with the growth of our markets and to suit the constantly changing tastes of our consumers. To accomplish this, we spend a lot of time in the centres, observing customers, talking and listening to tenants. They offer us many insights during our many interactions. Bill Gates, Chairman of Microsoft, once stated that your most unhappy customers are your greatest source of learning. Accordingly, we invest in market research, such as door-to-door household interviews in our target markets and focus groups, to gain insights from residents and particularly from shoppers who no longer visit their neighbourhood mall. As you can see, this process cannot be managed from behind a desk, but by walking around.

I often remain impressed with our management team’s broad understanding of retail concepts, consumer behaviour, leasing trends, property management and other disciplines. I constantly encourage our managers to achieve objectives by thinking out of the box. Collectively, we discuss our ideas and work together to customize strategies and tactics for each centre. Through our leasing and promotional activities, we can sometimes achieve very interesting results. Read on below.

Leasing is our competitive advantage

One of the biggest strengths of Hektar REIT is the resources and relationships with retailers. We have more than 300 retailer tenancies within our portfolio and access to a few hundred more retailers, both in Malaysia and internationally. Many of these retailers have first-hand experience working with us in our properties. They appreciate our efforts and contributions and know that we understand the retail business. This is a source of competitive advantage for us, particularly when we enter new markets or seek to improve existing ones (i.e. remixing the tenant mix). The track record provides retailers with confidence that by entering a Hektar property, they can expect a level of service to ensure their viability. This can translate into a rental premium for a Hektar property. Perhaps just as importantly, we work with retailers to devise new and exciting concepts.

Innovation in Retail

The product of our innovation and ‘thinking-out-of-the-box’ can be seen in the introduction of new retail concepts in our properties, including the Chillout Restaurant and Bar in Subang Parade and Elephant Bean cafe in Wetex Parade. Chillout offers a fusion of western and eastern cuisines, within an open-air concept. It opens to 1am in the morning, offering a late-night spot for our customers in Subang Jaya. Housed in an unused external area outside Parkson, Chillout represents the innovation that we strive to achieve – working with entrepreneurs to create unique retail concepts while at the same time, utilising unproductive areas to boost property yields and the overall appeal of the property. Subang Parade now offers a full variety of lifestyle options starting from Celebrity Fitness opening at 6am, Uncle Lim’s breakfast offering at 8am and winding down with Chillout until 1am.

In Wetex Parade, we also contemplated a re-think of the entrance statement retailer by placing a coffee chain in the front. The typical international coffee chains were considered, but we ultimately decided to partner with a local ‘champion’, a group which had already been running a successful outlet offering premium local coffee beans. The result was the first Elephant Bean, Muar’s very own coffee chain and now co-front anchor for Wetex Parade. By partnering with local retailers, we hope to discover new and exciting retail concepts which we could export to other markets in the future. The cultivation of new retail brands in this manner will boost Hektar’s competitive advantage in the long run.

Advertising & promotion is our ‘killer application’

Advertising and promotion (A&P) is regarded as the ‘killer application’ for running a successful shopping centre. In information technology parlance, the ‘killer application’ is often used to describe a piece of software which is exceptionally useful, innovative and ultimately very successful. For example, the spreadsheet application Excel was considered a killer application for the Personal Computer (PC) and ultimately boosted PC usage and sales. In that sense, we believe A&P is essential to maintain the shopping centre’s continued appeal and fuel demand for the rest of the centre’s offerings.

A&P encompasses the marketing activities designed to attract shoppers and motivate them to return. The activities can be very wide ranging from exhibitions, demonstrations to concerts. We typically design and plan our campaigns over a course of 12 months and feature various events to take advantage of the local festivities, for example during peak periods such as the festive seasons or school holidays. Typical and popular campaigns include ‘The Festival of Magic’, ‘Battle of the Bands’ and ‘Shop For Your School’. In 2009, Hektar REIT’s portfolio recorded over 21.3 million shopper visits. On average, Hektar malls receive over 58,000 visits from shoppers every day. For us, that represents 58,000 opportunities a day to appeal to shoppers.

At Hektar, we take our A&P very seriously. A number of our campaigns are designed to boost retailer sales. A successful programme is ‘Shop For Your School’, which we have been running in all of our shopping centres. Essentially, the campaign is focused on schools surrounding the shopping centre. It commences with a fixed time period during which students (and their families) may shop at their local Parade and nominate their respective schools at the guest services counter by showing their receipt(s). It is essentially a contest in which the schools with the highest nominated amount spent by their students and their families, win the top prizes. The prizes are sometimes sponsored by retailers and are usually designed to benefit the school, for example, new PCs for the computer lab. ‘Shop For Your School’ essentially has what we call, a ‘win-win-win’ approach; it benefits the retailers by improving sales, it benefits Hektar REIT by reaching out to shoppers and their families (and incentivising them to shop at their neighbourhood mall) and it benefits the community schools.

Corporate Social Responsibility

Hektar REIT’s shopping centres have traditionally been involved in promoting activities designed to assist community and social causes. ‘Shop For Your School’, as described above, has the elements of a good A&P campaign while benefiting the community at the same time. Beneficiaries of Hektar REIT’s promotions have included diverse associations such as the Calvary Care Home, Sek Kia Eenh Cancer Fund, Rumah Jalinan Kasih, Pertubuhan Kebajikan Anak-anak Yatim Islam Muar and others in the respective communities in Subang Jaya, Melaka and Muar. Unique campaigns are offered from time to time, such as ‘We Ate For Charity’ which featured a durian eating festival at Subang Parade, involving 120 volunteers, 4 tonnes of durians and a total of RM33,000 raised for the Children’s Wish Society.

Last year, our A&P campaign focusing on community issues won an award at the 2009 Asia Shopping Centre Awards by the International Council of Shopping Centers. Featured at Mahkota Parade in partnership with Malaysia Volunteers Fire and Rescue Association, the ‘Fired Up About Safety’ programme attracted over 280 children and RM14,000 in sponsorship to increase awareness about fire safety. We are very pleased to receive this recognition to reflect our continuing drive to develop innovative A&P programmes.

Strategy From The Top While we may invest a lot of effort and resources on the ground, we do take the time to view the bigger picture from the top. Our larger strategy is driven by the context of retail development, the outlook of the capital markets and the performance of REITs in Malaysia. We remain positive in our outlook for retail development in Malaysia as a source of growth for Hektar REIT.

There are essentially four ways for Hektar REIT to grow:- Continuous Improvement of existing properties; Development of new assets (greenfield); Re-Development of existing properties; and Acquiring assets with underpriced rents.

Continuous improvement

This is emphasised by our current business model and it involves a comprehensive methodology aimed at improving the operating and financial performance of the properties (refer to ‘Managing From The Ground’).

Development & re-development

The private companies of the Hektar group are prioritising the re-development project of Subang Parade’s expansion in Subang Jaya. A re-development project differs from a greenfield project in that while a greenfield project is usually in a completely new area, the re-development typically contains or leverages an existing market. Subang Parade has been recording close to fully occupancy for the past 3 years and as such, we have noted distinct opportunities and areas for new retail concepts. The proposed expansion is sited on a 2-acre parcel of land situated right next to Subang Parade. The private companies of the Hektar group are finalizing a joint-venture with an established player to develop a mixed-development project. The retail portion will merge seamlessly with Subang Parade and take advantage of retail opportunities currently absent in the existing Subang Parade. We hope to finalise this project and announce the preliminary specifications soon.

Acquiring assets

The fourth way of growth for Hektar is through acquiring assets with underpriced rents. Put simply, these are shopping centres with the potential to be yield-accretive to Hektar REIT’s current portfolio. The Muar acquisition of Wetex Parade and Classic Hotel is an example of this type of acquisition; Wetex Parade is one of the only purpose-built department store anchored shopping centre in Muar. Significantly, there are opportunities in Wetex Parade to improve the tenant mix and introduce new retail concepts, national and international chains into the centre. Consequently, the rental reversions for Wetex Parade have been positive in the last year (+8% in 2009). At 90.1% occupancy as at end of 2009, Wetex Parade still has headroom for top-line revenue growth.

Acquisitions update

We continue to source for potential acquisition deals. Last year, we undertook a few due diligence exercises on several potential malls for injection into Hektar REIT. Some looked promising but two reasons prevented us from making any acquisitions in 2009. Firstly, the price offered was too high, often exceeding the valuation done by our independent valuers. While the global financial crisis resulted in distressed valuations in developed markets, Malaysia’s property sector was relatively insulated. Part of the reason was due to the relatively well-capitalised banking sector in Malaysia compared to their overseas counterparts. Furthermore, when Bank Negara reduced the Overnight Policy Rate to support economic activity, many banks could afford to pass on the lower rates to their customers. Subsequently, there were no major bankruptcies by either financial or non-financial corporation in Malaysia and as a result, assets of a distressed nature were not widely available. The second reason which inhibited our acquisition prospects, was the ability to finance the acquisition by secondary equity raisings. The capital markets in Malaysia, while eventually recovering towards the second half of 2009, were not conducive enough particularly for REITs to raise capital cost-effectively. Hektar REIT’s nominal yield throughout most of 2009 hovered above 9%, which makes it nominally expensive to raise secondary equity to acquire new properties. Assuming available debt financing from banks below 4% and a 50% debt to equity ratio for financing an acquisition, the blended cost of capital on a simple nominal basis is around 6.5%. Not a difficult threshold from which to acquire fresh properties, but with Hektar REIT still trading below NAV, an equity issuance at a discount may still be dilutive to unitholders. As we have stated before, any acquisition for Hektar REIT needs to be yield-accretive. As at the end of 2009, Hektar REIT was trading at a 13% discount to NAV and while not an unreasonable discount, we will observe carefully for fairer pricing before committing to any acquisition.

We continue to source and look for new acquisitions across Malaysia. Our criteria have not changed: we like purpose-built shopping centres with anchors preferably starting from 150,000 sq ft of NLA and up. Located in established or emerging neighbourhoods with identifiable market segments, we are comfortable with developments already in existence or under construction. Fully leased or vacant, we will look at all properties and more importantly, examine where we can add further value with our leasing and asset enhancement capabilities. Finally, since we believe in control of the tenant mix to ensure a comfortable shopping experience, we tend to shy away from shopping centre properties with more than 10% sold lots. This is to ensure that we can apply our experience and business practices to every property we own and to make each shopping centre the leading mall in their respective market. Owners, developers and asset managers, feel free to contact us if you have prospective opportunities for our review. We welcome the opportunity to work with you.

Challenges & outlook

We remain cautious on the outlook of the world economy, particularly on the potential impact on Malaysia and ultimately, the domestic consumer economy. The immediate challenges concern our portfolio’s market exposure to a cautious retail environment.

In Melaka, the priority is to finish the refurbishment by April 2010; to continue the tenant mix improvement process and re-launch the advertising and promotion campaigns for Mahkota Parade. We have examined the retail sales record of our key tenants and have concluded the need to focus more on smarter campaigns to promote tenant sales. We have already crafted detailed plans which include more aggressive marketing tactics, issuance of vouchers and retailer-oriented activities to drive tenants’ sales. The comprehensive response of refurbishment and targeted marketing campaigns are expected to sustain shopper goodwill and generate interest in Mahkota Parade despite rising competition in the greater Melaka market. The re-launch of Mahkota Parade is expected to take place from the 2nd quarter of 2010 onwards.

For Subang Parade, while the neighbourhood-focused strategy has proven resilient during the economic uncertainty of 2009, we will remain vigilant to protect market share and consumer interest. New developments and competition in the Subang Jaya market may have a short term negative impact to Subang Parade. However, we can relate the similar experience to Mahkota Parade in 2008 when new competitors opened up nearby. Fortunately, as the market stabilised, the long-term potential improved as the entire area surrounding Mahkota Parade was promoted as a shopping precinct. We are expecting a similar path for Subang Parade; over time as new entrants stabilise in the market, the area will be promoted as a shopping precinct, perhaps along similar lines as the ‘Bukit Bintang’ of Subang Jaya. In the meantime, we will continue to innovate and improve the leadership position of Subang Parade in the area.

In the Muar market, we expect to continue our work on Wetex Parade in terms of tenant remixing and various enhancements. Top on our list is the proposed refurbishment to improve Wetex Parade’s amenities and ambience and cement its status as Muar’s leading shopping centre. The plans are in the works and we hope to announce the project soon.

We continue to monitor the capital markets and their continuing recovery. With improving prospects for fundraising and with our cornerstone investor, Frasers Centrepoint Trust still in solid support, we remain optimistic this year of finding the right match of the right property at the right price at the right time.

Focus, focus, focus

Hektar has a focused formula. The REIT owns well-located properties with a strong focus on their respective markets, the business model is focused on the retailers and the shoppers and our management remains focused on our REIT’s business objectives. If I could break down the formula of the relationships of our stakeholders, it looks like this:

Happy shoppers → positive retailer sales → happy retailers → positive rental income growth → positive REIT performance → happy unitholders

Our shoppers will remember our malls, in turn, our retailers will respect our efforts and our unitholders will be rewarded with results. Our singular objective remains the same – making Hektar REIT the preferred landlord and retail manager of choice. Our vision remains “Creating The Places Where People Love To Shop”.

Acknowledgements

On behalf of the Board of Directors of Hektar Asset Management, I sincerely wish to acknowledge our people for their continued and dedicated attention to their work. Looking back last year, I remain impressed and proud of the people at Hektar. Their hard work throughout the year has ensured that Hektar REIT posted another positive year despite the uncertainties of 2009.

Hektar remains committed to our goals of providing a defensible, safe investment to unitholders. While my maxim last year was to “think positive”, my message this year is to “stay focused”.

Dato’ Jaafar bin Abdul Hamid
Chairman & Chief Executive Officer