Al-Salam Reit eyes 85pct occupancy by 2027, backed by Komtar revamp

KUALA LUMPUR: Al-Salam Real Estate Investment Trust (Reit) occupancy is expected to rise to around 80-85 per cent by 2027, up from 69 per cent in the first quarter of 2025(1Q25).
In its research note, Maybank Investment Bank Bhd (Maybank IB) said the Reit expects the improvement to be driven by space reconfigurations and a shift toward fixed-base lease arrangements.
"We estimate a rental upside of approximately RM3.5 million or about four per cent of revenue by financial year 2026 (FY26)," it said.
Maybank IB noted that Komtar JBCC in Johor Bahru, which makes up about one-third of Al-Salam's total property value, is undergoing significant upgrades, with the alfresco dining area already completed in 1Q25.
The reconfiguration of the second floor is driving a shift toward mini-anchor tenants, international brands, grab-and-go offerings, and categories such as pharmacy and food and beverage (F&B).
Level 3 will be anchored by a pedestrian overhead bridge (POB), scheduled to open in 1Q27, which is expected to materially boost footfall.
Meanwhile, Maybank IB said Al-Salam's 1Q25 results showed notable improvement, driven by higher net property income (NPI) from Komtar JBCC.
Retail NPI margins increased from 55.9 to 58.4 per cent, while net cash from operations surged more than 90 per cent year-on-year, supported by stronger rental collection and operating leverage.
However, gearing remains elevated at approximately 49 per cent, limiting near-term acquisition flexibility.
"Management is exploring long-dated debt to refinance short-term borrowings and reduce cash flow volatility, targeting a capital structure reset in the second half of 2025," it said.
The firm also added that Al-Salam has unveiled its "DISRUPT27" strategy, aimed at building a more resilient and focused portfolio anchored on high-quality retail and industrial assets.
Central to this transformation is to turnaround Komtar JBCC by 2027, leveraging on infrastructure developments especially the Rapid Transit System (RTS).
As part of the "DISRUP27" plan, Al-Salam also aims to gradually reduce its exposure to 42 KFC and Pizza Hut assets, representing 41 per cent of total assets, by divesting non-core and underperforming units in collaboration with QSR Brands (M) Holdings Bhd.
While these assets remain fully tenanted under triple-net leases, the focus is aimed toward enhancing core retail and industrial segments.
"Management expects the upcoming infrastructure developments such as the Electric Train Service, RTS and electrified double track project, to catalyse long-term demand, positioning Al-Salam to capture cross-border retail and commuter traffic from 2026 onwards," it said.
Maybank IB has maintained a "Hold" rating on Al-Salam, with an unchanged target price of 40 sen.

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