APPENDIX A VALUATION CERTIFICATES @ 4” HENRY BUTCHER MALAYSIA International Asset Consultants ‘Our Ref: VR/O1-12/0053 (A) Date: 03 AUG 2012 IGB REIT Management Sdn Bhd Level 32, The Cardens South Tower, Mid Valley Lingkaran Syed Pura 59200 Kuala Lumpur. Dear Sirs CERTIFICATE OF VALUATION OF A 5 LEVEL RETAIL MALL WITH 1 MEZZANINE FLOOR, 2 LEVELS OF BASEMENT CAR PARK AND 4 LEVELS OF ELEVATED CAR PARK KNOWN AS MID VALLEY MEGAMALL (“SUBJECT PROPERTY”) We were instructed by IGB Corporation Berhad (“IGB"), the sponsor of the IGB Real Estate Investment Trust (#IGB REIT") to conduct a valuation of the Subject Property. The full details of the valuation are included in our Valuation Report bearing reference no. VR/O1-12/0053(A) dated April 10, 2012. ‘This certificate has been prepared for inclusion in the prospectus in conjunction with the proposed establishment and listing of IGB REIT on the Main Market of Bursa Malaysia Securities Berhad (Bursa Securities”), ‘The Subject Property was inspected on February 24, 2012. The relevant date of valuation for this valuation exercise is as at April 10, 2012. We confirm that we have valued the Subject Property based on the valuation basis stated below. The valuation had been carried out in accordance with the Asset Valuation Guidelines issued by the Securities Commission and the Malaysian Valuation Standards issued by the Board of Valuers, Appraisers and Estate Agents, Malaysia. ‘The basis of valuation adopted is the Market Value which is defined as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing, seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. JENRY BUTCHER MALAYSIA Sdn Bhd 1160536." 25, Jalan Yap AN Shak, 50300 Kuala Lumpur, Malaysia 1+ 4605-2694 2212 t+ +603-2604 484 (aation) 2+ hbmoleysie@henrybutcha-com.m ‘uso Roe! Estate Agency | eesmant Ave literabonws Marketing | Market Reseach | Developer Constancy Prot Markolng | Asset Management| Ratal Panrirg & Cansuancy Auctions | Plant & Machinery [aet Gnsutanoy AA (@QricsProperty Deseription Property ‘Typef Interests Valued Name and Address of the Subject Property Location Age of Building Building Deseripti Existing Use of the Subject Properly Average Current Base Rental A 5 level retail mall (from Level LG to 3) with | mezzanine floor, 2 levels of basement car park (Basement | & 2) and 4 levels of elevated car park (from Level | to 3 & Mezzanine Floor) known as Mid Valley Megamall. Mid Valley Megamall forms part of the Phase | development of the prestigious scheme known as Mid Valley City. It bears official address as Mid Valley Megamall, Mid Valley City, Lingkaran Syed Putra, $9200 Kuala Lumpur, It is situated approximately 6 kilometres west of Kuala Lumpur City Centre and 4 kilometres east of Petaling Jaya. It is linked by ‘major arterial roads such as Jalan Syed Putra which connects to the Federal Highway, and also by Jalan Maarof, Jalan Tun Sambathan, East — West Link Highway and Sprint Highway. ‘The Subject Property is easily accessible from Kuala Lumpur City Centre by using Jalan ‘Tun Razak. From there, connect to Jalan Kuching and head south towards Jalan Kinabalu, thence tum onto Jalan Syed Putra and exit onto Mid Valley City. Further, the Subject Property is also accessible from Petaling Jaya via the Federal Highway or Sprint Highway heading west towards Kuala Lumpur. 13 years (from the date of the ‘Temporary Certificate of Fitness For Occupation (FCF) which was issued in year 1999) ‘The building is generally constructed on reinforved concrete framework resting on deep piled foundation with brick infill rendered extemally and plastered intemally, with waterproof reinforced eonerete fat roof concealed behind parapet walls, which also serve as the foundation for the abovementioned office towers and hotels. Generally, the Subject Property is segmented into three sections, namely North Court, South Court and Center Court. Each section has its own entry point to the mall which is generally fitted with frameless automatic sliding glass door further secured with roller shutter. ‘The Center Court has two main entrances for patrons’ convenience, which are the East Entrance (near Coffee Bean) and ‘the West Entrance, located near the Starbucks Café, The Subject Property is also well connected to The Gardens Mall via an air-conditioned pedestrian bridge located on Level 1 and Level 2, as well as through the lower ground level which is ‘occupied by individual tenants along the passageway. Retail mall RM 9881 per sq. fi. per month A2Occupancy rate Year ‘Asatthe | 2011 2010 date of | valuation) _ __| ‘Oceupaney | 99.04% | 100.00% | 99.86% | 10.00% rate (Source The management team of MVC) Terms of Tenancy ‘The typical terms of tenancy is 3 years with the option of renewal option between I to 3 years le Particulars Master Title No. PN37075, Lot 80, Seksyen 95A, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur Tenure Leasehold for 99 years expiring on June 6, 2103 thus leaving an unexpired term of approximately 91 years as at the date of this certificate, Category of land use Building (Bangunan) Land Area. 1,047,532 square feet (4sq. fl") (97,319 square metre “sq. m.") Gross Floor Area Approximately 6,107,103 sq. ft. (567,369 so. m.) Net Lettable Area Approximately 1,729,108 sq. ft. (based on rental roll as at March NLA”) 26, 2012) No. of Car Park Bays 6,092 bays (as at March 26, 2012) Registered Owner Mid Valley City Sdn Bhd(*MVC”) Express Condition This land shall be used for commercial building only(Tanah ini hendaklah hanya untuk bangunan perdagangan sahaja) ‘This land shall not be transferred, leased, secured or charged except with the consent of the Federal Territory Land Executive Committee Secretariat (Tanah ini tidak boieh dipindah milik dipajak, dicagar atau digadai melainkan dengan kebenaran Jawatankuasa Kerja Tanah Wilayah Persekutuan Kuala Lumpur) * We wish to draw your attention that the Subject Property carries a restriction in interest which stipulates that the land shall not be transferred, leased, secured or charged except with the consent of the Federal Territory Land Executive Committee Secretariat. In this regard, our valuation is on the basis that the written consent from the Federal Territory Land Executive Committee Secretariat in respect of the aforesaid restriction in interest will not be unreasonable withheld, INDIVIDUAL BLOCK STRATA TITLES IN RESPECT OF THE SUBJECT PROPERTY HAS NOT BEEN ISSUED BY THE RELEVANT AUTHORITY. OUR VALUATION IS ON THE BASIS/ASSUMPTION THAT INDIVIDUAL BLOCK STRATA TITLES _IN RESPECT OF THE SUBJECT PROPERTY WILL BE ISSUED BY THE RELEVANT AUTHORITY AND WHEN ISSUED, WILL BE FREE FROM ALL ENCUMBRANCES A3Planning Appro Planning Approval Date of Certificate of Fitness for Occupation The Subject Property is located within an area designated for commercial purposes. The Subject Property was issued with Certificate of Fitness for Occupation (“CFO*) dated 8 December, 2001. An amended building plan has been submitted on 27 March 2012 to Dewan Bandaraya Kuala Lumpur (“DBKL") for approval. Occupancy Rate ‘Tenancy Profile Tenancy Term 99.04% as at the date of valuation ‘The Subject Property has three major anchor tenants, namely AEON, Metrojaya and Carrefour which occupy approximately 713,307 sq. f. of retail space. There are also 18 others junior anchor tenants such as Golden Screen Cinema, Mega Kidz, MPH Bookstore, Kamdar and Toys *R’ Us. The landlord is assumed to be responsible for all external and structural repairs, statutory outgoings, service charges (if any) and building insurance for the property. Overall, the tenant mix of the Subject Property can be summarised as follows:- Departmental Store / Supermarket Entertainment and Leisure 151 iit Fashion Apparel 14 306 Food and Beverage 13 167 Sundry and Services i Th Beauty, Health & Wellness a2 6 Exhibition Centre 39 3 Home and Gifs 3a 3.0 Discounters Ts 1S Timepiece and Jewellery TH a Total 100.0 100.0 (Source : The management team of MVC)‘Trade Sector Analysis | Beauty, Health & Exhibition Center, i Wellness, 4.20% 3.90% | Sundry and Services, ‘Other, 6.30% 6.10% | Fashion Apparel, 12.40% Entertainment and Leisure, 15.10% | Food and Beverage, 11.30% Department Store ‘Supermarket, 41.70%) Bexhibition Center other Fashion Apparel Food and Beverage MDepartment Store/ Supermarket Entertainment and Leisure Sundry and Services Beauty, Health & Wellness Source: Manager Note Bete on percentage o ceca (Seite fae mcs such te Hore ane Gite, Occunters and Tmepiaces and Jewel. ‘The table below illustrates the tenant mix table of the Subject Property:= Type of Tenant | Area Occupied | Rental Income ofNLA _|_ombase rental_| | Key Tenant 48.30% 14.86 % ‘Normal Tenant 51.07% 82.37% Kiosk 0.63% 2.16% ‘The table below illustrates the tenancy expiry profile of the Subject Property as at 31/12/2011 Peet Rien eee Pee) Meee Cet ic am Once Low Income expiring (%) esa expiring (%) 2012 193 26.33 34.68 2013, 174 26.50 32.24 2014 51 34.58 32.70 2015 and thereafter 2 1261 037 Total I 460 100.00 100.00 * Excluding carts, storage, signage, light boxes, auto-teller machines, payphone and kiddy rides. (Source : The management team of MVC) ASWe have adopted the “Investment Method” and “Comparison Approach” in formulating our opinion of the Market Value of the Subject Property. Investment Method In the “Investment Method”, the capital value of the Subject Property is derived from an estimate ‘of the Market Rental which the Subject Property can reasonably be let for. Rental evidence may be obtained from actual passing rents commanded by the building itself if it is tenanted, Outgoings, such as property taxes, repairs and maintenance, insurance and management are then deducted from the annual rental income. The net annual rental income is then ca current market yield to arrive at its indicative capital value. For our calculation purpose, we have categorised the tenancy into 3 eategories:- ’) Key Tenant (i. Carrefour, AEON, Metrojaya, Uniglo, Toys ‘R’ Us, Kamdar, Oasis Food Court and Golden Screen Cinema) Normal Tenant (tenants other than the Key Tenant) Kiosks 1) Gross Rental Gross rental is divided into 2 categories which is term rental and reversionary rental, The term rental is the expected rental that the Subject Property is expected to achieve and is derived from the current rental tenancy. ‘The reversionary rental is the expected rental that the Subject Property is expected to achieve upon expiry of term rental. We have use the average term tenancy rental as a benchmark to arrive at our teversionary rental. However, some of the term rental is,on the low side as compared to the prevailing term rental rate of its neighbouring lots on the 2" and 3 floor of Mid Valley Megamall and therefore, we have adjusted the reversionary rental upwards. ‘The term rental rate for key tenants has been increased 10% upon the reversionary period as itis stipulated in the tenancy agreements that rental inerease upon expiry will be in the range of about 10% to 20% and we have adopted a 10% inerement upon reversionary. [Average current base rental RM 9.81 per sq. fA. per month ‘Average reversionary base rental_| RM 10.20 per sq. ft. per month AG2) Other Income ‘ental income - percentage | 31,006,000 | 26,823,000 | 23,240,000 | 23,329,000 rent (RM) [Other Income= 737,000 7,378,000 6,980,000 6 810,000 Leasing (ATM, Storage, | Cart, Signage, Interior, | Website) (RM) “Advertisement and | 7,848,000 5,802,000 Promotion’ Mailbox/ Pai Phone/ Sundry Income (RM) 358,000 $745,000 ‘Car park income (RM) 24,434,000 | 20,911,000 | 20,098,000 | 19,505,000 ‘(Source : The management team of MVC) We have adopted an average gross annual income for year 2010 and 2011 of RM28,900,000 for percentage rent, RM22,680,000 for car park income and RMI4,200,000 for leasing and advertisement and promotion, 3) Operating Expenses (Outgoings) ‘These are the expenses incurred in maintaining the Subject Property, which comprise staff costs, ‘operational costs of the Subject Property, general expenses, headquarters support expenses and ‘maintenance cost We have been informed by the client that the tenants of the Subject Property are currently paying RM 1.50 per sq.ft. per month for service charge. It should be noted that the historical operating costs exclude part of lower ground floor with the NLA of approximately 25,467 sq. f.which is designated as part of the Subject Property are currently under the management of Mid Valley City Gardens Sdn Bhd, the owner and operator of ‘The Gardens Mall The historical operating cost is presented as follows:~ Outgoings 2011 2010 2009 2008 Outgoing (RM)* 37,068,000 54,988,000 56,481,000__| 59,693,000 ‘Outgoing (RM! per 219 2.69 76 2.92 5q.ft)e* (Source : The management team of MVC) * This outgoing covers staff cost, property cost, general expenses, advertising and promotion costs, headquarters support expenses and property upgrade expenses for retail. ** Based on NLA of 1,703,641 sacft. which excludes 25,467 sq ft The average historical operating expenses excluding the major capital expenditure of property upgrading over the past 4 years is approximately RMS7,057,500 per annum (RM2.75 per sq.ft) Therefore, we have adopted RM2.70 per sq.ft. which is similar to the operating expenses in year 2010 in our valuation computation. ATTo arrive at the outgoing for the retail area (i.e. excluding the carpark) we have deducted the estimated outgoing for the carpark portion, We have allowed the carpark outgoing as 15% of the carpark revenue. Therefore, outgoings for the retail area portion after deducting the carpark. outgoing are as follows:- Analysed outgoing | NLA (sq.ft) | Outgoings to be collected per annum Key tenant RM 1.70 per sq. f. 335,095 RM 17,036,000 ‘Normal tenant RM 3.30 persq fe 883,053 RM 34 960,000 Kiosk RM 3.30 persq. ft 10.960 RM__ 434,000 TOTAL T_1,729,108 RM 52,439,000 | (RM2.53 per sq. ft) id carpark expenses adopied 15% of revenue RM22,680,000 RM 3,402,000 Total outgoing (retail area and carpark) RMS5,841,000 (RM2.70 persq. We have been informed by the client that the security services and the maintenance of the common area (including escalators) within the Key Tenant lots are being managed by the Key Tenants themselves. Thus, we have adopted an analysed lower rate at RM 1,70 per sq. ft. per month as operating expenses for key tenants. We have analysed actual carpark outgoings for the subject properties to be in the range of 3% - 6% without taking into accounts the shared cost between the retail mall portion and the car park portion such as security charges, utilities charges, property maintenance charges, etc. We have also noted that other retails mall of the similar capacity and location such as Pavilion Mall and Sunway of the carpark income as their carpark outgoing. As such, we have adopted 15% of the carpark income as outgoings rate which is reflective of realistic outgoing rate. We have compiled the following outgoings rate for other retail malls in Klang Valley as comparables:- T Monthly Outgoing | Net Lettable Area (sq.ft) (per sq.ft) Year Ending Pavilion | 1,335,119 3.60 2011 Subang Parade | 521,807 2.65 2011 Sunway Pyramid | 1,685,568 275 2009 PC | 304,943 2.63 2010 (Gouree Prospectus of respective malls) Monthly outgoings for other retail malls in Klang Valley are in between RM2.63 per sq. ft. to RM3.60 per sq. ft. Thus, the analysed outgoings we have adopted for Mid Valley Megamall is within the market range. 4) Yield ‘This yield is used to capitalise the annual net rental to arrive at the capital value. We have adopted the following capitalisation rate for the Subject Property. Period eect Com rec) ic) ‘Tenaney period Reversionary Period (upon tenancy expiry) "Higher rate to reflect risk due to uncertainty. ASThe following are the analyzed yields for other retail malls in Klang Valley: Comparable1___| Comparable2 | Comparable3__|Comparable4 | Comparable 5 Property Pavilion Kuala} Sungei Wang | Starhill Gallery | Lot 10 Shopping | Sunway Pyramid ‘Lumpur Mall Plaza Centre Location Jalan Bukit Bintang [Jalan Bukit Jalan Bukit | Jalan Sultan | Bandar Sunway | Bintan; | Bintang Ismail [NTA Gq) [7.335.119 450,470 [297,354 256811 1,685,568 Consideration | RM 3,190,300,000_ | RM 724,000,000, RM 629,000,000 | RM 401,000,000 | RM 2,132,025,000 Price | [Transaction 2011 2010 | 2010 2010 2010 [Year | [Source Prospectus of | Prospectus of | Bursa Securities’ | Bursa Securities’ | Bursa Securities” | Pavilion REIT CapitaMalls | Announcement | Announcement | Announcement | Malaysia Trust | [Transacted Price | RM 2,390 RM 1,607 RM 2115 RM 1,361 RM 1,265 (Per. sq.ft. [Net income | RM 203,326,000 | RM49,956,000 | RM 42,800,000 | RM 27,250,000 | RM 146,000,000 | (includes carpark income and other income) _ | Analysed Yield_| 6.37% 6.90% 6.80% 6.85% ‘Average net | RM 12.69 per sq.| RM 9.24 per sq.| RM 11.99 per | RM 8.84 per sq. | RM 7.22 per sq. income per | ft, ft. sq.ft. ft, ft NLA The analysed yield of the retail malls set out above shows a range between 6.37% to 6.90%. We have adopted Pavilion Kuala Lumpur Mall as the best comparable due to its similarity in terms of large NLA space and also its date of transaction which is close to date of this exercise. Based on the analysed yield of Pavilion Kuala Lumpur Mall of 6.37%, we have further made downward adjustments on the following factors: 1) Average net income per sq. f. for Pavilion Kuala Lumpur Mall is RM12.69 per sq. ft whereas the Subject Property average net income per sq. ft. is RM8.95 per sq.ft. for year 2011. As the average net income per sq. ft. of the Subject Property is lower than Pavilion Kuala Lumpur Mall, the risk also should be lower and therefore a lower yield was adopted. 2) Average occupancy rate for Pavilion Kuala Lumpur Mall and the Subject Property for the _past 3 years are as follows:- [Year 2011 2010 2009 Pavilion Kuala 98.50% 96.50% 98.70% | Lumpur Mall {as at June 30, 2011) [Subject Property 10.00% 99.80% 160.0% (Source : The management team of MVC) Itcan be seen that the occupancy rate for the Subject Property is higher, this shows the risk is lower therefore a lower yield adopted. Based on the above factors, we find that the 6% yield adopted for Normal Tenants is fair. As for Key Tenants, the tenancy periods are longer and the rental rates are lower and therefore we have adopted a lower yield of 5% due to its stability. As for Kiosks, we have adopted a yield of 5.75% which is slightly lower than Normal Tenant as it is generally easier to rent out and has a high demand. AgWe have adopted 6% yield for carpark and teasing and advertising and promotion income as itis considered to be stable whilst 8% was for turnover rent income is to reflect its more fluctuating nature. ‘The overall analysed average yield of the Subject Property is 5.32% taking into consideration the ower rentals as compared io the comparables and the fact that the Key tenants make up approximately 48.30% of total net lettable area. 5) Voids We have adopted a 3.0% for void allowance for vacancy periods, marketing and rent free periods offered to new tenants as the Subject Property has recorded an occupaney rate of more than 99% cover the past few years. Year ‘As at the date of zi | 2010 2009 valuation) ‘Occupancy rate 99.04% 100.00% 99.86% 100.00% (Source : The management team of MVC)‘Comparison Method This approach is the Market Approach of comparing the Subject Property with similar properties, that were either transacted recently or listed for sale within the same location or other comparable localities. In comparing properties, due consideration is given to factors such as location, size, building differences, improvements and amenities, time element, quantum discount for en-bloc sale and other relevant factors to arrive at our opinion of value. Our findings from the data of the Valuation and Property Services Department, Ministry of Finance Malaysia data revealed that there are few transactions of retail malls within the vi For the purpose of this valuation, we have adopted the following comparables, Comparables i z 3 z Property Pavilion Kuala | Sungei Wang Plaoa | Suri Gallny | Uot TO Stopping Lumpur Mall Cente Sourse Prospectus oF | Poapecns of] Bursa Securities" Bursa — Seeuries Pavifn REIT | CapitaMalls Announcement | Announcement Malaysia Trust Tenare Teaschold for 99 | Frechotd Frechand Teasshold tor 95 yeas expiring on years expiring on October 26, 2109 July 29,2076 Age (ee ae) Approximately 5] Approximately 3 [Approximately 15 | Approximately 20 transaction date) | years yews ar ars Net Letable| 1335119m,R [5041 R | 97ASIaG RP 28a Area Consideration RM3, 190,300,000 | RM724,000,000 RM629,000,000 | RM401,000,000 “Transaction | 01/06/2011 107062010 1610872010, 1670872010, Date ‘Veron Trasharia Vast Winner” Stn] Mayban Trastse| Mayban Trice - __| cemering sn Bia | Bhd Bead Berhad Purchaser | AmiTrustee “AmiTrustee HSBC HSBC Berhad, the | Berhad, ‘the | Institutional ‘Trust | Institutional ‘Trust trustee of Pavilion | trustee of | Services Services REIT CapitaMalls | (Singapore) (Singapore) Malaysia ‘Trust | Limited, the | Limited, the (CMMT) trustee of Starhill | trustee of Starhill Global REIT | Global REIT Value peraq. f._| RMZS90 M607 RM2.115 RMI.S6I ‘Adjustment - Location = Time = Time = Time Made + Accessibility |~ Location + Location + Location = Income = Condition = Accessibility | - Accessibility = Accessibility | - Tenure © Tenure + Tenure = Size = Size > Size + Master Lease | Master Lease Agreement ‘Agreement al Adjusted Value (per sq 8) | rMisiz RM 1,527 RM 1,798 RM 1640‘After final adjustment, we have arrived at a range of RMII,527 per sq. ft. to RMI,912 per sq. ft Having taken the above into consideration, we are of the opinion that comparable No. 1, Pavilion Kuala Lumpur Mall is the best comparable to the Subject Property due to its similarities in size and compatibility in Kuala Lumpur. It is therefore our opinion that RM1912 per sq. ft. reflects the fair and reasonable current market value for the Subject Property. The value summary from both methods of valuation and the reconciliation rationale are as follows: Investment Method RM 3,440,000,000 Comparison Method RM 3,306,000,000 In arriving at a market value for a homogeneous property such as vacant lands and residential properties, the Comparison Approach is the most appropriate method of valuation as there are less adjustments and analysis on comparables. However, for a more complex property and other income generating or investment properties, qualitative and quantitative adjustments are more difficult to compute to reflect the differences of the comparables and the property being valued. ‘Therefore, we have adopted the Investment Method as the main method in arriving at our opinion of the current Market Value. We are of the opinion that this is the best method to be used in instance as the Subject Property is an income generating commercial property. It is our opinion that the current Market Value of the Subject Property with the rem unexpired term of approximately 91 years, wi subject to the existing tenancies and the indi ing, Certificate of Fimess for Occupation issued, idual block strata titles being issued free from encumbrances, as at April 10, 2012, is RM 3,440,000,000. Yours faithfully, HENRY BUTCHER MALAYSIA SDN BHD las LONG TIAN CHEK B.S, MRICS, MRISM Registered Valuer (V-241) LTCiyeolapril’sk An@ ©~ HENRY BUTCHER MALAYSIA International Asset Consultants (Our Ref: VR/O1-12/0053 (A) -Itr Date: § 3 AUG 2012 IGB REIT Management Sdn Bhd Level 32, The Gardens South Tower, Mid Valley City Lingkaran Syed Putra 59200 Kuala Lumpur. Dear Sirs REPORT AND VALUATION OF A 5 LEVEL RETAIL MALL WITH I MEZZANINE FLOOR, 2 LEVELS OF BASEMENT CAR PARK AND 4 LEVELS OF ELEVATED CAR PARK KNOWN AS MID VALLEY MEGAMALL (“SUBJECT PROPERTY“) ‘We refer to our Valuation Report bearing reference no, VR/01-12/0053(A) dated April 10, 2012. We are writing to inform that subsequent to the Valuation Report, we note that the application for alienation of land adjacent to Lot 80, Section 954, Town of Kuala Lumpur has been approved subject to the conditions stated vide a letter bearing reference no. PTG/WP.2/43781/1 1(21) dated June 22, 2012. Yours faithfully, HENRY BUTCHER MALAYSIA SDN BHD. oe LONG TIAN CHEK B.Sc., MRICS, MRISM Registered Valuer (V-241) LTCiyeo HENRY BUTCHER MALAYSIA Sdn Bhd ciso0s5 ») 25, Jalan Yaa A Shak, 50300 Kula Lumpur, Malaysia 1605-2604 2212 T 609-2608 3484 (valuation) omalaysia@nenybutcrercom my (slusion| w # www.henrybutcher.com.my Valuason | el Estate Agency Market Pesach 1D Pojact Maretng | Asset Manage pootcoams (QQrics Gay@ *© HENRY BUTCHER MALAYSIA International Asset Consultants Our Ref: VRVO1-12/0053 (B) Date: 1 3 AUG 2012 IGB REIT Management Sén Bhd Level 32, The Gardens South Tower, id Valley City Lingkaran Syed Putra 59200 Kuala Lumpur. Dear Sirs CERTIFICATE OF VALUATION OF AN 8 LEVELRETAIL MALL TOGETHER WITH 4 LEVELS OF BASEMENT CAR PARK AND 4 LEVELS OF ELEVATED CAR PARK KNOWN AS THE GARDENS MALL (“SUBJECT PROPERTY”) We were instructed by IGB Corporation Berhad, the sponsor of the IGB Real Estate Investment Trust (“AGB REIT”) to conduct a valuation of the Subject Property. The full details of the valuation are included in our Valuation Report bearing reference no. VR/01-12/0053(B) dated April 10, 2012. This certificate has been prepared for inclusion in the prospectus in conjunction with the proposed establishment and listing of IGB REIT on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”). ‘The Subject Property was inspected on February 24, 2012. The relevant date of valuation for this valuation exercise is as at April 10, 2012. We confirm that we have valued the Subject Property based on the valuation basis stated below. ‘The valuation had been carried out in accordance with the Asset Valuation Guidelines issued by the Securities Commission and the Malaysian Valuation Standards issued by the Board of Valuers, Appraisers and Estate Agents, Malaysia. ‘The basis of valuation adopted is the Market Value which is defined as the estimated amount for ‘hich a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion, HENRY BUTCHER MALAYSIA Scin Bhd :150605-") 26, alan Yap A Shak, 50300 Kusla Luror, Maia t= 4608-2654 2272 1» +609-2604:3484 (vat 2» hbmelaysiaghonnyburchercom my (alusto>)_w wwwhenrybutcher.com.mmy \ouson Fo x Aaya ey ame nae Mae RewwesICeweenencananny (QQ RICS CBS rect Marketa Astat Management| Ratal Planing & Consutancy | Axcions I Pant & Macrinery At Coneitncy 4 AndProperty Description Property Type! Interest Valued Name and Address of the Subject Property Location Age of Building Existing Use Of The Subject Property Average Current Base Rental Occupancy Rate ‘Term of tenancy An 8 level retail mall (Level LG to Level 6) together with 4 levels of basement car park (Basement P1 to P4) and 4 levels of elevated car park (Level 4 to Level 7) known as The Gardens Mall ‘The Gardens Mall forms part of the prestigious development scheme known as Mid Valley City. It bears the official address of The Gardens Mall, Mid Valley City, Lingkaran Syed Putra, $9200 Kuala Lumpur. Itis situated approximately 6 kilometres west of Kuala Lumpur City Centre and 4 kilometres east of Petaling Jaya. It is linked by major arterial roads such as Jalan Syed Putra which connects to the Federal Highway, and also by Jalan Maarof, Jalan Tun Sambathan, East — West Link Highway and Sprint Highway. The Subject Property is easily accessible from Kuala Lumpur City Centre by using Jalan Tun Razak. From there, connect to Jalan Kuching and head south towards Jalan Kinabalu, thence tum onto Jalan Syed Putra and exit onto Mid Valley City. Further, the Subject Property is also accessible from Petaling Jaya via the Federal Highway or Sprint Highway heading west towards Kuala Lumpur, 5 years fiom the date of the first Temporary Certificate of Fitness For Occupation (TCF”)which was issued in 2007, ‘The building is generally constructed on reinforced concrete framework resting on deep piled foundation with brick infill rendered externally and plastered intemally. The building also has a water proof concealed reinforced concrete flat roof and metal deck roofing on top. We noted that a portion of the roof was constructed with steel roof trusses covered with glass panel to allow for natural skylight to the podium. ‘The Gardens Mall has two main drop off entrances to the mall which is generally fitted with frameless automatic sliding glass door. One drop off entrance is fronting Lingkaran Syed Putra, the main service road within id Valley City whilst another is fronting an intemal carriageway between ‘The Gardens Mall and Mid Valley Megamall. The Gardens Mall is also well connected to Mid Valley Megamall via an air-conditioned pedestrian bridge located on Level I and Level 2, as well as ‘through the lower ground level which is occupied by individual tenants along the passageway. Retail mall RM 5.92 per sq.ft. per month Yer 2011 2010 2009 ‘Occupancy Rate 99.64% [98.17% | 96.70% (Source : The management eam of MVCG) ‘The typical terms of tenancy is 3 years with the option of renewal option between | t0 3 yearsTitle Particulars Master Title No. Tenure Category of land use Land Area Gross Floor Area Net Lettable Area NLA’) No. of Car Park Bays Registered Owner Express Condition **Restriction In Interest PN37073, Lot 79, Seksyen 95A, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur Leasehold for 99 years expiring on June 6, 2103 thus leaving an unexpired term of approximately 91 years as atthe date of this certificate. Building (Bangunan) Approximately 421,773 square feet (sq. ft’ (sq.m.") or 9.68 acres) 89,184 square metre Approximately 3,379,510 sq. ft. (313,967 sq. m.) Approximately 814,860 sq. ft. (based on rental roll as at December 31, 2011) 4,128 bays (as at December 31, 2011) Mid Valley City Developments Sdn Bhd * ‘This land shall be used for commercial building only(Tanah int hendaklah hanya untuk bangunan perdagangan sahaja) ‘This land shall not be transferred, leased, secured or charged except with the consent of the Federal Territory Land Executive Committee Secretariat (Tanah ini tidak boleh dipindah milik, dipajak, dicagar ataw digadai ‘melainkan dengan kebenaran Jawatankuasa Kerja Tanah Wilayah Persekutuan Kuala Lumpur) *The Subject Property is currently owned and operated by MVCG, a wholly-owned subsidiary of KrisAssets. However, the master land on which the Subject Property is constructed is still held under a master title registered in the name of Mid Valley City Developments Sdn. Bhd. The subdivision of the master title and the issuance of individual strata titles to the various components constructed on the master land are pending, ‘**We wish to draw your attention that the Subject Property carries a restriction in interest which stipulates that the land shall not be transferred, leased, secured or charged except with the Consent of the Federal Territory Land Executive Committee Secretariat. In this regard, our valuation is on the basis thatthe written consent from the Federal Territory Land Executive Committee Secretariat in respect of the aforesaid restriction in interest will not be unreasonable withheld. INDIVIDUAL BLOCK STRATA TITLES IN RESPECT OF THE SUBJECT PROPERTY HAS NOT BEEN ISSUED BY THE RELEVANT AUTHORITY. OUR VALUATION IS ON THE BASIS/ASSUMPTION THAT INDIVIDUAL BLOCK STRATA TITLES IN RESPECT OF THE SUBJECT PROPERTY WILL BE ISSUED BY THE RELEVANT AUTHORITYAND WHEN ISSUED, WILL BE FREE FROM ALL ENCUMBRANCE! OVER THE RESPECTIVE FLOOR AREAS. M6Planning Approvals Planning Approval ‘The Subject Property is located within an area designated for commercial purposes. Date of Certifieate of ‘The Subject Property was issued with the latest TCF dated January Fitness for Occupation _16, 2012 whieh expired on June 29, 2012. An amended building plan has been prepared and pending submission 10 Dewan Bandaraya Kuala Lumpur (“DBKL”) for approval. Occupancy Details & Tenancy Profile Occupancy Rate 99.64 % as at date of valuation ‘Tenancy Profile ‘The Subject Property has three major anchor tenants being Isetan and. Robinson departmental stores and GSC Signature which occupy approximately 284,878 sq. ft. of retail space. There ate also ‘numerous junior anchor tenants such as Marks & Spencer, Marketplace by Cold Storage, Borders, Hokkaido Ichiba and Redbox. ‘Tenaney Term ‘The landlord is assumed to be responsible for all external and structural repairs, statutory outgoings, service charges (if any) and building insurance for the property (Overall, the tenant mix of the Subject Property can be summarised as follows:- Departmental Store! . 150 Supermarket Entertainment and Leisure | 16.1 10 Food and Beverage 150 192 Fashion Apparel Z B3 245 | Home& Gifs 75 67 Beauty, Health Wellness 60 438 Fashion (Luxury) 33 73 Sundry and Serviees 29 38 Timepieces & Jewellery 18 37 ‘| Total 100.0 100.0 (Source : The management team of MVCG)Trade Sector Analysis Home and Gifts, Other, 4.70% Fashion (Luxury), 7.5 3.30% Fashion Apparel, 13.30% ee Beauty, Health & Wellness, 6.00% Food and Beverage, | Entertainment and_| 15.00% Leisure, 16.10% Department store/ Supermarket, 340% j Other 1 Fashion Apparel | @ Food and Beverage @ Department Store/ Supermarket | ‘M Entertainment and Leisure 5 Beauty, Health & Wellness | G Fashion (Luxury) G Home and Gifts | Source Manager. | Note: Based on percentage of occupied NLA, | ("talaga etm uch eS a Sis, an imei and ewliry ‘The table below illustrates the tenant mix table of the Subject Property:~ Type of Tenant | Area Occupied | Rental income _ of NLA on base rental_| Key Tenant 34.96% 4.89% ‘Normal Tenant 63.2% 88.74% Kiosk 132% 6.36% ‘The table below illustrates the tenancy expiry profile of the Subject Property as at 31/12/2011 ener Tae mn ae aes Per Pree een es occupied et income expiring (%) err ey expiring (%) [2012 oe 13.2 178 2013 126 [529 54.3 2014 39 [32.2 24.8 — (2015 and thereafter 6 na [32 Total _ 233 100.0 | 100.0 | (Source: The management team of MVCG) “Excluding carts, storage, signage, auto-teller machines and kiddy rides. MMBWe have adopted the “Investment Method” and “Comparison Approach” in formulating our opinion of the Market Value of the Subject Property. investment Method In the “Investment Method”, the capital value of the Subject Property is derived from an estimate of the Market Rental which the subject property can reasonably be let for. Rental evidence may be obtained from actual passing rents commanded by the building itself if it is tenanted, Outgoings, such as property taxes, repairs and maintenance, insurance and management are then deducted from the annual rental income, The net annual rental income is then capitalized at an appropriate ‘current market yield to arrive at its indicative capital value, For our calculation purpose, we have categorised the tenants into 3 categories:- i) Key Tenant ie Isetan, Robinson & GSC Signature ii) Normal Tenant (tenants other than the Key Tenant) iii) Kiosks 1) Gross Rental Gross rental is divided into 2 categories which is term rental and reversionary rental. The term rental is the expected rental that the Subject Property is expected to achieve and is derived from the current rental tenancy. The reversionary rental isthe expected rental thatthe Subject Property is expected to achieve upon expiry of term rental. We have use the average term tenancy rental as a benchmark to arrive at our reversionary rental. The term rental rate for key tenants has been increased 10% upon the reversionary period as it is stipulated in the tenancy agreements that rental increase upon expiry will be in the range of about 10% to 20% and we have adopted a 10% increment upon reversionary. ‘Average current base rental RM 5.92 per sq.ft permonth | ‘Average reversionary base rental _| RM — 6.32 per sq. ft per month 2) Other Income VO) 5,774,000 3,867,000 | 1,847,000 Other Income: | Leasing 1,931,000 1,536,000 1,221,000, 519,000 | (ATM, Storage, Cart, | Signage Interior, Antenna, Website) ‘Advertisement , promotion | 1,055,000 802,000 753,000 (547,000 1 & Others | —_t | Car park income (15476000 | 12,996,000 [9.283.000 [6,140,000 (Source: The management team of MVCG) We have adopted an estimated gross annual income of RMS, 800,000 for percentage rent, RMIS, 476,000 for ear park income and RM3, 000,000 for leasing, advertisement and promotion.3) Operating Expenses (Outgoings) These are the expenses incurred in maintaining the Subject Property and include staff costs, operational costs of the Subject Property, general expenses, headquarters support expenses and maintenance cost. ‘We have been informed by the client that the tenants of the Subject Property are currently paying service charge of RM2.50 per sq.ft. per month, It should be noted that the historical operating costs include part of lower ground floor with the NLA of approximately 25,467 sq. . which is designated as part of the Mid Valley Megamall Sdn. Bhd. but are currently under the management of the Subject Property, the owner and operator of ‘The Gardens Mall. The historical operating cost is presented as follows:- Outgoings 2011 2010 2009 [ 2008 ‘Net Outgoing* 36,048,000 34,363,000 35,211,000 37,057,000 Outgoing (RM/ per sqR)*] RM357 | RM3ar | RM3.49_| —_RM3.67 ‘Gource : The management team of MVCG) *Total outgoings include staff cost, property cost, general expenses, advertising and ‘promotion cost, headquarters support expenses and property upgrade expenses for retail ** Based on NLA of 840,327 sqcft. which includes 25,467 sq.ft. ‘The average historical operating expenses of property upgrading over the past 4 years is approximately RM35,670,000 per annum (RM3.54 per sq. ft). Therefore, we have adopted average of RM3.54 per sq. ft. for retail area and carpark portion, To arrive at the outgoing for the retail area (i.e. excluding the carpark) we have deducted the estimated outgoing for the carpark portion. We have allowed the carpark outgoing as 15% of the carpark revenue, ‘Therefore, outgoings for the retail area portion after deducting the carpark outgoing are as follows:- [ ~ ‘Analysed outgoing | NLA (sq. ft.) | Outgoings to be L collected per annum Key tenant RM 5.30 per sq. ft 284,878 RM 11,281,000 RM330persq | 519,189 RM 20,560,000 |__RM3.30persq.f._| 10,793 RM __ 427,000 TOTAL 814,860 RM 32,268,000 _ (RM3.30 per sq. ft.) ‘Add carpark expenses adopted 15% of revenue RMIS,476,000 RM 2,321,000 j Total outgoing (retail area and carpark) RM34,589,000 l (RM3.54 per sq. ft) We have analysed actual carpark outgoings for the subject properties to be in the range of 3% - 6% without taking into accounts the shared cost between the retail mall portion and the car park portion such as security charges, utilities charges, property maintenance charges, etc. We have also noted that other retails mall of the similar capacity and location such as Pavilion Mall and Sunway Pyramid Mall is also adopting 15% of the carpark income as their carpark outgoing. As such, we have adopted 15% of the carpark income as outgoings rate which is reflective of realistic outgoing rate, 20We have compiled the following outgoings rate for other retail malls in Klang Valley as ‘comparables:- Monthly Outgoing Net Lettable Area (sq.ft) (per sq.ft.) ‘Year Ending Pavilion 13335,119 3.60 2011 Subang Parade 521,807 2.65 2011 Sunway Pyramid 1,685,568 2.75 2009 IPC 394,943 2.63 2010 (Gource Prospectus of respective malls) Monthly outgoings for other retail malls in Klang Valley are in between RM2.63 per sq. ft. to RM3.60 per sq. ft. Thus, the analysed outgoings we have adopted for The Gardens Mall is within the market range, 4) Yield ‘This yield is used to capitalise the annual net rental to arrive at the capital value. We have adopted the following capitalisation rate for the Subject Property:- Period eg OE) Tenant) a) ‘Tenancy period 6.00% | 5.00% 5.75% Reversionary Period (upon tenancy expiry) _ * 6.25% | #5.25% | * 6.00% “Higher rate to refleet risk due to uncertainty. ‘The following are the analyzed yields for other retail malls in Klang Valley: Comparable1 [| Comparable2 | Comparable3__| Comparable 4 | Comparable 5 Property Pavilion Kuala | Sungei Wang | Starhill Gallery | Lot 10 Shopping | Sunway Pyramid | Lumpur Mall Plaza | Centre Location Jalan Bukit Bintang [Jalan Bukit | Jalan Bukit | Jak Sultan | Bandar Sunway Bintang Bintang Ismail NEA GR) [1335009 450,470 297,354 1256811 1,685,568 1 Consideration | RM 3,190,300,000 } RM 724,000,000 | RM 629,000,000 | RM 401,000,000 | RM 2,132,025,000 Ps ‘Transaction 2011 2010 2010 2010 2010 Year Source Prospects of | Prospectus of | Bursa Securities’ | Bursa Securities” | Bursa Securities” | Pavilion REIT | CapitaMells Announcement | Announcement | Announcement | | Malaysia Trust ‘Transacted Price | RM 2,390 RM 1,607 RM 2,113 RM 1,561 RM 1,265, per.sq.ft. 1 —__} Net income | RM 203,326,000 | RM/49,956,000 | RM 42,800,000 | RM 27,250,000 | RM 146,000,000 (includes | carpark income | | and other | income) ‘Analysed Vield | 6.37% 6.90% 680% 680% | 685% | ‘Average net|RM 12.69 per|RM 924 per|RM 11.99 per|RM 884 per|RM 7.22 per income per | sq.ft. sq.ft. sqft. sq.ft. | sate | NLA. A21‘The analysed yield of the retail malls set out above shows a range between 6.37% to 6.90%. We have adopted Pavilion Kuala Lumpur Mall as the best comparable due to its similarity of large NLA space and also its date of transaction which is close 10 date of this exercise, Based on the analysed yield of Pavilion Kuala Lumpur Mall of 6.37%, we have further made downward adjustments on the following factors:~ 1) Average net income per sq. ft. for Pavilion Kuala Lumpur Mall is RM12.69 per sq. ft whereas the Subject Property average net income per sq. ft. is RM7.03 per sq. fi. for year 2011. As the average net income per sq. ft. of the Subject Property is lower than Pavilion Kuala Lumpur Mall, the risk should also be lower and therefore a lower yield was adopted, 2) Average occupancy rate for Pavilion Kuala Lumpur Mall and the Subject Property for the ‘past 3 years are as follows:- Year 2011 2010 2009 Pavilion Kuala 98.50% 96.50% 98.70% Lumpur Mall (as at June 30, 2011 ‘Subject Propert 99.64% WIT 96.70% (Source : ‘The management team of MVCG for Subject Property) I can be seen that the occupancy rate for the Subject Property is higher for year 2010 and 2011, this shows the risk is lower therefore a lower yield adopted, Based on the above factors, we find that the 6% yield adopted for Normal Tenants is fair. As for Key Tenants, the tenancy periods are longer and the rental rates are lower and therefore we have adopted a lower yield of 5% due to its stability, As for Kiosks, we have adopted a yield of 5.75% which is slightly lower than Normal Tenant as it is generally easier to rent out and has a high demand. We have adopted 6% yield for carpark and leasing and advertising and promotion income as itis considered to be stable whilst 8% was for tumover rent income is to reflect its more fluctuating, nature. ‘The overall analysed average yield of the Subject Property is 6.11% taking into consideration the lower rentals as compared to the comparables. 5) Voids We have adopted 3.0% for void allowance for vacancy periods, marketing and rent free periods offered to new tenants as the Subject Property has recorded an occupancy rate of more than 96% over the past few years. Year 2011] 2010 2009 ‘Occupancy Rate | 99.64% | 98.17% | 96.70% (Source : The management team of MVCG) ‘omparison Method This approach is the Market Approach of comparing the Subject Property with similar properties that were either transacted recently or listed for sale within the same location or other comparable localities. In comparing the properties, due consideration is given to factors such as location, size, building differences, improvements and amenities, time clement, quantum discount for en-bloc sale and other relevant factors to arrive at our opinion of value. 22ur findings from the data of the Valuation and Property Services Department, Ministry of Finance, Malaysia revealed that there are few transactions involving retail malls within the vicinity. For the purpose of this valuation, we have adopted the following comparables. ‘years expiring on October 26, 2109 [Comparables 1 2 3 4 Property Pavilion Kuala | Sungei Wang Plaza __| Starhill Gallery Lot 10 Shopping Lumpur Mall Centre ‘Source Prospectus OF | Prospectus of| Bursa Securities’ [Bursa __ Securities” Pavilion REIT CapitaMalls Malaysia | Announcement Announcement Trust Tenure Teasehold for 99 | Freehold Freehold Leasehold for 99 years expiring on July 29, 2076 ‘Age (as at| Approximately 5 | Approximately 34 | Approximately 15] Approximately 20 transaction — | years years years years date) Net Lettable | 1,335,119 sq f 430,470 39, Fe 297,354 39, fe 256.811 59. ft ‘Area ‘Consideration _| RM3,190,300,000___| RM724,000,000 [RM629,000,000 | RM40,000,000 Transaction | 01/06/2011 10/06/2010 16/04/2010 16/04/2010 Date Vendor Urasharta Cemerlang | Vast Winner Sdn Bhd |Mayban Trustee | Mayan ‘Trustee Sdn Bhd _| Berhad Berhad Purchaser | AmTristee Berhad, | AmTrustee Berhad, the | HSBC Institutional | HSBC — Institutional the trustee of Pavilion | trustee of CapitaMalls | Trust Services | Trust Services, REIT Malaysia Trust | (Singapore) Li (Singapore) Limited, (CMMT) the trustee of Starhill | the trustee of Starhill _ Global REIT Global REIT Value per sq. | RM2,390 RMI,607 RM2115, RMI,S61 ft ‘Adjustment = Location > Time = Time > Time Made = Accessibility | - Location - Location = Location = Income = Condition = Accessibility = Accessibility - Accessibility - Tenure - Tenure - Tenure - Size + Size - Size = Master Lease = Master Lease Agreement Agreement | Final Adjusted Value (per sq. | fi) RM 1,792 RM 1,527 RM1.798___| RM 1,640 ‘After final adjustment, we have arrived at a range of RMI,S27 per sq. ft. to RM1,792 per sq. ft. Having taken the above into consideration, we are of the opinion that comparable No. 1, Pavilion Kuala Lumpur Mall is the best comparable to the Subject Property due to its similarities in size and compatibility in Kuala Lumpur. Itis therefore our opinion that RM1,792 per sq. ft. reflects the fair and reasonable current market value for the Subject Property. 23‘The value summaries from both methods of valuation and the reconciliation rationale are as follows:~ Investment Method RM 1,160,000,000 Comparison Method RM 1,460,000,000 In arriving at a market value for a homogeneous property such as vacant lands and residential properties, the Comparison Approach is the most appropriate method of valuation as there are less adjustments and analysis on comparables. However, for a more complex property and other income generating or investment properties, qualitative and quantitative adjustments are more 1WOU0D® “oiBos 94, Ut s10\50sp Josnjou PUD sIsU9 \gop uoedon3 Oy WOH SE5\D S.499409 40 BYE UHI" 10 PO! 409 24. "suse; soud yuojsuoD UI | 19Z UI UOWINY Z62'BBSWA OF 0ODZ U! LOH LOF’9SEWa WOH meL8 (gD) fInpOIg 2¥seWOR F504 aesseessaq| i aad \ZLOZ ~ 0002, “MaIAIORO C4Oq aHWOUOD s10yo21puy 2WOUDg hoy", OOUNO GNV MGIAYIAO DINONODA VISAVIVW OZ JOON PU_ Ma!AIEAG 2WIOODg HISKD]OW Z 4ajdpyyChapter 2 Malaysia Economic Overview and Outlook 2.2 Income and Spending Trends 2.2.1 Moon Gross Menthly Household Incame Table 2.2c: Malaysia Grass Monthly Household Incame, 1999 - 2009 Maloysio | 2.472 | 3,247 | 3,686 | 4,025 205% Koolo lumpor | 4,705 | 5,011 | 5.322 | 5.488 295% Selangor | 3.702 | 5175 | 5.580 | 5,967 488% ‘See Fnac Hanving Unt and Departnan of Sashes Malye, Hovaahol Income Savy = The naffanal mean grass monthly hausehald income increased from RM2,472 in 1999 to RM4,025 in 2009 at a CAGR of 5.00%, m= The mean grass manthly havsehold incames in Kuala Lumpur ond Selongar were RM5,48B and RM5,962, respectively, in 2009, bath of which were higher than the notional average of RM4,025. Kuala Lumpur's mean gross monthly household income. ‘grew by « CAGR of 2.95% from 1999 fo 2009, whilst that of Selangor grew by a CAGR af 4.88% during the same period. 2.2.2 Hauseheld Expenditure Chart 2.2b: Malaysia Composition of Household Expenditure, 1998/99 - 2009 100% Education soe | Grea Heath dle, berger od 80% tobocco von PBR ond ooteoe sozeoon an lire oon | exfething, ovnbold re tenance son | ecuemmines woe | Restovents ond hotels | ticoloneou good on ony OFS | Soli 10% 1BFood ond non-alcoholic eves om nw - 1998/99 2004/05 2009 Source: Departmen of Sloisios Moaysa and Bonk Negara Malaysia Based on the most recent Household Expenditure Survey corried out by the Department of Statistics Malaysia ond reported by Bonk Negora Molaysia in 2009, Malaysian households spend, on average, 51.6% af their total expenditure on a few key items, including food and nan-alcoholic beverages (21.8%, housing, water, electricity, gas and fuels (16.7%) and transport (13 1%). The total percentage of spending an these core items CBRE |Meat sy ctr Poge 3 wemeutcimmes Sen BSChapter 2 Malaysia Economic Overview and Outlock 223 was reported to be lower in this latest survey than in previous surveys (58.2% in 2004/05 cond 58.7% in 1998/99) Components of expense that have grown in importance as @ percentage of total expenditure over the post ten years from 1998/99 ta 2009 include cammurication (+105.6%), miscellaneous goods and services (+95.4%), alcoholic beverages ond tobacco (+21.1%), heclth (+16.7%), and recreation (+14.0%). This is characteristic of income growth in emerging economies. As household incame increases, the proportion of percentage of expenditure an discretionary items e.g. mobile devices, beauty services, trovelling increases while the percentage of expenditure on essential items decreases. ‘Consumer Spending Behaviaur and Preference ‘Malaysia's GDP has grown by 65% since 2000 ot CAGR af 4.66%, and by correlation the ‘average heusehold income in Kuala Lumpur and Selangor have grown 34% and 61% respectively during the period 1999 - 2009. In this period there has been @ corresponding shift in the consumer spending pattern as well. This growth in household income has roised disposable incomes whilst at the same time raising the Klang Valley to © brood middle class base, At RMS,A8B ond RM5,962 pe Lumpur and Selangor, the population lies squarely in the middle-midale income lavel (household income of RMS,000 to RM.10,000 per month), This allows a lot af room for the retail industry to grow as well. There was @ time when it month average incomes far Kuala wes dificult 10 support lifesiyle mall, as income levels were not sufficient and the cspirational brands not offordeble. But in less then 15 years, we have sean + 38 influx of many new foreign retailers and brands, meny much cwoited by the wall heeled. The breadth of merchandise hot therefore increased and this hot very quickly put the Molaysien retail market on par with the best in he region. What i different now from their nascent doys of the 80's is that our malls ere now the Maloysion "third place’, after the home and the workplace. The frequency with which we vist our moll is fell-ole sign of ou new lifestyle ~ private surveys conducted in the city centre mall and suburban mall show that average annual vsitations to malls were both more thon 50 times « year, that is ot least once a week The retail industy in the Klang Valley hos matured as well and is similar to markets in Bangkok end Singapore. Now we have not only cought up, but aur brands have grawn inta regionel enes os well, including Perkson and Bonia, which are both highly successful Likewise the qualiy of many of our new malls is Fst closs and certainly investment grade. Amature retail industry implies segmentation of demographics in terms of incomes ond behavioural patterns. Certainly, mini theme parks on roof tops of malls are no longer in ‘vogue beth in Bangkok and Kuale Lumpur. In ther place replexes are becoming mein ‘anchor tenants of malls. The food and beverage sector hos likewise become ¢ major draw as lifestyles change to the extent where consumers are now eating out more than twice & week, as oppased to cooking ot home. This has resulted in food and beverage content surging past 15% of trade mix in terms of net letiable area in most successful malls worldwide ond even more so in Kuala Lumpur, Fashion hos also segmented into diferent price point categories end major malls row reed fo have @ complete range of these 10 afer sufficient comparison shopping. Now fashion offerings must include not anly department stores but fost fashion {young and trendy streetwear), premium brands ond edgy independent boutiques CBRE }Moloyia 2.22 srepy miter Poge 4 86Chapter 2 Malaysia Economic Overview and Outlook © Consumers are now more sowy ond discerning as @ result of information technology (M7) fond new methods of communication such as Facebook™, Apple iPhone™ and BlackBery™. A private survey suggests thot online shopping, even in Kuola Lumpur, has increased significantly amongst 20 to 40-year olds, whilst brick-and-mortar shopping by the young and trendy is frequently preceded by research on the internet on @ porticular brand. = With such shifts teking place in shopping preferences and behaviour, there ore implicofions for retoil destinations. These trends observed on the consumer spending behavior and preference in Moloysio con be summorized as follows:= © Shoppers seek fo accomplish more in less ime: > Shopping is evolving into en experience, beyond functionality olone; it now frequently has fo be « good / satisfactory experience; @ Aspirofiono! brands are becoming more impertent; Food and beverage is « mejor part of the shopping experience; In larger molls, average time spent is longer at 3% hours, as shoppers combine meals, groceries, services and households with comparison shopping in one tip: Iniernet shopping is fast geining recognition; youths aged 20 to 24 spend en average of 22.3 hours online per week according to « Nielsen study, this could possibly resuit in greater online spending wren they join the work force = There are clearly three price ossociated trends in the country’s demographics. Like those ‘of most middle income countries, Maloysio’s middle income groups have been offected by rising inflation with purchasing power shrinking as petrol ond uility price increcses have ‘grown faster than salary grow. This has resulied in price elosicity becoming more pronounced and mainstream and fast fashion brands have been more severely affected in the aftermath of the US subprime crisis. Middle income consumers are now driven by volve-for-money merchondise. In 2008 particulorly, moinstreom brands sow more then 30% drops in gross soles turnover throughout the country. Fine dining wos likewise alfected. Conversely, hypermarkets ond fast food chains experienced growth in that same period as middle income fomiliss shifed their spending a notch downwards to cheaper but qualily products. Thirdly, the luxury segment, although slightly affected, continued to ‘hrive throughout the US subprime crisis o$ the upper income grouns were less offeced. Regional tourism also inereated olthough fuel prices increased, resulting in better performance for the luxury segment. In the next few decades, the shift in retoil will be towards Asian feshion ond more lifesyle, experiential shopping. This is the ‘now’ generation, piczzes and the ‘third place’ will dominate the retail scene, [The rest of this page has been intentionally left blank} CBRE |More snoeyintee Poge 5 87Chapter 2 Malaysia Economic Overview and Outlook 2.2.4 Retail Performonce Chart 2.2c: Malaysia Retail Sales Valve, Retail Sales Growth and GDP Growth, 2000 ~ 20128 aM 140 bil 140% 40120 bil f | 20x at 100 6 ‘ 100% R80 bil | Rm 60 bi | RM 40 bi Soles Value (RM) 2M 20 bil PMO bil M20 bil CE files Vole Rati Soles Grout an am @ GDP Growth Note: = esimaton Source Degorment of Slstic: olysia, Maleeio Rotates Aesocinon (MR) = Molaysio Retailers Association (MRA) reported retail soles value of RMB3.2 billion and retcl soles growth of 8.1% in 2011, higher than the earlier forecast of 6.0%. Notably the retail sales growth ratas have boon higher thas the national GDP growsh rote since 2004. = In view of the Eurapean debt crisis, job uncertainty ond reduced credit spending, MRA projects retail sales ta grow by 6.0% in 2012, equivalent to total soles volue of RME8.2 billion, 12 The Tenth Malaysia Plan (10MP) targets an onnual growth of 8.30% during its five year period (2011-2015) for the distributive trade sector which camprses of the wholesole trade, real rade and motor vehicles trade [The rest of this page hos been intentionally let blank] CBRE Mono 3322 re son Poge 6 BS Growth Rate (%)Chapter 2 Malaysia Economic Overview and Outlook 23 Tourism Indicotors 2.3.1 Tourist Arrivals ond Receipts (Chart 2.30: Malaysio Tourist Arrivals ond Tourist Receipts, 2000 - 20128 60,000 | gener Tours Arve id > 30 “eur Reset (RM mi) 50,000 2s 40,000 | E Ez i i 30,000 | 18 2 € 3 < i 3 20,000 10 & o,oc0 5 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20126 Note: © setmaton Source: Tourism Malaysia Tauris crrivals and receipts have been generally an an uptrend aver the lost decedo, wih the exception af 2003, when the SARS outbreck affected Malaysia's tourism industry CAGRs of taurist arrivals and receip's were 8.4% ond 11.7% respectively for the peried 2000 - 2011. The tourism sectar, the largest cantibutor to GOP in the services sectar, witnessed rapic agrewth in 2007 fallawing the success ofthe ‘Visit Moloysio 207° campaign Recevering fram the glabal ecanamic dawnturn in 2009, taurist orrivls reoched @ new record in 2011, ot 24.7 rrilion, while tourist receipls were alsa at on all-ime high of RMSE.3 billon, The Ministry of Tourism onticipotes tour'storrivols of 25 milion with RM6O bilion in tourist receipts in 2012, [The rast ofthis page has been intentionally lat blank] CBRE |Hooyio 2225. opens tpn Page? [SSE orogens ha ttn otcertmet Mai 2012 BoChapter 2 Malaysia Economic Overview and Outlook 2.3.2. Component of Tourist Expenditure Toble 2.3b: Breokdown of Tourist Expendi ‘esommedaion Serrieg LT97046 BA ose 4128402 em 14.2056 Hs 15,6311 rulers | S108 Feed Bewrage | aM 6569 By 67626 fm 9.5087 ma 97724 Rm 932908 | 174% Loco Trompataien | 3,706.7 fu set Bo 4007.0 Be Sst iM 5asa1 | 9am Enesinm me 12782 ps 12420 ew 14202 me 1406s Ru 15940 30% Domosic iors | mH 1.2462 pa roms bm 2.2574 ms 24285 fu 22787 | 43% Mctona fu _9908 py as eu 74 moa fu yoors | 19% 319341 any 20 46,0700 wa 29.5512 ry 53.9077 Sex Toss Mesa © Tourist expenditure in 2009 was mainly focused on Accommodation (31.0%), Shopping (28.3%) ond Food & Beveroge (17.4%). = High-growth components include the Shopping and Organised Tour components, which recorded double digit growth of 13.7% ond 11.8%, respectively, in 2009, followed by Accommodotion (+7.2%), Eniertoinment (-+7.2%), Miscelloneous (+7.0%), Food & Beveroge (+5.9%) ond Locol Tronsportation {+1.9%). = Shopaing is becoming incraosingly signifcont in terms of fotol expenditure by tourists, witnessed by the increase from 20.8% of foral tourist expenditure in 2005 to 28.3% in 2009. 2.3.3 Tourist Avivals by Country of Origin ‘Chort 2.3c: Maloysic Tourist Arrivals by Country of Origin, 2000 - 2011 25,000,000, sone 70/000,099 ‘OWast Asin/ middle East | open 15,000,000 vhcnaie Bino 10,000,000 trae Mg oa ofthe slntersie 5,000,000 a oa. 2000 2001 2002/2003 2008 2005 2006 2007" 2008 2009 7010 2011 Source: Tourism Molaysio = Key infernationel source markels for Malaysio hove troditionally been Australio, Jopan, Korea and Europe, in particular United Kingdom, France and Germany. = Within the ASEAN region, Singapore - by virtue of its historical links with Malaysia and its physicol proximity - has been the primary source of tourists to Malaysia with a share of CBRE eS pmynsaies roves B10Chapter 2 Malaysia Economic Overview and Outlook 1» 50% af fatal tourist arrivals aver the lost decade. Indonesie, on the oer hend, hos been on important morket but showed a decline in arrivals in 2011 = However, changing trends ond increasing globelisation and ‘ravel have opened up some new key markets, most notably China, India and the Middle East. ‘= The mop below shows the selected major tourist markets of Malaysia in 2011 with arrival statistics, Map 2.3d: Selected Mejor Touris! Markets of Maloysia and Arrivals Stati Sal Tce] 2011 - em | “Ghinai Hang Kong/ ihacow comes See } Ze nae Ot Lay | 3 Sour: CBRE Research, Tourism Malay 2.4 — Federal Government Initiatives ‘= 2009 marked significant changes in the histary af Malaysia’s ecanomic development with the governments unveiling of « comprehensive package of economic liberalisation measures, The new policies are wide in scope and will have « significant impact on the real estate sector os they hove removed a large number of resticions on the purchase of properties by foreign investors. Other measures will widen and diversify the base of the nelion’s economy by encouraging the growth of the service and financial sectors whilst olso erecting new ‘opportunities for international investment. = Repeal of the Foreign Investment Committee (FIC) Guidelines: Etfeciive 30 June 2009, the former Foreign Investment Committee (FIC} guidelines were repealed, resulting in the abolition of a large number af resticians on the purchase of properties by foreign investors. Previously under the FIC oll property acquisitions by a fareign investar were subject ta FIC approval Some minor restrictions remain however; approval from the Economic Planning Unit (EPU) is required where a direct or inditect property transaction involves the dilution of Bumiputera (indigenous ond ethnic Malay) ar gavernment interest for properties valued ot RM20 million tend above, while foreign investors ore only cllowed to purchase properties priced abave 844500,000 per unit. These meosures are designed to increose the volume of transactions by cttcacting more foreign investors who ore considering entering the Malaysian recl estate ‘market for the frst time or further expanding their existing faathald. '= Liberalisation Measures on Services and Financial Sector: Other measures have focused on the service and financial sectors. The government cims fo increase the service sector's conttibution CBRE Molo Page 9Chapter 2 Malaysia Economic Overview and Outlook ‘a Malaysia's GOP from 55% to 60% and intends fo achieve this by progressively liberalisi variaus service sub-sectors. Is first step hos been fo remove the 30% Bumiputera equity candifian in 27 sub-sectors of the service sector induding business services, computer and related services, health and secial services, sporting and other recreational services, tourism services and transport services. The financial liberalisation measures which were and will be implementod over the period from 2009 to 2012, include the issuance of Islamic and ‘commercial banking licenses fo allow more foreign compa te operate in the Malaysion financial services sector, a step which should provide the impetus fa create new demand in the office sector as economic conditions imprave. By 2012, seven new foreign banks, including two mega-lslamic insfitufons, will be permitted to commence operation. In addition to the removal of the former FIC guidelines covering property acquisition by foreigners, these relating to the acquisition of equity stakes, mergers and tokeovers were also repealed, meaning that, with @ few exceptions, there will no longer be a general 30% Bumiputera equily condition imposed by the FIC, although regulators of certain strategic sactors will sill be able to con fo impose equity condifions on companies operating within them. The new measures are expected to have o positive medium term impact and spur interest on the part of foreign and lacal institutional properly funds and REITs in entering the Malaysian real estate market. The removal of the 30% Bumiputera equity condition in certain sectors of the economy is particularly significant; the existence of this regulotion hed formerly delerred many foreign. institutional investors from investing in Molaysia but is repeal puts the country’s policies on an even footing with those found in Hong Kong ond Singapore and sels Malaysia apart from some of the still emerging economies elsewhere in Southeast Asio = Multimedia Super Corridar (MSC) Stotus Office Buildings: MSC Status office buildings were first inftoduced in 1996, being designated physical areas and environments that suppart and promote the growth of information communication technology {ICT} industries. Among such MSC siotus office buildings in Klang Volley include Cyberjaya, Technology Park Malaysia (TPM), UPM-MTDC Technology Centre at Universiti Putra Malaysia, KLCC Tower 2, Plaza Sentral, Quill 7, | Sentral and Mercu UEM ot KL Sentral; Menara TM, The Gardens at Mid Volley (North & South Tower), CityPark at i-Ciy, |BM & KPMG Tower, 1 Tech Park, and 1 First ‘Avenue at Bandor Utama; The Horizon in Bangsar South City, GTower, The Intermark and Wisma Hameah Kwong Hing in Kuala Lumpur city; and Quill 9 ond Symphony House in Petaling Jaya;, These, os well os muliimedia faculties located in institutions of higher learning ‘outside the cybercites, are eligible forthe follawing incentives/faciliies and benefits: [> Pioneer Status wih income lax exemption of TOOK oF stavtory income for a period of ten years ar an investment] Tax Alowance of 100% on the quaifing copii expendiure cured wihin a period of five yors to bo of gaint 100% of ottory income foreach yea of ausessment Elijby fr research end development grt oe majry Malaysan-onmed MSC sok compar‘e Durytoe import of mulmecio equloment Intsllocucl propery protein and o comprehensive homework of eer Na censorship ofthe intenet + Wedd-cass physical end IT inkaskuerre Globally compotivetiacommurication ‘ris and sevices Consultancy and assistance by the Multimedia Development Corporation to companies wihin the MSC sts buildings High quel, slonned urban devlooment Exclletresaarch ard davalopmentfoclies Green ond protactdervzonment Import ety, excite cty and slas tx eamption on machinery, equipment and mates CBRE |inie hort Pose 10 B12Chapter 2 Malaysia Economic Overview and Outlook = Incentives for Green Building Development: The launch of Malaysia's green building rating sysiem, The Green Building Index (GBI), in May 2009 has been heralded as a major step jowards promoting the construction of enviconmentally-hiendly buildings in the country. The GBI rates buildings according to six key criteria: i} energy efficiency; i) indoor environmentol quality; i) sustainable site piancing and management; iv) material and resources; v) water efficiency; ond vi) innovation. According fo the GBI assessment framework, achieving points in these categories will mean that the building is likely be more environmentallycriendly than those that do not address such issues. The GBI methodology involves on assessment at the design stage leading fo the award of the provisional GBI rating. The final award is not issued Uniil one year afer the building is first occupied. The scheme requires buildings to be re- cossessed every three years in order to meintoin their GBI cating so as to ensure they are properly managed ond well-maintoined. Buildings are awarded Piatinum, Gold, Silver or Cerlfied ratings depending on she results they atein in the six categories. The Molaysion government hos swung its weight behind the drive towards green buildings and green technology and its Budget 2010 was the first one ever to give priority #0 the procurement of goods ond services thot are environmentally friendly. The budget contoined the pledge 10 create a fund of no less than RMT.50 billion to be given as soft loans to companies that supply cand utilise green technology. The scheme commenced on 1 January 2010 and is expected to benefit 140 companies. The government has also granted tax breaks and stamp duly exemptions respecively to building owners obicining GBI certificates and buyers purchasing buildings with GBI cerifcates. Building owners obtaining GBI certificates between 24 October 2009 and 31 December 2014 ore enflled to income tax exemplion equivalent to the ‘additional copital expenditure incurred in obtaining the certificates, while buyers purchasing buildings with GBI Cerffcotes from developers are entitled to be given stamp duty exemption qulvalent to the additional cost incurred in obtaining the GBI certificates, and is given to buyers who successfully execute soles and purchase agreements from 24 October 2009 until 31 December 2014. The GB! has already goined significant momentum in the months since its introduction and the development industry in Moloysia has responded rapidly and favourably to the call for more environmervally-friendly buildings. fon instruments of transfer of ownership. The exemption omount will be New Economic Model (NEM): The first quorier of 2010 ended on a positive note with the ansouncement by Moloysio’s Prime Ministor on the NEM, « framework that is expected to set the course far Malaysia towards becoming « high-income economy by the year 2020. One of the key strategies targeted under the NEM to imprave the financial services sector is promoting the county as @ hub for integrated financial services. The Malaysian government has recentiy unveiled its plans 40 build on international financiol district in the capital city known os the Kuala Lumpur International Financial District (KLIFD), = Tenth Molaysio Plan (IOMP): The Prime Minister tabled the TOMP for the period of 2011 to 2015, which highlights the country’s approaches towards becoming o high income and high productivity economy. Among the properly-related highlights of the TOMP includes:- + Redevelopment of pockels of land in Kualo Lumpur, which includes land in the vicinity of Kompung Baru ond Sungai Besi cirpor, the latter of which will be o mixed development known o8 Bandar Malaysia and has been entrusted to © consortium of companies which includes TAtalaysia Development Berhad (IMDB), Lembaga Tobung Angkaton Tentera (LTAT) ond Qotar Investment Authority: CBRE |Woloyio 222 tosey seater Poge 11 (BRET enameres Son bodChapter 2 Malaysia Economic Overview and Outlook +The development of the RM26 tilion KUIFD vio a joint venture between IMDB ond Mubodala Development Company (en Abu Dhobi government investment vehicle); and +The crestion of @ Faciliation Fund worth RM20 billion to help the private sector finance projects such os land reciemotion in Westport, Port Kiang, the Malaysia Truly Asia Tourism Centre in Kualo Lumpur and Senci High Technology Park in Iskandar Malaysio, Johor. = Malaysia Budget 2012: The 54” budget of Molaysia was tabled by the Prime Minister on 7th October 2011 which include real estote related policies as below:- + Implementation of the Secand Ralling Plan (RP2) of the 10" Malaysia Plan with ‘otol allacarian af RM98.4 billion for 2012 and 2013. The main projects ta be implemented are the Gemas-lohor Bahru double-rocking rail project; the Jobor-Kuola Terenggony stretch of the East Coast Expressway; the Barting-Taiping West Coast Expressway; the Segomet-Tongkok Expressway; the Central Spine Expresswoy; the Kota Marudu-Ronou Road; and redevelopment of the Sungsi Besi Kuala Lumpur Air Bose. * Tax incentives to companies in order to baost the develaoment of KLIFD: Among the incentives include 100% income tox exemption for o period of 10 years ond stamp duty ‘exemption on loan ond service agreements to KLIFD Status componies; industrial building allowance ond accelerated capital allowance to KLIFD Marquee Status componies; ond 70% income tex exemption for five yeors to KLIFD developers + Incentives for fisttime home buyers: © My First House Scheme (Skim Rumah Pertomaku) which wos introduced in Maloysio Budget 2011 to ollow firstime home buyers to obtoin 100% financing with guarantee from Cogomas Berhad will see the ceiling price to be roised ta RM400,000 from RM220,000. 5 Introduction of PRIMA (Perumahon Rokyot Malaysia) 10 act os an individual agency to develop and mainisin affordable housing to caler for middle income earners, The government has identified the Sungai Besi Kuole Lumpur Air Bose and the Sungai Buloh Rubber Research Insitute as the sites for development of affordable housing priced ot RM300,000 ond below. > Full stamp duty exemption for loan agreement instruments to finance purchasers of coffordoble hausing under the PRIMA scheme for Soles and Purchase Agreements executed between 1 Janvory 2012 and 31 December 2016. + Edeension of the withholding tox rate of 10% on dividend received from Real Estate Investment Trusts (REITs) on individual and nen-corporale institutional investors up to 31 December 2016. + Real Property Goins Tax (RPGT) to be raised to 10% for residential ond commercial praperiss dispased within two yeors fram their purchase, The rate will remcin ot the current rate af 5% for disposals within three ta five years af purchase, Properties dispased of alter five years of purchase will be exempted. ‘= Abolishment of impor duty on fourism products: It wos onnounced in the Malaysia Budget 2011 that with the iiliotive to further boos! the tourism industry and to render Malaysia os the leading shopping destination, itis proposed by the Malaysia government that import duty on the following goods that ore preferred by taurists and locols will be abolished. These items include: * Hondoogs, walls, suns, biases, oppoel, footer and has with diy of between 5% and 20%); CBRE |Hioyic 25 sey etn Poge 12 BdChapter 2 Malaysia Economic Overview and Outlook # Jewellery, costume jowellery and ornaments (with duty af between 5% and 20%); and "Toys such as dolls and small scole recreatiancl models (with duty of between 5% and. 20%) The net result of this will be increosed retail sales turnover in the shor! term, not only ‘rom inereased domestic consumer spending on these items but olso from increosed tourist spending con these items, = Government aids and incentives: The Moloysion government had onnounced several aids ond incentive polices thet are anticipated to boost retail spending, ineluding: ‘+ IMolaysia People’s Aid (BRIM) - One-off cash poyment of RM500 to 0 potentiol 5.2 rilion households earning less than RIM3,000 per month. + Moloysian Remuneration Scheme (SSM) = Poy rise of 7% to 13% ta the 1.4 million evi servants. 18 Overall, the federal government's initiatives hove caused direct ar spill-over affects onto the ‘commercial property sector in the notion, The redevelopment of 4 main locotions in the Klang Vlley (ie. the proposed KLIFD, Bondar Malaysio, the Malaysion Rubber Research Institute Land in Sungei Bulo® os well as the Cochrane mixed development site which is anticipated to house Moleysio’s 2° IKEA furniture store) bodes wall for the retail sector os the catchment area will ougment with increased population, thereby creating potential demand for retail goods and services. Improved infrastructure works such as the proposed MRT is alsa anticipated te ‘enlarge retail caichment oreos due to increased mobility ofthe population. (The rest of this page has been intentionally eft blank] CBRE Heopio 25 resins Poge 13 Por el be C2RE ote mtr seem"Chapter 2 Malaysia Economic Overview and Outlook 2.5 Performance of the Real Estate Market Chert 2.5: Malaysia Property Transaction Volume and Valve, 2000 ~ 2011 fa 160,000 500,000 fat 140,000 | Seca) a | “000 = Era une . al 400,000 E aa 120,000 Seen z f 350.000 g 3M 100,000 | ua” oe 3 | Pome f se0n00 RM80,000 | ig. | + 250,000 4 —_ é Fvcou pe : £ | an 150,000 'B Ru40,000 A Dn ag | 2 : : 100,000 RM 20,000 EE 5 | aM ¥ a G a i 50,000 eat Sat bt bd el 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Valuation and ropenySavices Department, Minny of Finance Maloysio = In 2011, a tote! of 430,403 property transactions wore recorded for a tatol value of RM137.83 billion. This represents a historical high, surpassing the 2010 praperty market activity by 14.3% (2010: 376,583) ond 28.3% (2010: RM107.44 billion) for volume ond value of property transactions respecively. 43,674 commerciel properties trensactians invelving RM27.64 billion registered during the year, compared ta 39,798 transactions valued at RM23.84 billian in 2010. = The Valuation ond Property Services Department reparied that the grawih demonstrated in 2011 can be attributed to the implemenlations of Economic Transformation Programme (ETP) projects across 12 Notionel Key Economic Areas (NKEA), [The rest of this page has been intentionally left blank} CBRE |Molopin 225 sropoy uate ae Poge 14 ruetsecaneionenmes BSTC B46Chapter 3 Kuala Lumpur Economic Overview and Outlook 3.0 KUALA LUMPUR ECONOMIC OVERVIEW AND OUTLOOK 3.1. Gross Domestic Product (GDP) ‘Chart 3.1: Kuala Lumpur Gross Domestic Product, 2005 ~ 2010” 90,000 4 BAg-cure Mining Series BManutectring eConsttion Pls: part Dati 80,000 70,000 60,000 | so | 40,000 30,000 20,000 10,000 of 2005 2006 2007 2008 2009 2010p ote: ¢~ askinoes;p— pwelininary, by Doparimaot of Sets Motosia Source: Deparment of Soisies Malaysia = Kuole Lumpur remained as the secand largest contibutar after Selanger ta nafienal GOP with © 15.2% shore in 2010, fram 14.8% in 2009. Ecanamic grawih was rabust in 2010, when Kucle Lumpur achieved 9.2% grawh rate agoinst 3.9% and 7.0% in 2009 and 2008 respectively. 8 Tho services sector centribuied 89.9% tawards “he GDP af Kuala Lumpur in 2010, principally fram the finance, insurance, real estate end business services (35.8% af fatal GOP) ond ‘wholesale ond retell rade, occommadation ond resiauronts (27.7% of fatal GDP) sub-sectars. 3.2. Population and Demographics in Kuala Lumpur Toble 3.20: Kuala Lumpur Papulation, Household Number ond Size, 2000 and 2010 52 a7 Trarage HavraFal So 378 Sours parent Set Mo CBRE |Mocin osu romey seneyn Poge 15 Serica redeectaevnena Mot BA7Chapter 3 Kuala Lumpur Economic Overview and Outlook ‘Map 3.2b: Maior areas in Kuala Lumpur Kuala Lumpur Population, 2010 CBRE Milos 1,674,621 or he CE reer BATU CAVES GOMBAK/ KePONG/ SETAPAK/ . ‘SEGAMBUT/ WANGSA MAJU JINJANG f - SENTUL DAMANSARA HEIGHTS/ . \ MONT KIARA AMPANG: kuna GOLDEN 4 LUMPUR CuD. TRIANGLE i mp VALLEY crTy/ ’ KL SENTRAL/ BANGSAR i PANDAN Ja¥A/ TAMAN MALURI SEPUTEH/ TAMAN DESA/ = SSUNGAL BESI/ - SALAK SELATAN, 1 wi ‘1D KLANG Ro~D/ - KUCHAI LAMAa/ t SRI PETALING _ cHERAS ‘ Highsvaye “rinepal Roads Stel Boda ‘Souace: CBRE Rezcaich CBRE|Woiosio Page 16Chapter 3 Kuala Lumpur Economic Overview and Outlook '= Totol Population: The population in Kuala Lumpur grew at an average rote of 1.9% annually ‘over 2000 10 2010, slightly lawer than the national average at 2.0%. The capital city forms 5.9% of the nofianal population with a population of 1,674,621, and is the most densely populated city in Malaysia with on average of 6,891 persons per sq km. 1" Gender Sogregotion: Kuola Lumpur’s mole and female population ratie is clmast equal with 50.9% male and 49.1% female in 2010, compared ta 50.5% mole ond 49.5% female in 2000. = Averoge Household Size: The national average household size wos 4.33 in 2010. Kualo Lumpur hos the second lowest hausehold size of 3.79 offer the Federal Territory of Putrajaya at 3.50, whilst Pulau Pinang and Selangor were ot 3.94 and 3.99 respectively CChort 3.2c: Kuala Lumpur Papulatian by Age Group, 2000 ond 2010 oom ose 10% . 69%. os om 5% o% Maleysic, 2000 Malaysia, 2010 Kuala Lumpur, Kuala Lumpur, Selangor, 2000. Selanger, 2010 2000 Below 3535.60 Source: Depovimsn! of Statics Moloysio 1 Population by Age Group: The compesitian af the Molaysion populatian by age group has been consistent over the post ten yeors. AS ot 2010, about 65% af the total Melaysion population are below 35 years. About 27% are between 35 to 60 years whilst only 8% ore ot 60 yeors and above. These figures are almost similar to the Kuala Lumpur and Selangor population by age group, where 62%-66% are aged below 35 years, 28%-30% are between 35 t0 60 years, and 6%-8% are at 60 years and above = Medion Age: Molaysia hos 0 very yaung pepulotion with « medion oge of 26.2 yoors. Kuala Lumpur, @ serviced-based economy, has a population with a median age of 28.6 yoors which s the second highest among other states in he country alter Penang (29.6 years). 1 Urbonisofion: Kola Lumpur as the capitel city is defined as a fully urberized city in Malaysia by the Department of Statistics Moloysio in 2010, wtilst Selangor is 97.4% urbanized by populatin. CBRE Pio 22h nage face 17 B19Chapter 3 Kuala Lumpur Economic Overview and Outlook 3.3 Unemployment Rate Table 3.3: Kuala Lumpur Labour Force and Unemployment Rate, 2000 - 2011 teeter Paco | maz |e | nos | wove | ar.z | wea | vous | rio | oma e078 sleet GD panon) | WB | TORF | EL | TBI | OP | Ha | ores | oan | oem | eran | r728 | vena ‘Urenelyed 000 woron) | 174 | 105 | 297 | aa | 129 | 91 | 195 | wos | wee | m0? | 205 | Me Vowrpormt tony | a0 | 29% | an | ae | 20x | aan | 2en | 2% | 27% | 298 | 2ex | 276 34 “Searee: Deparment oF Satie Malaya Unemployment rate in Kuala Lumpur is notably lower thon the nationol level (3.1%) ot 2.7%, ‘and has marginally increased ‘rom the preceding year. The labaur force in Kuaio Lumpur represents 6.4% of the national aggregate in 2011 Government Initiatives ‘The government announced the Economic Transformation Programme (ETF) in 2010, which coves 12 Notional Key Economic Areas (NKEAS) including the Greater Kuala Lumpur/ Klang Valley, which envisions fo grow onnual Gross National Income contribution from RM258 billion fo RM650 illion per year, t0 increase total employment from 2.5 million in 2010 to 4.2 millon by 2020, to lift gross natianol income per capita from RM.40,000 to RM70,000 per year, la grow the population fram 6 to 10 million and other similer aspirations. A total of 9 fenty point projects (EPP) have been identified in respect of the Greater Kuala Lumpur / Klang Volley area: Table 3.4: Greater Kuala Lumpur (KL)/ Klang Valley (KV), Economic Transformation Programme ee eee EPP 1: Attracting 100 af the world’s most dynamic firms within priority sectors 1. Estabish on creative incentive packoge fr mulinaenal earpovation (NC) headquariows ii Proactively merket Greater Kuala Lamu: /Klang Valloy fo pry hoosquartors Ti, Strengthen the local tlie bare wth on emghesis on vpuskiling and really Iw Racluee the gor af ding bosinese EPP 2: Attracting the right mix of intemal ond external talent Establish Malaysia Halls Leveroge leading parsonages in Molaysa Track ond engage wil he tap 5,000 mos inaosing Malaysian diaspora incon Is. —_Ungrad censor serteas in rity ees ‘t_Esobich owards to racomnise world dass Malayions Falah on omlina jab search engine Vil Leverage to urivonits 0 rirwsyorate oki relations vi, Berd Prnert Raider sas “eter foreign gost start vise EPP 3: Connecting o Singapore via « high speed rail systom EPP 4: Building an infegroted urban mass rapid transit system ic Mss Rap Tara ase snonnng 141 klometes wah Hr alo ous, eins fo cary up io 2 milion deeb 2020, EPP 5: Revitalising the Klang River ino ¢ heritage end commercial centre for Greater KL/KV i. Upgrade eiseg sage systems ore polltonts rom onwing ino she rive JL Enforce th zero uci ply throgh cal aura 0 revert unter woe ik. Ungrae dsinage sams e prevent Hoody ar mein woter quony iv. noes welir waste gucines for residents, ocbris ora eamimarcal oxo Hveugh foal athe EPP 6: Greening Greater KL/KV fo ensure every resident enjoys suficient green spoce 1 Adopt greenfocused development ploy CBRE |Motio 222 soeeysesntine Poge 18 (Ga iaroregeren sore rstewcattetiveneven MII? B20Chapter 3 Kuala Lumpur Economic Overview and Outlook Re Ti Employ ceatve andsenpng mwas EPP 7: Creating iconic places and attractions 1 Hentoge triangle waking museum i. Corr Market bung willbe ransformed and radsiged ints « comple with ve at stios ii, Adu Jail ta be tronsformed inla «mised development af resident, ofc and raki compenenis, lined wth eutsrel and recreational atockons. EPP 8: Creoting 0 comprehensive pedestrian network i Asproxmaty 2 pany waienys fr thems trm i _Approximesey 42ém comprehonsive walkways or th ong Yar EPP 9: Developing on Efficient Solid Woste Management Ecosystem | Revamp sold waste monagemant fs ii, sncreasa implementation of reduce, reuse nd rye R) Eelore ophons for sobd wore treatment iv. Ensure peelarmane 3.5 Performance of Real Estate Market CChort 3.5: Kuola Lumpur Property Transaction Volume and Value, 2000 ~ 2011 4 25,000 j 35.00 f\ 30,000, E RM 20,000 | Se tedenal tare | || s Sin eo - 5000 3 5 2 RM 15,000 3 2 2000 3 * a 1,000 som @ £ + 10000 B wws.000 2 + 500 ft Lo 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Sourcer Vavation and Property Services Deperkary, Minichyof France Malays = The Kuala Lumpur properly morket continues its uptrend in 2011, with 31,664 tronsoctions worth RM22.81 billion ragisterad ogoinst 27,370 tronsoctions worth RM20.03 billion in 2010. = Commerciol properties tronsoctions were buoyant during the yeor, 6,478 transactions worth RM7.72 billion were recorded, this represents growth of 17.6% ond 20.0 % respectively for volue ond volume of tronsoction. [The rest of this page has been intentionally left Blank} CBRE Woloso 22 rony unten Poge 19 B21Chapter 4 Klang Valley Retail Property Market 4,0 KLANG VALLEY RETAIL PROPERTY MARKET 4.1 Retail Formats = Retail formets hove evolved rapidly in Malaysia, certainly much faster than that in matured ‘econamies like the UK. This can be attributed almost entirely to the simultoneous growth of the constructian industry, the population and the GDP. Population growth and economic growth ‘are good for retail and this hos underpinned a robust retcil industry which grew from the trading and OEM manufacturing days ofthe late 80°s to fodey's sophisticated local brands and franchisees. Within four decades, the retail industry caught up fast with globol fashion trends because of globalization and the internet. Malaysians now see European merchandise here within weeks instead of months previously ‘= The exparsion of the retail industry hos been rapid and constant as well, and this is fuelling all thot consiructian we saw in the post 30 years. It has also compressed the evolution of moll concepts and formats into @ very short span of fime. In less than two decades, atleast faur new generations of mall concepts have been spawned. 18 The pioneer malls were mere arcades 6 la Ampang Park. Six generations later the industry is now showcasing apen air malls such as The Curve and Desa Park City’s Watertront. = In that period, sizes of malls have increased os well. Ampang Pork and its first generation ‘malls were on two or three acres of land whilst later models becarne larger on about five acres. The megamal’s af today are on at least 15 acres. First generation mails were only 200,000 sq ft of net lettable rec in size, whilst today’s megamalls are ot leost a million sq ft by comparison. = Today, there are many more retail brands than ‘here were 30 years ago. As @ result, he number of shops has also increased rapidly. Eorliey malls had 200 shops compared with today’s more than 450 shops in the larger malls. = Ancther trend hos been the entyy of bulk retail into the country, while Carrefour introduced *he hypermarket to Malaysis. These stand clone formats are also significant in that combined, the hhypermarkets take up about 10% of the market shore of rode ocross all categories. They affect the viability of supermarkets in the country and in she cities. = Today, the Klang Valley is dotted with malls olmost in every corner or sub-market of is length tand breadth. This has made it tougher for new entries to compete and the result has been ore evolution of formats. The name of the game is now cifferentition. This differentiation is ow manifesting in both the hardware os well as the software; i.e. the concept and the merchandise mix of the malls At the macro level, the intense competition between malls has resulted generally in the bifurcation of the formats into two groups ~ large megemalls in one group and smoller to mid sizod neighbourhood or niched malls inthe other '= Megamails tend fo ottract by sheer size and variety of offer whilst neighbourhood malls eppec| through their distinct and targeted offers. = In the years aheod, we see a consolidation in the industry © this dol level of retailing formats, with neighbourhood malls doing ralatively well ond sustaining alongside megamalls because of their selacted range. = Classification of mal’s can be by way of formals and positioning. In terms af positioning, malls can be divided into three broad groups, i.e. masslige versus prestige malls, plus mid-market malls, namely: Premium fashion malls Mid market malls © Moss market malls CBRE |Neosa rotten Peon 20 B22Chapter 4 Klang Valley Ret Property Market 4.1.1 Premium Fashion Malls = Kuola Lumpur’s rapid growth in size and ffluence has ollowed segmentation ‘especially at the upper end. Although the market is broadly middle income, there is 6 lorge enough band of upper-middle and upper income to support a variety of premium offers both in terms of foshian ond food and beveroge. Today premium designer lobels like Gucci, Prado, Burberry, Hermes and Louis Wuitlon ore well represented here. Kuola Lumour now has quite a complete offor in terms of the fashion brands and the essence of « top class shopping destination is proudly showcased in its most dazzling premium feshion malls inciuding The Gardens Moll, Poviion Kuola Lumpur Mall, Suria KLCC and Starhill Gallery. 4.1.2. Mid Market Malls 41 Mid morket malls ore positioned at the middle income bond. Many of the larger ones offer a wide range of brands ond variety of merchandise. The category is wide ond includes megamalls and neighbourhood ones. The larger malls have « significont presence of established international brands, and ore usually anchored by depariment stores ond large supermarkets or hypermerkets, Mid Volley Megomoll, 1 Utomo Shopping Centre and Sunway Pyramié are examples of the larger malls whilst Bangsor Shopping Centre and Empire Gallery cre the neighbourhood malls within this category. 4.1.3 Moss Market Malls = Moss market molls serve @ wider range of shoppers but are aimed primarily at the mid to lower end of the market, Theirs ore the mosstige offers, in contrast to the prestige coffers of the premium fashion malls. Malls under this category typically oppeal through price competitiveness and less branded offers. Examples include the hypermarke's, and bazaars like Sungei Wang Plaza. 15 Under the mojer categories os mentioned above, there ore sub-categories thot are defined by size and format as follows: ‘Megomalls Regional malls Neighbourhood malls Lifestyle or niche malls 4.1.4 Megamalls = Megomaells are defined os molls with net letiable areas exceeding one milion sq ft ‘These include Mid Volley City (Mid Valley Megamall and The Gardens Moll}, Pavilion Kuala Lumpur Mall, Suri KLCC, Sunway Pyramid ond 1 Uioma Shopping Centr. Megamells attract by sheer size and the variely ond comprehensiveness of offers. But over the yeors, even megomalls have storted differer‘ating, 1o increose their strengths cond draws; thus Pavilion Kucla Lumpur Mall is distinctly different from Suria KLCC by way of its positioning and its trade mix. In the fulure we anticipate more megomolls being built. These include Empire City Mall in Damansara Perdana, Boustead development in Cochrane, i-City Mall in Shah Alam ond {Ol City Mall in Putrcioye. CBRE |Moloyio Sn remynencon Poge 21 B23Chapter 4 Klang Val ley Retail Property Market 415 Alb 4ar CBRE}Moionia 2 Regional Malls Regional malls are usually of mid size, between 500,000 to 700,000 sq ft of net lettoble area, Many of these were the biggest malls until the arrival of the megamall These include AEON Bukit Tinggi, 1 Utama Phase 1, The Curve and IO! Mall. The offer is similar to megamall in that ragional malls also provide the all under one roof trade mix albeit in a slighty smoller scale. Regional malls are distinguished from neighbourhoad -olls in terms af catchments as well. They serve a wider, cxoss catchment versus the neighbourhood malls which seve @ mare immediate neighbourhaad. Again diferentiation hes occurred, for instance The Curve has focused on a different, open air, format ond cancept ta draw against is neighbours. Neighbourhood Malis These serve an immediate neighbourhood with @ primary cotchment area of around 10 minutes’ dive fime. Mony such neighbourhood malls in the Klang Valley are sized in the region of 300,000 sq ff to 400,000 sq f. Examples of such malls include Bangsar Shopping Centre ond Empice Gallery. Neighbourhood malls are usually ‘compact at 300,000 sc fof not lettabie area. Trade mixes are usually focused around the groceries, services and conveniences, with minimel fashion conlenl. Many have survived wall and are able to sustain as a rasult of having strong grocers and food and beverage outlets Lifestyle or Niched Malls ‘These are usvally small sized malls, with up ta 400,000 sq ft of net letlable area. The ewer malls in many neighbourhoods have had to speciolize or are the resuits af a Darwinian market where mall develapers and owners need to create new concepts and formats fo survive. Such lifestyle malls are usually only in mare affluent neighbourhoods which are able to accept newer concepts quicker. Merchandise mix is predominantly food-centric, Examples include CITTA Mall, Sunway Gizo and Publika of Solaris Dulames. [The rest of this page has been intentionally left blank} Page 22Chapter 4 Klang Valley Retail Property Market 4.2 Key Retail Areas ‘Mop 4.2: Key Retail Areas in Klang Valley Mid Valley City * inate 4.2.1 Mid Volley City = This orea is of the midpcint between the city and the suburbs. Althaugh locations like these traditionally sutfer from the lock of neither the pull of the city nor the proximity to the cotchments in the suburbs, Mid Volley City is strategically located next to the Federal Highway, which is the one of the main orterial roads into and out ofthe city. Its good network of links into the highwoys allows the locotion fo benefit from the lorge volume of doily traffic coming from all of the Kiang Volley. Major malls situoted within this locality include Mid Volley Megamall ond The Gardens Mall. It attrods Bangsor, Peicling Jaya ond Cheres shoppers, ie., shoppers from some of the more affluent suburbs. onan CBRE }Maloyia Beier Foge 23 B25Chapter 4 Klang Val ley Retail Property Market 422 423 424 425 KLCC-Bukit Bintong This is locoted within the Golden Triangle and is the prime rete area in the country This is where city centre retail occurs, where fashion end entertainment dominate and where flagship stores vie for markst presence or dominance. Bukit Bintang has been the historical shopping and entertainment destination of Kuale Lumpur since the 50's Todoy some of the more populer malls such as Pavilion Kuala Lumpur Mall, Suria KLCC, Sungei Wang Plaza, Lot 10, Starhill Gallery and Berjaya Times Square can be found in the KLCC-Bukit Bintang ares. Bukit Bintong addresses a catchment oreo ‘across the whole of he Klang Velley. Bangsor-Damansora Heights-Mant’ Kora This is the most offivent suburban orea in the country and hes the highest concentration of expatriaies. The area has mony in‘ernetional schools and good Comenites plus proximily to reilway stations highways and the cily centre itself. itis served by a few neighbourhood malls such cs Bangsar Shapping Centre, Bangsar Village and 1 Mont Kira. The area ' generally populer for gourmet grocery stores, food and beverage offerings and lifestyle ond street retail Pelaling Jayo-Domansara Petaling Jayo-Domansara area is the largest and second most affluent suburb in the Klang Valley. Major malls located within this area include 1 Utome Shapping Centre, The Curve, IPC Shopping Centre, IKEA, Tropicana Cily Mall and $STwo Mall Sunway-Subang-Puchang This is a very lorge regian savth of the Federal Highway and represents the ather half of the Klang Valley's suburbons. Is massive catchment supports some very successful malls, Sunway Subang area is home to Sunway Pyramid, IO! Mall, Subang Parade and Empire Subang. This is a mature area but is stil expanding os mejor developments siretch this area further outwards towards the south and west. The area has substantial content of upper middle income groups and benefits fram 0 gaod network of roads and highways that allow cross catchment shopping 4.3 Key Retail Operators and Brands 43.1 43.2 Department Stores Department stores are usvally the anchor tenants in malls in Malaysia. Key department siore operators include Parkson, Metrojaye, C K TANGS, Iseion, Robinsons, Debenhams, Marks & Spencer and AON, Fashion The fashion trode is synonymaus with shapping. Local brands have to cantend nat just with premium brands but also with the fost fashion new entries like Uniqlo, Cotton On, Mango, Zara, Pull ond Bear, Esprit and Forever 21 CBRE Molo 222 ray atone Page 24 ICSE opener Sted B26Chapter 4 Klang Valley Retail Property Market 4.3.3 Food and Bevarage = The growth of the hospitality industry in Asio in the recent past has created @ new layer of professional chefs and beck of house logistics that ware almost nonexistent 20 years 090. This hos allowed not only specialization in the food trades but also the grawth af several new but powerful regionol end local brands that have taken mojar market share from the coffee ond fast food players. Whereas in the post, globoliy-recognised fost food chains were almost campulsory in a mall's trade mix plan, they are no langer must haves today ond maintsining veriety of food and beverage outlets is key for mall. = Tho contont of food and beverage sector in a typical trade mix has therefore grown tand specialized molls ike The Curve have at least 30% of shops in this category. A goad critical mass is ot least 50 foad and beverage autlets these days. = From Madam Kwan, Delicious and Papparich to Dragon-i, Malaysia is witnessing surge in this trade in terms of quality cheins. The entry of regional and internatione! names like ll Divo, Din Tai Fung and Food Republic is adding on enother dimension ‘and depth to this otherwise secondary category of trode in @ mall 4.3.4 Enlertoinment = The entertainment trade is becoming essential in ¢ mell’s content os shoppers seek to ceccomplish more tasks as port of their shopping experience. This has led to bowling alleys, karaokes and cinemas being a fixture in almost ell new malls. 4.4 Cumulative Supply = CBRE Research reports 137 significant malls in the Klang Valley as at 2011. OF this total, 59 malls are located in Kuala Lumpur, while the rest ore in Selongor. For s population of 6.69 million inthe Klang Valley, this amount of space suggests market maturity ond some areas with high concenitotion of malls are facing intense competition especielly in the groceries category. However, performing malls ere dominant and continue fo grow in terms of total soles turnover ond rental volves. = Of the 46.11 million sq f of retail space in the Kiong Volley as at 2011, 3.56 million sq ft ore attributable to premium foshion malls, which include The Gordens Mall, Pavilion Kuale Lumpur Mall, Starill Gellery and Suria KLCC. = Currently, four malls with an aggregate 2.47 milion sq ft ll within the mid and mass market ‘moll category, are under development in Klang Valley ond are scheduled to be completed by n012 {The rest of this page has been intentionally left blank} CBRE Palos Sree tater Page 25 B27Chapter 4 Klang Valley Retail Property Market (Chart 4.4: Retail Space Supply in Klang Valley, 2000 - 2015e 60.00 Retail Space (milion 9 f) Bog 8 8 8 8 8 8B a g Note: Tea 28 Bhd and Moss Market Mal 8 af oe § & e8is seg SESS ERE R eRe EEE tries ation ml ded y The Gao Ml, Pola aia al, SRC nd Ser Gallery 4.4.1 Selected Majar Malls = Mid Volley Megamall. Mid Vallay Megomall is the first retail camponent in the Mid Voliey City develapment ond wos frst opened in 1999. This mid morket mall is sizeable ct 1.72 million sq 4 of net letiable area and recorded 100% accupancy at end-2011. Collectively with The Gardens Mall, © premium fashion moll inked to Mid Valiey Megemoll, net lettable area af retail spoce in Mid Volley City is in excess of 2.5, lion sa f. = The Gardans Mall. The Gerdens Mall is located within Mid Volley City ond is linked to Mid Valley Megomoll. it was apened in 2007 with 816,657 sq # of net lettable oreo over eight levels af retell ficers, and registered 100% occupancy ot end-2011 = Suria KLCC. Opened in 1998 ond located within the KLCC development, Suria KLCC has in excess af 1.16 million sq ft af net letiable arec spenning across six levels af retail floor, and is expected fa further increase by 450,000 sq ft by 2015, Occuponey ale wos estimated ot 96% in 2011 = Pavilion Kuala Lumpur Mall. Pavilion Kuala Lumpur Moll wos opsned in 2007 with 1.26 million sq ft of net letfable area, with o future extorsion plan of edditional 300,000 sq ft by 2014. Located in the KLCC-Bukit Bintang retail belt, the moll is o premium fashion mall in the heor! of Kuole Lumpur city cone, ond wos 99.1% caccupied in 2011. = Berjaya Times Square. Berjaya Time Square is by for the largest mall in the Klong Valley region with 2.1 million sq # of net lettable oreo. It is located along Jolon Ibi ‘ond is a landmark retail development by Berjaya Group and is portly stoto-tiled. CBRE Main 22 ern wane Pogo 26 meamcttomeenne Soman B28Chapter 4 Klang Valley Retail Property Market © 1 Utome Shopping Centre. 1 Utama Phase 1 development wos initially opened in 1995, and was then expanded in 2003 ond underwent refurbishment in 2011 for Phase | development. This 1.98 million sq ft mid morket moll is locoted in the residential area of Petaling Joya-Domonsara belt 10 cater to the suburben population. Occupancy rate was estimated of 93% in 2011, which is relatively low agcinst other ‘campetitor molis due to the transitian period in its recent refurbishment exercise = Sunway Pyramid, Sunway Pyramid is o two-phose retail development locoted in Bondar Sunwoy, a suburbon city in Klong Valley. Itis 0 mid morket moll with 1.56 million sq ft cf net letioble creo with on Egyptian theme, and was 98.2% occupied in 2011. Going forward, the mall is expected to further expand by 500,000 sq ft in two phases, namely P83 ond SPA. 4.5. Population and Retail Space Supply per Capita CChart 4.5: Population and Retsil Space Supply in Klang Valley, 2000 - 2015e eso nt ron st nt § 4.00 mit fron! acon | ooo ni nL egeee888 88 2E8888 EELERESRREREEEEE pon — ety SE SGORT canes cae tanned '= For the purpose of this review, CBRE Research defines Klang Volley os the combined oreo of Kuole Lumpur, Putrajayo, district of Petaling, distict of Gombok, district of Klang and district of Ulu Longot. = The Klong Valley population hos grown of on overage annual rote of 3.2% since 2000. By 2015, the populotion in Klang Valley is projected to reach 7.32 million, thus retoil space per copita is expected to reach 7.26 sq # in 2012, ond is estimated fo remain cround 7.49 sq ft to 7.93 sa ft per persan unfi 2015, Regionally, selected markets’ retail space per capita are as follows: Bangkok ~ 5.34 sq ft per copia (net Singapore ~ 7.23 sq f per capita (ret Klang Valley ~ 7.28 sq ft per capita (net) Sydney - 9.69 sq ft per capito (ne!) Tokyo - 9.85 54 ft per copito (ne!) Hang Keng ~ 16.36 sq #t per capits (gross) CBRE) Hloyio 9202s nane nse Poge 27 (GRE arog Sn bre sttecatetinrenes 0.8 2012 B.29Chapter 4 Klang Valley Ret Property Market = The Klong Volley morket suggests © mature market and ranks Klang Volley on por with Singapore. In some woys it reflects the overoll segmentation of the morket in that there are mony mells here but only @ few perfarming malls. Retail is about drawing shoppers inlo a domein, about attracting via merchandise, ccivty ond lifestyle afters. Nat all the 46.11 million sq ft af net letiable area in the Klang Volley does this job effectively. in most cases the molls themselves ore ill-conceived or poorly located ond retail trade is not significant in these venues. = According fo CBRE Reseorch, less thon 60% of fofal retell space supply, or opproximately 4.00 5q ft per copita, are considered performing malls and hypermorkels. Mony of the restore either underperforming or in decline. Although there is dilution in the sector, performing molls nevertheless continue to draw erowds by virtue of their size, merchondise offer and quality of ambience. 4.6 Future Supply of Malls, = Currently, 23 developments wih totl net letable area of 12.75 milion sq ft are expected 10 be ‘opened in Klang Valley from 2012 until 2015. Of these, seven mals (4.06 million sq f will be sitvated in Kuala Lumpur. In Selangar, 16 malls will add 8.69 mrillian sq # af net letable area into the retail market, ond all of these ore expected fo be within the mid ond mass market mall category. © Of the 23 malls, nine malls will be significant in size at over 500,000 sq ft, including Nu Sentral (650,000 xq fi, Atria Shapping Gallery (660,000 sq fi), Sata City Mall (700,000 sa ft, Paradigm Moll (700,000 sq f}), Sunwoy Velocity Lifesyle Shopping Mall {850,000 sa ft), Empire City Mall (1,000,000 sq ff, i-City Mall (1,000,000 sq f}, Bousteod Retail @ Jalon Cochrane (1,200,000 sq 4 ane! 101 City Mell (1,950,000 sa f}). = We expect no new premium fathian malls ta opened befara 2015, with the excaptian af the extensions to Pavilion Kuala Lumpur Moll (+300,000 sq ft} ond Sutio KLEC (+450,000 sq ft. This will result in the two malls having enlorged sizes of 1.56 million sq ft ond 1.61 million sq ft vespectivaly Toble 4.60: Future Molls in Klang Valley, 2012-2015 ra Se ee Sai neta 1 camalin Cheras Mass 420,000 2012 2 Nw Sentra KL Sentra Mess 650,000 2012 3 Domansoro Ciy Mall Domansara Heights Moss. «188,452 2013 4 Povilion Kuala Lumpur Mall Exension —-K.CC-Bukit Bintang Premium 300,000 2014 5 Boustead Retail @ Jalan Cochrane Jelan Cochrane Moss 1,200,000 2014 6 Sunway Velociy Lifestyle Shopsing Moll Cheras Moss 850,000 2014 7 Suria KLEC Extension KLCC.Bukit Bintang Premium 450,000 2015 Selangor 1 Paradigm Moll Kelona Joya Moss 700,000 2012 2 Selia Ciy Mall Sela Alam Mass 700,000 2012 3. Atria Shopping Gallery Damansara aya Moss 660,000 2013 4 Cheras Central Shopping Mall Cheras Mass 486,973 2013 5 MSquare Shopping Cele Puchong Mass 380,000 2013 6 The Strond Mall Kota Damansara Maes 308,800 2013 7 The Whad Puchong Puchong Mass 302,739 2013 8 Empire City Mall Domansara Ferdona — Mass—=—=«*1,000,000 2013 2% daimén uss Mass 400,000 2014 CBRE }beeyio 22 ronnie Page 28 B-30Chapter 4 Klang Valley Retail Property Market Poa 10-10 City Mall Putra ayo Mass 1 Jaya Shopping Centre Petaling Jaya Mass 12 Sunway Pyramid 3 ($P3} Retail Edension Bondar Sunway Mass 13 Avenue Street Mall Sungai Buloh Mass 14 Darensera Uptown Mall Damansara Uptown Mass 400,000 2015 15 isCity Moll Shab Alam Mass 1,000,000 2015 16 _Ki Eco City Retail Podium Abolish Hoku Mass____ 300,000 2015 ‘Sutee: CBRE Ressorsh 1 Anumber of new retail projects hove been announced recently. Aihaugh there have been no finolisotion of details far these propased new malls a this stege, we anticipate these projects ta hove significant impact ta the Klong Valley recil properly morket in due course. Lebron 1 oll @ Bult Birtong Cy Cente farmer Pad oi) talon Pada 2 Moll @ Kuala Lumpur Ifrnainal Financial Dsl Kuro 2 Mall @ Worsan Merdeka Wortsan Merdeka 4 Wall @ KL Meopots Datars Selongar 1 Malle Souren: CBRE Resvarch 4.7 Occupancy Rate Trends Chart 4.7: Occupancy Rate for Klang Valley Malls, 2000-2011 100.0% | cons Rang Volley meme Priv msm Me and mass Note: Premium fashion malls are sefines by The Gardens Mal, Povlon Kuala Lampor Mall Sure KLCC, and Stoll Galery. Mid and ‘nose market mall ove rapesented by 3 baske! of 48 mel Source: CBRE Reesaroh B28 CBRE }Maloyia bis Soe ee Page 29 B31Chapter 4 Klang Valley Retail Property Market = The average occupancy rale of mells in Klong Volley was estimated of 97.7% in 2011, representing @ drop from the previous year. This is predominantly due to new mall openings where occupancy hos not yet stabilized at high level = Premium feshion malls in general outperformed mid and mass market malls in terms of ‘occupancy, as evidenced by the former's average cewpancy rates of over 95% since 2000, with the exception of 2007 (94.5%). In 2011, the average occupancy rate for premium feshi rmolls was 96.2%. = Mid and mass market malls, despite its lower overage occupancy roles aginst the premium fashion malls, have recorded encouraging overage occupancy rates of aver 90% since 2000, except 2004 dus to Berjaya Times Square's (2.1 millon sq ft of net lettable area) opening ot high vacancy. Average occupangy rate for this segment in 2011 wos ot 91.2%. = The drops in both the segments in 2011 were due to the transition period in Surio KLCC ond Fevilion Kuole Lumpur Mall for the premium fashion mall segment, and new openings with mediocre occupancy rates for the mid and mass market mall segment, 4.7.1 Factors Influencing Roteil Demand ‘= Populotion growth in Greoter Kuolo Lumpur/ Klong Volley. Under the ETP, population in the Greater Kuala Lumpur/ Klang Valley cegion* is expected to expand to 10 million by 2020, fram approximately 6 million in 2010. This will be the biggest driver for retail demand in the next 10 yeors. = Economic foctors. Consumer confidence, « critical factor in retail spending, generally moves in tondem with economic conditions, growth in nominal GOP per capita of 6.8% annually from 2004 to 2009 and average household monthly income from RM3,249 in 2004 to RM4,025 in 2009 has created higher household disposable income, which in turn has led ta grow in retail spending. = Government policies ~ tox / import duties. The abolishment of duties ond other torifs allows products to reach final consumers at © lower price, thereby creating higher demand. However, cost sevings ore not always passed on in their entirely to ond purchasers, 08 seen with the recent abolishment of import dutias on 300 retail products (where it appears that some of the savings is being kept by retailers to balster their morgins) = Eose of credit. As reperled by Bonk Negara Moloysic, credit disbursed for consumption, which consis's of loans for personal uses, credit card spending and the purchase of consumer durable goods, grew at a CAGR rate of 15.3% since 2000. Tourism. Some of the major malls in the cily can have 30% of their footfall from the tourist sector = Infrastructurol development. Eosy access to mells crectes convenience far shoppers. Projects such os the proposed Moss Ropid Tronsit (MRT) system will benefit malls located near stations by the higher resuliant footfall. = Development facilis. In the absence of good public transportation facilis, the ovailabilty of car park space will go 6 long way towards determining footfall of the mall, In gonoral, the average number of occupants per car is three, and a greater umber of turns per car pork space invariably increases footol Note; += Greater Kuele Lumpurklang Valiy's boundary is dened under the Economie Trarstocmation Progtam os the area covered by 10 smurcipolies, each govemed by loccl chores: Dewan Sandaroya Koole Lumpur {DBKl}, Perbodonon Purooya, MB Shah Alom (MASA), M3 Petting Jaya (MP, MP Klang (MPA), MP Kojang, MP Sobons Joya (MPS), MP Selayang, MP Ampang lye (MPMI) and MD Sepang. CBRE |Woioyia $22. ntn oor page 39 B-32Chapter 4 Klang Valley Retail Property Market 48 — Rents © The tap perfarming malls in the city centre are the market leaders in the Klang Volley in terms of rentals far ground floor shops, ronging as high os fram RM60 ~ RMIO7 per sq ft per manth in some cases. In older malls with strote-ttied units, rents far similar space have exceeded RM200 per sq fi per manth in @ few instances. Ouiside of the city centre, the highest rents being achieved for ground floor shops range from RM30 ~ RMBQ per sq ft per manth = The prime rental index for 0 baske! af 11 prime malls in Klang Valley is shown in the follawing chart and table. 4.8.1 Prime Retcil Rentol Index Chart 4.80: Klang Valley Prime Reteil Rental Index, 1995-2011 300 5 ana i & 150 & on Sw B04 2 1995 19% 1997 1998 1999 2000 1200 2002 2008 2004 2005 2006 2007 2008 2009 2010 201 Source: CBRE Research {The rest ofthis page has been intentionally lft blank] CBRE Pile Seco Faget B33Chapter 4 Klang Valley Retail Property Market Table 4.8b: Average Prime Retcil Rents of Selected Malls in the Klang Valley ae es eens a Rete icops ec eee ia 2 995 100 1936 1 1.69% 1997 148 32.46% 1998 18 22.01% 1939 106 “8.17% 2000 13 15.69% 2001 125 1.59% 2002 V7 1.64% 2003 140 10.94% 2004 46 4.32% 2005 164 177% 2006 174 598% 2007 22 29.31% 2008 222 0.91% 2009 231 3.86% 260 2.69% ~ Sires: CBRE Reseach 1 Prime rent is defined as the rental rate far retail Iats lacated on the ground ar cancourse flaar, receiving the highest level of traffic within the mall Average prime rents have been an the rise since 2000. In 2007, average prime rents breached RM3O per sq 1 per manth fa @ high af RM33.73 per sq ft per manth. = Average prime rents have remained steady at araund RM33.40 per sa ft since 4 2008 throughout the globol fnonciol crisis primorily becouse there were fewer rent reviews during thot period. By 2 2009, overage prime rents rose to RM34.10 per sq ft os rent reviews in some leading molls begon oround the some time ond consumer sentiment, meosured by the Moloysion Institute of Economic Research’s (MIER) Consumer Sentiment Index, improved significantly, rising by 26.9 points to 105.8 points in the first half of 2009. The economy also began to recaver, as GDP grawth registered 4.5% in 4@ 2009 alter three consecutive quarters of retraction. = In 2010, overage prime rents increased to RM39.11 per sq fl, cccampanied by a further increase in cansumer sentiments during the period = While it can be argued thot the morket hos sizeoble supply in terms of tatal flaar space and lls (106) ond hypermorkets (31) in the Klang Valley, the fact remains shat retail is con industry predicated an the ability ta distinguish ane mall from another, and there are 35-40 ells and hypermarkets in the Klang Valley that have strong sustainability in terms of turnover and rents, number of In foct, whilst underperforming older molls and same new anes are experiencing rental pressures, successful malls have enjoyed rentol increases fram the late 90's until naw. The lost rent review in 2010 witnessed ren's far a few select shaps breaching the RMI00 per sq ft barrier in the best performing malls. In cartrast, the poorer malls have nat seen rental raoses ot reviews, which suggest thot with an increesing population, salary increases, CBRE }Moloyia St Page 32 B34Chapter 4 Klang Valley Retail Property Market infltion, increased taurist arrivals and the requisite feel-good foctor, the better malls will continue fo enjoy rental escalation for the foreseeable future. 4.9 Major Retail Property Transactions in Klang Valley ‘Toble 4.9: Major Retail Property Transactions in Klang Valley, 2008 - 2011 SED Beet OMAN! AeDanersee 47460070070 Parc Dona 52 ve onoasmert Patel SeWeryPtaa FNS store 395 —1.166—Canland Ad Lona hd Jaen Sten . Stil Gobel leno enSelen nega aoy sev Sm Sie 209 on sk Seal bel sti'Goley HBR aerase aap ans SL svi : a mosen Wo Sstyeng Hal Syn «gS, tan Arnhem Wo SnwoyFreid —Gandr Sunway 1485568) 2180) 1265! SumoyRET——_Suoy Group rant ao alr now smlOtchram MESO asoara 7h or aN Catal Nios hopong Foe SeiKerbongon 71956580. 737—CAMITRE ——Gapitendta SACC Na Shah lom 1857890 ag Manche ans 1 Mor at fatal ok Aiassn Nea oper [Offica/Retai) Mort Kiar 225,920 333 . Dragon Fund ud . Winds 168 Goran TFeGoniew ti? — Hida cy ania? a? ome ie OBC bo set ashen ayy on ' ere —sdontuea Rae Sorway RT Able Aion Mate _TaW ia arg Frode Woorg 6.85 oman, wes zo ‘Urusharto pesin Kil unger faa On Buk rong avo! 2.3908 fon test Carman ar Waseat tp Mamie SEB At CANS! Damani a2aasy 265577 | SEB ‘Waist Tha Sancy Pram propery consis oF 1,542, TOT 39 Reta space and 143,487 39 f convertion cone 2 The } Mont’ Kiera properties wero sod for 8399 milion, corsising of 20-sorey ofc tower Weck (185 405 29 ff end S-torey real mal incesive af corpork. "Tho ransacton of The Gordane Mall was 2 equiy acquisition of ts holding company, Mid Vally Cly Gardens Sah Bh. The reported value of BHB20 milion was the marke valve of ho mail asribed byte indopondon valve “The tle of Poa Pace const of Tha Malta), 100 Pra Pace (oe), The Legare! Hota jot) end 1,323 car parking boys. "Tha sae price and anchsod sale price per #9 fof Poin Kuala Lumpur Mal, including he retail ofce block. Source: CBRE Research There were a foto! of 14 transoctions (excluding The Gordens Mall, see Note #3 obove) of major retell properties in the Kiang Valley since 2008, of which 10 occured in 2010 and 2011 = In 2008, Singopore-based CapitoLand Lid purchased part of Sungai Wang Plaza for R595 million, which was fate injectad into CopitaMalls Malaysia Trust (CMM) in 2010 for RM724 rillion, together with The Mines Shopping Fair for RMS30 million. In the same year, CITA [Maloysig i mopay Poa ep ye 33 CBRE ~ B-35Chapter 4 Klang Valley Retail Property Market ‘Mall wes sold to SEB Asset Management for RM280 million, which was then sold fo ARA Asia Dragon Fund in 201 1 for RM245 million. 1% Inon exerc'se 0 reposition ise es o hospitality REIT, Starill REIT sold is two retail properties in Kuala Lumpur in 2009, Lot 10 (RM4OT million) and Storhill Gallery [RM629 million) to Storhill Globol REIT, which owns retail properties in Singapore, Malaysia, Chin, Austrolia and Jopan, Sunway Pyramid was also injected into Sunway REIT in 2010, for the consideration of RM2,132 milion. In 2010, 1 Mont’ Kiara was sold to ARA Asia Dragon Fund for RM333 million. The 1 Mont” Kiora transaction consists of a 20-storey office tower and the 1 Mont’ Kiare mall = A notable equity transaction involving retal properties in 2011 was KrisAssets Holdings Berhad’s acquisition of 100% equity in Mid Valley City Gardens Sdn Bhd from IGB Corporetion Bethad for RM215.7 million. Mid Volley City Gerdens Sdn Bhd is the owner ond operator of The Gerdens Mall, which wos valued at RMB20 millon. = Klang Parade was also sold in an auction in 2011 collectively with two other properties, namely Ipoh Parade and Seremban Parade for RM450 milion to Ara Asia Dragon Fund. However itis loter reported thatthe Serembon Parade transaction wos net completed. = At the same year, The Mall at Putra Place was sold in an auction fo Sunway REIT for RMS13.9 million, the price includes retail, ofice and hotel properties. In the second holt, the high-profile initial publi offering of Fovilion REIT saw Pavilion Kuala Lumpur Mall injected into the REIT for RM3.19 billion, equivalent fo RM2,390 per sq ft including its retil office block. 4.10 Klang Valley Retail Market Snapshot and Outlook = CBRE Research defines Klong Vlley os the combined area of Kuala Lumpur, Putrajaya, district of Petaling, district of Gombok, district of Klang ond district of Uly Langat. This provides a total of 6.69 million population which con be considered os the Klong Valley's total catchment for retail in 2012 ‘As ot 2011, the cumulative supply of retil space in Klang Volley stonds at 46.11 milion sa f 11 developments were complated in 2011, including Viva Mell (660,000 sq fi, Publiko @ Solaris Dutamos (835,000 sq f, Kuala Lumpur Festival City (450,000 sq, Kenanga Wholesole City (500,000 sq #) ond Suria KLCC extension (140,000 sq A} in Kuala Lumpur; and First Subang Mall (140,000 sq 4, CITTA Mall (424,467 sq fil, Mines 2 Steet Mell (300,000 sq fi, Space u8 (619,280 sq fH, AEON Rawang (370,000 sq fy, and Gient Cheros ‘Mall (200,000 sq f} in Selangor. The yeor also sow the closure of Atria Shopping Centre and UDA Ocean. = Going forword, os many 0s 23 developments are expected to complete before 2015, should all of these complete in time. In the immediate term, four new molls ore anticipated fo open by 2012 with on estimated combined net ettable orea of 2.47 million sq ft, ie. 1 Shamelin, Nu Sentral, Paradigm ond Seta City Moll The overage occupancy rate of retail space in Klang Valley in 2011 decreased by 1.5% to 91.7%, meinly due fo the new openings that have not stabilized in terms of occupancy. = Average prime rents remained sioble ot RM39.23 per sq ft per month in 2011, wih marginal growth against the previous year. = The general sentiment in the morket 's softer in 2012 as expected, largely due to the uncertainties with the Malaysio general alaction and the European financial crisis. Bonk Nagara's credit tightening measures hove olso contributed to a softer market. CBRE |Malaysio a Poge 34Chapter 4 Klang Valley Retail Property Market = Nevertheless the market performed well in 2011 and 2012 is expected fa canfinve to grow as the first quarter has already shawn "= Alhaugh retailer sentiments are cautious in 2012, many relailers remain positive, with mony ‘exploring o reintraductian af previously-shelved expansion plans. = Of significance is the launching of the Pavilion REIT, which nat only increased the size of the Molaysion REIT market but alsa helped change value paradigms to sub 7.00% net yields on valuations and volues above RM2,300 per sq ft = There were also many transactions, chief amangst which were the purchase of the The Moll at Putra Place by Sunway REIT and the acquisition of East Coast Mall by CapilaMalls Malaysia Trust. Bangsar Shopping Centre was alsa the subject of an acquisition at « fairy high price although the sale was called off subsequently. CITTA Mall was resald ta ARA Asia Dragan Fund who also bought the Klang and Ipoh Parades. = Allin oll 2011 was significant far its lorge number of transactions and this probably marks the shifljewards investment led retail assets in the industry from a develaper centric ane previausiy. ©The other significant event in 2011 appears to be the apening af Jahar Premium Outlet Mall in Navember. Soles were encauraging in the first 2 manths and despite @ quick leveling aff, general opinion is that the format is here to siay and thus has triggered « gold rush mentality ‘amongst many would be moll owners fo build a similar one in Kuala Lumpur. '= The latest buzz is also about the entry of some mojor brands which are expected to make an. impact to the industry. One of this is the Central department store from Thailand, the other brand is Hennes & Mauritz (H&M) whase first stare is expected ta apen in August in Lat 10, Once opened the latier will be a potent force and will impact on the existing retailers. = Tho nex! rent review far most malls will be in 2013 and there oppears ta be raam far grawth in cll the malls where rents have sill nat reached their peck. Currently fashion is segmented between luxury, fast fashion ond price-driven boutique merchancise. Most brands in these categories have yet fo reach their top level performance an a per sq ft basis becouse of the limitations in the public transport. ‘The rest of his page has been intentionally left blank] CBRE epee Poge 35 B37Chapter 5 Review On REIT Portfolio 5.0 REVIEW ON REIT PORTFOLIO 5.1. Mid Volley City = Mid Volley City is one of the largest" mixed-use developments in Malaysia, and has successfully achieved admirable growth in terms of ts real estate value. The entice development includes two malls, ie. Mid Valley Megamall and The Gardens Mall, three hotels with 1,484 hotel -ooms and 199 suites, seven commercial office buildings with over 2.67 milion sq ft n net letable area and 228 residential units. The development sits on a 50-acre site, with more than 2.5 million sq f of total net lettable retail space which makes it the largest” inte-liked retail property project in Moloysio 8 Mid Valley City’s atractiveness les in not only in its size but also its strategic location atthe fringe of Kuala Lumpur and at the beginning of the Federal Highway which connect the city to the rest of the Klang Valley. Despite a slow start owing to its pioneering stahis in the 1990s, in what was considered fringe location, the success of the entice development has now transformed the rea into @ sought ofter residential and commercial area. Mid Valley City is primarily known for its megamall which continues to be a benchmark for retail throughout Malaysia, ond is a preferred location for many brands’ flagship stores. Additionally, the self-contained city has Gttracted multinational corporations and established local companies in the likes of Accenture, Baker & MeKenzie (Wong & Partners), BHP Billiton, Danone Dumex, Oracle, and Tricor. 5.2 Description of Mid Volley Megamail '@ Mid Valley Megamall is one of the largest malls in Malaysio. The mall has 1,717,609 sq ft of net lettable area os at 31 Morch 2012, and 's home to more than 450 retail tenants, and is anchored by AEON (department store), Metrojaya (department store), Carrefour (hypermarket), Golden Screen Cinemas, Toys ‘R’ Us (toy store], Kamdar (fashion and textile store) and Oosis Foodcourt. When it first started, it was one of the biggest malls in the country and its large number of retail offerings was its greatest attraction for shoppers all over the Klang Valley. Today, competitors can boast of even more offers than Mid Valley Megamall but for most shoppers Mid Volley Megamall provides a wider range of brands and lifestyle attractions as well as the latest in fashion, For retailers, the combination of Mid Valley Megamall and The Gardens Mall is potent 03 it attracts « wide range of customers and a very large catchment area with potentially higher footfall. = Mid Volley Megomall is positioned towards mid market and caters tothe entire Klang Valley. This '5 4 typical megamall concept, and is the first in Malaysia in terms of its large size and the concept relies on a very effcient single corridor mall, flanked at its ends by anchor tenants with large entertainment and lifestyle attractions at the top floor of the mall. [Notet Maid Valley Cys fol buil-up aren excluding corner is eatmated at 12 milion sq. This puts t amongst one ofthe lergest mised davelopman's in Moloysa. Comparable developments would be inte likes of: ) KL Sentah ~ 72 cers ld, buil-vp ea eppreximataly 27 milion #9, i) KLOC 100 acres land, buil-up area appreximasely 21 milion ea, &i) KL. Eea Gy - 28 sees and, buit-up ea apratiaily 8 milan 9 The size oF Md Volley Megemall at NUA of 1.72 milion sq fis ranked the thie largest mili» Melasia cher Berio Times Square (NLA: 2.1 mulion #9) onc Utama Shopping Centre (NLA: 1.98 milion 2g). la combinotion with The CGordens Mai! ct NLA of 0.82 milion eq A chese two infor-inked complexes when combined «reae the lege retail sroperty projec inthe coun thi unc, CBRE |Holos 2 ner etanee Page 36 B38Chapter 5 Review On REIT Portfolio 1 Bronds found in Mid Valley Megamll are mostly mid-range, which appeals fo 9 wider market as the biggest slice of the Klang Valley population pie is the middle income group. Popular brands which can easily be found here in Mid Valley Megamall include Zara, Topshop/ Topman/ Ms Selfridge/ Dorothy Perkins, MNG, Charles & Keith/ Factary Outlet Store, G2000 Men, Guess, Cotton On, Original Levis Store, Padini/ Padini Authentics/ Seed PDI/ P&Co/ Vincci/ Vineci+, Food Junction, Chilis Grill & Bar, KFC, MeDanale's, Madam Kwan's, Hong Kong Kim Gary Restaurant, The Library and Delicious. = Mid Valley Megamali hos received 18 awards and accolades since 1999, and some of the key ‘wards include the follawing: © “Innovative Shopping Outlets 2010/2011- Meri’ by Tourism Malaysia © “Winner in Best Promotions & Events (Central Business Distric!} Cotegory for Chrisimos 2009 in the Malaysia Year End Sole Awards 2009" by Tourism Malaysia © ‘Winner in Best Promotions & Events (Central Business Distrcl) Category for the Molaysio, ‘Megs Sole Cornival Awards 2009” by Tourism Malaysia © ‘MAXI Merit Award 2005 in Sales Promotions and Events Category for the Hari Raya 2004 Promotion’ by International Council of Shopping Centres {ICSC) © ‘Malaysio Tourism Awards 2004 ~ Most Supportive Shopping Outlet (Shopping Complex ‘Cotegory) by Tourism Malaysia © ‘Malaysio Tourism Awards 2001/2002 ~ Best Supporting Shopping Ouilets (Shopping ‘Complex’ by Tourism Malaysia ‘Best Retail Development Award 2001" by FIABCI Malaysia ‘Best Shopping Complex Award 2000" by Tourism Malaysia ‘Gold Award in the Shopping Complex of the Year Category 1999 by Retail World Excellence Award 5.3 Description of The Gardens Mall = Lacated within Mid Volley City, and in clase praximity ta same af the mast affivent suburbs in the Klang Valley, The Gardens Mall is a premium fashion mall, and he only mall of is type in the suburbs. = The Gardens Mall wos opened in 2007 and has 816,657 sq ft of net lettable retail space and 208 retail fenans os at 31 March 2012. The mall was introduced on the back of the successful ‘Mid Valley Megomall, but was positioned towards the higher end of the market ~ to differentiate it from the later, and to capture an increasingly affivent suburban population that was not Fully served by Mid Volley Megamall. The Gardens Mall targets the upper-middle te upper income fomilies and expatriates in the nearby affluent residential oreos of Bangsar, Seputeh, Toman eso, Damansara Heights, Mant’ Kiara, Hartamas and Bukit Turku. '= The design concept is single mall design with department stores anchoring both ends, ike Mid Volley Megamall. Being part of an integrated city development, The Gardens Mall is well-linked to Mid Volley Megara both ot the car park levels os well as the upper flooss. 1 Today, The Gardens Mall has established itself as a premier high-end mall which boasts strong high-fashion brands like Louis Vuitton, Burberry, Coach, Mulberry, Juicy Couture, Boss Hugo Boss, Versace Jeans, Lewre Couture, Tods and Longchamp. CBRE isons Suara Poon 97 B39Chapter 5 Review On REIT Portfolio 5.4 Location Analysis 5.4.1 Mocra Analysis Located in the southern part af Kuola Lumpur city, Mid Valley Ci is strategicolly locoted at the confluence of Federal Highway and the beginning of the Eost-Weal Link Expresswey. This ollows Mid Volley City to reach oul fo most of the Klang Valley os itis accessible from virtually oll directions. It hos thus become one of the most recagnized addresses in Greater Kuole Lumpur / Klang Velley. © Despite being on the fringe of the city, it is also very clase to large existing suburbs of Bangsar, Damensare Heights, Petoling Joye, Old Klong Road, Seputeh, Tarren Desa ond CCheras. Mid Valley City is centrally located within @ bustling suburben ecosystem, with close proximly to the transportation hub of Kuale Lumpur, KL Sentral. © In essence, Mid Valley City is now the defauit location for meetings, conferences ond exhibitions and reteil theropy for those awiding the city’s traffic joms, ond clo @ convenient stop for inbound and autbound travelers across the country. 5.4.2 Micro Analysis © Lounched in 1999, Mid Valley City is an integrated mixed use development comprising hossitelity, office, residenticl ond retell camponenis. The toble below sets out development components of Mid Volley City. Tablo 5.4a: Development components of Mid Valley City Mid Valley Meg Retail | Citite Hote! Hospitality 1999 ‘Menor IGB Office 1999 Boulevard Offices Retcil/OFfice 1999 Boulevord Hotel Hospitality | 2005 Northpoint MVC Olfica/Residential | 2006 | Centrepoint North and South Towers Office 2007 The Gardens Moll Retail 2007 The Gardens Hoiel and Residences Hospitality 2008 The Gardens North end South Towors Office 2008 Fulure Development _ | ‘Mid Volley City Southpoint T Office: 2014 Soren: CHAE sar Noe: Expsced year of competion = Mid Valley Megemell ond The Gordens Mall are the significant retail beacons within Mid Volley City that drow crowds to the development. © One of the strengths of Mid Volley City is is excellent connectivity. It is served by o ring raod, known os Lingkoran Syed Putra, thet links the development directly with ather major raods and highways such os Jalon Bangsar, Jalan Moarof, Jalan Syed Putra, Old Klong Rood, New Pontai Expressway, East-West Link Expressway, North-South Highwoy ond Federal Highway which connects west of Klang Volley to the Kuolo Lumpur city © Due to its popularity, Mid Volley City and its surrounding areas ore suscepiible to traffic congestion during weekends and peck periods. This suggests thot with its current car pork spoce af more then 10,220 bays, improvements to the traffic system in and around the development may increase shopper trafic to the malls. CBRE}oiosia 2222 Poge 38Chapter 5 Review On REIT Portfolio 5.4.3 Cotchment Demographic "A Customer Exit Survey was conducted in 2010 by the mall management and the visitors profile ond preferences are summarized in this section, = Gender distribution of visitors is firly even, with 66% Chinese, 20% Malay, 9% Indian ond 5% from other ethnicity 18 The primary catchment of both the malls stretches from as near as Old Klang Road and to «0s for os to Subang and Cheras, suggesting thot the secondary catchment includes the rest of the Klang Valley. A total of 40% of the visitors are from the south, south east and south west of Mid Valley Cily. It is evident tht Mid Valley City’s location is very strategic ond it pulls up to 20 minutes drive fime zone in terms of the location ofits shoppers, or catchment area. Unie many other mails, Mid Valley City enjoys regular visitations from iis secondary catchment area residing between 10 to 20 minutes owoy. Port of its catchment area stretches beyond 20 minutes, the tertiary band i.e. Shah Alom, Klang ond Puchong. = The overage onnval vsitofion to Mid Volley Megomall wos 69 fimes; whilst The Gordens ‘Mall shaws an average of 54 fimes a year. 60% of Mid Valley shoppers visit the mall at least once o week, against 47% in The Gardens Mal 18 The average fime spent in Mid Valley Megarail is 160 minutes whilst The Gardens Moll registers at 103 minutes. Effectively this means some visitors, with above average fime spent in both the malls, spend olmost o whole day in the malls or the shopping trips straddle two meals. = 27% of the visitors visit the mall to browse or window shop whilst 26% of the visits were t0 actually buy particular goods in both the malls. F&B is an atraction to visitors at The Gordens Mall, with 13% of total visitors visiting the mall for ils F&B offerings, compared to Mid Volley Megamall’s 9%. This feature is visible in the lower ground of The Gardens Mall thot is linked to Mid Volley Megomell = More than 80% of the shoppers visit Mid Valley City by car. With @ total of more thas 10,220 car park boys in Mid Valley City, the development has enough parking space to support shopper trific during most periods (except for weekends and public holidays). This provides retailers in both Mid Volley Megamall and The Gardens Mall with consistant shopper traffic throughout the year. = The typical vistors profile is © 30 to 39 year old professional or managerial urbenite eaming on average househeld income of RM9,130 and RM10,772. per manth in Mid Volley Megomall and The Gordens Mall respectively {The rest of this page has been intentionally lef blank} CBRE aioe Poge 39Chapter 5 Review On REIT Portfolio ‘Map 5.4b: Major Catchment Areas of Mid Valley Megamall and The Gardens Mall CBRE bir wax a nS } Sonuennee fs site ae Loe ro Re | to hi age 1S eee COSY ; Kerinchi/Bukit Angkasa/ . Pontal Dalam Abdulloh Hukum \, 9 RED ert seen Pesan Petaling Jaya \| Le ~'Seksyen ue- fs ate enh Subang Jaya/ - : Bandar Sunway/ x USI/ Putra Heights 4 | / Bukit Jolly | \ - Sri Petaling/ |< ~ Sungai Best |" | 9 Wong } Puchong Shona & Kinrara seaman 11GB Corporation & CBRE Research [The rest of this page has been intentionally left blank) CBRE}biosia 22 foge 40 reetta can aionnaes Ma 2012Chapter 5 Review On REIT Portfolio 5.4.4 Key Infrastructure ® Strotegically lacated in the master planned Mid Valley City, Mid Valley Megamall ond The Gordens Mall are accessible via a netwark af highways such as the Federal Highwoy, East-West Link Expressway, New Paniai Expressway and Narth-Sauth Highway. Other rmojar raads that cannect fails majar catchment orees are Jolan Bongser, Jolan Maaraf, doian Syed Putra and Old Klang Raad. Mid Velley City is supparted by the Keretapi Tanah Melayy (KTM) railway system. The Mid Volley KTM Kamuter Station, which forms part af the Rawang-Seremban raute, is diredlly connected to Mid Volley Megemall. This station registered the secand highest ridership of 2,289,403 in 2011, after the KL Sentral Station, The dreft Greater Kuala Lumpur/ Kieng Velley Land Public Transpart Masterplan released by the Land Public Tronspart Commission (Suruhanioya Pengangkutan Awam Darat, SPAD) includes plons for on upcoming MRT 2 Circle Line, on arbital line af the Mass Ropid Transit systom thet will ink areas such as KL Eca Ciy/ Mid Valley City, Mant’ Kiara, Sentul Timur, Ampang and the MATRADE develapmect. This railway system is targeted to camplete by 2020. Under the same plan, the KL Manarcil will be extended ta Taman Gembira in Old Klang Raad pre-2020, and is expected ta benefit Mid Valley City, Bongsar and Taman Gembira Going farward, there is @ prapased linkage fram Mid Valley City to the adjacent KL Eco City, @ 25-ocre integrated mixed-used development, which will be an integrated rail ‘ranspart hub cansisting of the existing Abdullah Hukum Putra LRT (Light Rail Transit) Statian, @ new KTM Kamuler station alang the Santul-Perl Klang raule, and a statian an the MRT 2 Circle Line 5.5 Trade Area Analysis Toble 5.50: Trade Area Analysis - Residential ederal Territory of Kuale Lumpur Distt of Petal 1.76 milion elongor 1.97 milion District of Uy Lengat, Selangor 1.28 milion Secondary — Federol Tenitory of Ptrojaya 0.10 milion District of Gombak, Selangor 0.72 milion Diskiet of Klong, Selangor 0.91 milion _ Klang Volley Taral 6.69 milion ‘Source: CBRE Resoorch ‘Mid Volley Megamall ond The Gardens Mall are able to attract visitors fram all incame types and lacations. The Cuslamer Exit Survey canducted in 2010 shawed that 40% af the visitors are from sauth ta south east and savth west af Mid Volley City, ond that the coverage extends ta the entire 6.69 millian papulatians in the Klong Volley. By definitian, any mall auiside the city is categarized os suburban mall, yet Mid Velley City's in o unique position in that itis neither in suburb nar in the cily, @ mejar odvantage as it can act as default destination far people wha prefer nat fa enter the city but want an alternative to suburban malls. Hence, rather than being limited to @ primary and secandary catchment araund certain suburbs, Mid Valley City can cater to virtually all the suburbs in the Klang Volley. CBRE Moya 222 nmi rt Page 41 eae cere Aa B43Chapter 5 Review On REIT Portfolio "Currently Mid Volley City is not connected to the LRT network. Should it be connected, we anticipote thot Mid Valley City will receive even higher footall thon it hos now, as its parking spoce is currently olmost fully moximized in terms of daily patronage. However, it is currently linked to the KTM Komuter stotion which helps bring not only same of its shoppers, but olso the working population to the offices ot Mid Valley City "With the trend of urbon spraw! continuing in the Klang Valley, suburban malls are essential as traffic congestion in the city and extended travelling time became concerns for the average household, As such molls ike Mid Volley Megamall and The Gardens Mall are mainly supported by the broad residential zones in both the Selangor stale and Kuola Lumpur. Table 5.5b: Trade Area Analysis — Office Population within the 5-kilometre Drive Distance a 5 2 “Eplipatediectupied’ | © Exiinied ace aes UG a eR eee | Primary - Ac Valley City 2.87 million 2.8 milion Secondary ~ KL Sentral, Bangsar, i Bangzor South, PanlaisKerinchi, Old Klang Rood, part of Damansore Height, 18.53 millon 15.42 milion 102,819 port o Petaling Jaye, 21,20 milion 17.60 milion | 07385 _—| Source: CARE Reseorch OS Nate: "Based an the timated average accopany rate of 81.8% in Kuala Lemur Suburban Areas anc! BP.8% inthe Control Business District (CBD) "assuming one {office worker for over 130 89 of accupiad office space. Mid Valley City and its immediate vicinity has substantial commercial content as over the years, the area has become 0 popular location for small and medium enterprises, ond more recently, multinational corporations, Mid Valley City’s status os MSC Maloysia Cyber Center commercial precinct has also helped it draw technology based corporations into the development. In a larger context, 0s at 2011, the total net letiable area of private office space within the 5-kilometre drive distonce from Mid Valley Ciy is estimated fo be ot 21.20 million sq ft, of which 17.60 million sq ft ore estimated to be occupied. This is equivalent to an olfice population of 117,365 workers that may contribute to the patronage of Mid Valley Megamall and The Gardens Mal [The rest ofthis page has been intentionally lft blank} CBRE |Mooyio tipo mapyetetnen Page 42 BadChapter 5 Review On REIT Portfolio ‘Map 5.5c: Light Rail Transit (LRT) Lines, KTM Rail Line, Express Rail Link (ERL) and the praposed Mass Rapid Transit 1 (MRT 1) Blue Line in relation ta Mid Valley City CBREhi t j Soames, % ; Te LSE mA pes ‘Sour, CORE Research [Noe The proposed MET 2 Line and KL Menara Eitetion ore not shown in ths mop as the teal olgament hoe not been ennounced a CBRE }Mooo Seren page 43 BasChapter 5 Review On REIT Portfolio ‘Map 5.5d: Selected Major Office Buildings, Molls and Hotels in relation to Mid Volley City within 5- kilometre Drive Distonce {The rest ofthis page has boen intentionally lot blank} CBRE Meo 322 nents voce at meneteteee en B46Chapter 5 Review On REIT Portfolio 5.6 Performance Analysis - Mid Volley Megamall 5.6.1 Key Tenants = In 2011, the top 10 largest tenants by net leltable area in Mid Volley Megamall foke up con aggregate at 57.7% of fatal available crea in the mall, whereby majority of the space dare token up by the depariment stares ond supermarket. These 10 tenants cantibuted towards 22.1% af the rentel income in 2011 1= The table below sets out Mid Valley Megamall’s tap 10 tenants by net letiable area as ot 31 December 2011 Table 5.60: Mid Volley Megamal’s Top 10 Tenants by Net Letiable Area os ot 31Decomber 2011 a Fp NA 7 Carrefour 2 CColabrity Fitness a Cosmic Bow Da Golden Sc:een Cinemas 5 AEON 6 Kamdar | 7 Merroiaya | 8 Mid Valley Exhibition Contre 9 MPH Bookstores 10 | _Why Pay Move/ Stucio R& Puma Sa 1G Capron 6 CE Rasch 5.6.2 Trade Mic Chart 8.6b: Mid Valley Megamall Trade Mix Analysis by Net Letcble Area as ot 31 December 2011 Eihibiian Holl Home Products Toys & 3.9% & Electrical Games/Music ' Video Hobbies 4.8% Entertainment 7.9% Source: GB Corporation & CBRE Research Note: The ctegares af he above Wade mix surmerite 9 lager sel of sub colegoree and include shop ond wna CBRE e022 etn pope 4 wentatamen nt B.a7Chapter 5 Review On REIT Portfolio 1& The chart above depic's the trode mix of Mid Volley Megamall by net lettable oreo os at 31 December 2011 = Mid Valley Megomoll is positioned as a mid-to-moss income mall, and with 1.72 millian 5q ft of net lettable arec, the mall provides wide atfering of merchandises ond brands ta shapoers. The mall is anchored by two department stares and a supermarket, represented by AEON, Metrajoya and Carrefour, that callectively occupy 41.7% of the oggregote space in the moll. Fashion stores occupy 12.8% and include some popular mass fashion brands such as Guess, Zoro, MNG, Cotton On, Padini, G2000, and Roxy. 2012 will see the addition of Forever 21 and Uniglo ta the mall = Food ond beveroge outlets hove became an integral part of the moll - Mid Volley Megomall hos 11.6% of the totol spoce ollocoted for this trode. From fast food outlets to cafés ond restaurants, the mall has mare shan 100 faad and beverage tenants, including Chili's Grill & Bor, Madar Kwan's, Sushi King, Delicious Cofé, Hong Kang Kim Gary Restaurant, Roam 18, Carl's Juniar, McDanalds's, Storbucks Coffee and San Francisca Coffee, = Entertainment trade farms a sizable shore af the trade mix in Mid Valley Megarnall Galden Screen Cinemas, Cosmic Bawi (bowing centre), Mega Kidz (children play centre), Galoctic Loser (laser tag entertainment centre), Brewball (pool centre) and Holidoy Planet (orcade cenire) take up 7.9% of the aggregate space, 5.6.3 Occupancy Rate Chort 5.6¢: Mid Volley Megamall’s Occupancy Rates vs Mid and Mass Market Mall's Average 100.0% 99.9% 100.0% 100% 93.8% 90% 20% 70% 2009 2010 Valley Megomoll Source: IGB Corporation & CBRE Research = Mid Vollay Megamoll is one of the few malls in the Klong Valley that hos consistently cochieved full accupancy; this isin spite of its large size af 1.72 million sq ft. For the post three years, the mall achieved full accupancy with the excepfian of 2010, when ane af the spoces underwent « transition period far reconfiguration af space. Campared with the somple of 48 other mid ond moss morket malls in the Klang Valley, including 1 Utama Shopping Centre, Sunway Pyramid, Sungei Wang Ploza, Berjaya Times Square and Bangsar Shopping Centre, which overages ot 91.4%, 93.8% and 87.7% of accupency in CBRE ios Ponsa Page 46 B48Chapter 5 Review On REIT Portfolio year 2009 - 2011, Mid Volley Megomall clearly cutperformed in terms af its abiliy 10 tract ond retoin tenonts as evidenced by ils consistently high eccupancy rates. 1= This probebly is the best performance in terms of occupancy for successful malls in the county. 5.6.4 Rents © In 2011, the average grass rent on per sa ft basis in Mid Volley Megomell was RM10.21 per sq ft. Considering thot olmost 60% of spoce ore occupied by mojor lenonls who pay lower rent due fo their sizes, RM10.21 per sq fis © significantly high average. This ranks Mid Valley Megamall’s average gross rent within the top fier in the country, which suggests 0 commendoble rate of success considering the number of lorge spoce users. Since commencement in 1999, rents have been growing consistently throughout each rent 18 We believe thot rents con potentially go higher as there is an active pracess af change in terms of relocating some fenonts ond introducing new 10 the market tenants. This allows Sgnificont growth in large areas, where Floor space currently leased to onchors ond mini anchor tenants ot reiat'vely low rental rotes. For instonce, the former MPH Bookstore’s space that has been recanfigured far new tenants with higher rents. Gaing farward, thereiore, it is possible for some of the majar spaces to be reorganized for both tena mix improvement ond rental growth, As o result, despite its large size ond consistently high accupancy rate, the mall has strang rental grawth potential. Demand far space at Mid Volley Megomall is evidenced by the waiting list for new spoce thet is stil in excess of two years long. The highest rent per sq fis sfill below RM60.00 per sq ft (as compored to rents in the city centre which have exceeded RM100.00 per sa fi], and bosed on the turnover of some of the best performing tenants, there seems fo be room for further growth in rents Chart 5.6d: Mid Valley Megamall’s Average Gross Rent M.11.00 per sq fi RM 10,21 persq f 244 10.00 per saft | 149.69 per sat 2449.22 per sq 749.00 per sat | | 0 | RM 8.00 porsa | PH47.00 per sq 206.00 per aq # | RM5.00 persq tL a a! a 2009 2010 2011 Sooner ISB Corporation Malaysia ert ay tos Poge 47 CBRE| eriairen tt B49Chapter 5 Review On REIT Portfolio 5.6.5 Shopper Tratfic © Based on the car park statistics provided by he mall management, CBRE Reseorch estimates the footfall in Mid Valley Megamall and The Gardens Mall to be at 34.7 milion in 2011 on fatal basis. This puts the footfall of both the malls amang the top in ‘Maloysia, as compared to other malls such as Suria KLCC (Financial Year 2011: over 40 million), Povilian Kuala Lumpur Mall (2010: 31 milion), Sunway Pyramid (Financial Periad 2011: more than 34.0 million) and Sungei Wang Plaza (2011: 23.9 million) st The symbiotic connection between Mid Valley Magamall and The Gardens Mall signif that both the malls aftentimes share the same visitor traffic. Nonetheless the shoppers in Mid Valley Megamall are not direct torgets of The Gardens Mall and vice verso. 1# Because both malls share the same parking space and visitrs, its difficult to isolate the footfall for each mall. For the purpose of this report, footfall of both che malls were esiimated from the car park trafic {including season parking enitias ond exits) in Mid Volley Megamall and The Gardens Mall, ond the incorporation of statistics from the Customer Exit Survey conducted in 2010. = The footfall cauld potentially increase but will be limited by the number af cars that the malls can accommodate, Cutreny, each car park bay has a daily turnaver of about three times, with each tum being an average of three hours, which suggests that car park usage is almost at on optimum level. 5.6.6 SWOT Analysis ‘Strengths = Located within a large fully integraied self-contained mixed-use develapment which includes three hatels (1,484 rooms and 199 suites), seven office buildings (NLA: 2.67 million so f} and 228 residential units that provide consistent day traffic to the mall = Accessibilily: Very strategic location accessible by the mojor roads ond highways from all directions end supported by the reiiwey system. = High visibly: Being « significant landmark to vehicular ery into the Kuala Lumpur city {rom the west Klang Valley. 1» Support fram the cily and the suburbs. The unique location of Mid Valley City means that it is capable of attracting the massive population in the suburbs, and also from the 45 e004 6s aise edging ong pn wane yon ame 08084 osiop| ED ‘aloo poo moes noo pg werent pain pooner seed “ay fowung doug ued Aon 955 ‘duyssoung oo pote So : GET True nay 87S _— vee "0009 Keimuwosdéy Hoople soa ea mo ON Soa ig oes sam ‘ramon ® vernon a 3 7 re y Z ZL hsewesog pro} coun oman Ady ran or ence T HR eer teat edmpel Camel om von owea 86 6 teeny wow cna 7 Ta ae eT rer ‘20000 Aaiowpordey (be) any oyqoue7 oN, fo (quod) siskjouy exyosodwon g°¢ OOpOd LIT UO MalAay § saydoypose osioen| STEAD 85 of0g \eveesny 389 05008 O1oH40d LIT UO Maley § 40;d0y9Chapter 5 Review On REIT Portfolio 5.8 Comparative Analysis (cont) CBRE |Moloyia 22s rumynesnypn Poge 59 Out ofthe 46.11 milion sq fretil space in Klang Valley, mid and mass merket malls contribute 92.3% af fotel supply os ot end 2011. Mid Volley Megomell end The Gardens Mall together contribute 2.5 milion sq, representing 5.4% of total retil space The tendency today is for some developers to assume that the bigger malls have © better rate of survival. However, there is a limit fo how many megamalls there can be in @ given market and therefore the threat for Mid Velley City is how many more competitors there will bein the future ‘hat would potentilly dilute its market shore. As it stonds today, the larger mails seem to be successful whilst many of the smaller malls have either medioere performances or ate trading below por; with some notable exceptions. Smaller malls, especiclly those below 500,000 sq fi, inveriebly need to be located in o very strong coichment area to be of significance. Therefore, the pattern in the market until now seems 10 fovor lorger malls, end it looks like bigger is better. A the Klong Volley is large, with ¢ fotel population today of exeund 6.69 milion, it is capable yet of supporting the mid and moss morket malls and premium fashion malls very well Al the lorgest molls have outperformed consistonily and growih in ell cases in terms of retail soles turover has been constant in the pst decade, This suggests vory litle overlap despite similar offers. Research and anecdotal doto suggests thet Pavilion Kuala Lumpur Mall and The Gardens Mall do not shore the same customers in that both serve diffrent catchments with similar income gr0ups. Likewise, Mid Valley Megamll does nat compete dieclly with 1 Utoma Shopping Centre ‘or Sunway Pyramid, as shown by 0 cursory glance ot the high occupancy of car park space in the ‘bree melle during weekends Although Malaysia is sill on emerging economy, the rete industy has matured at a fer more ropid rete then the country’s economic growth, ond hos oubstipped the growth of the retail industios in many other Asian counties. This matucly has therefore allowed both the segmeniatian of the market in terms of geographical segregation as well os income segmentation. Therefore, we can find @ higher-end mall now capoble of performing significony well in the city centre, namely Pavilion Kuola Lumpur Mall, whilst in the suburbs the growing afiuence has created support for further premium feshion mall ie, The Gardens Moll. This certcinly could rot have been possible only 12 years ago both in terms of hoving ‘wo such malls with similar high-end brands and in terms of one being in the suburb. Therefore, the market is now capable of supporting five strong, robust and successful megamells Kuala Lumpur has shown over the lost decade that it has become an attradive location for top quality international retail brands. By scles turnover ond number of outlets for these brands, Kvala Lumpur is almost as big o merket os the best in the region now. {mn the long term, this suggests thot lorger mols thot are currently doing wall will continue to perform because the market is forge enough end growing. Kuole Lumpur is therefore a critical part of the region's map for any major inte-nofioncl retailer. Increasingly, international brands cere coming into Kuala Lumpur straight from either Singapore or Hong Kong or sometimes colmost simultaneously. This cugurs well for the mals in terms of potential expansion or creating ‘he differentiation over the yecrs that they need to maintain their competitiveness. It is therefore foresseable that Mid Valley Megamall and The Gardens Moll both have « good combined poo! of customers within their specific cotchment ond segment, ond thot these strengths ore sustaineble in the long term Mid Volley Megamall was considered by retcilars in its earlier years os a mass market mall compared with Suria KLCC, The latter was seen os © mid-to-upper-mid market mall. 1 Utomo Shopping Cenire and Sunway Pyremid, which were then without their extensions, were just B61Chapter 5 Review On REIT Portfolio regional sized malls catering ta their individual coichments. Mid Volley Megamall was then the largest mall in the Klang Volley. 8y 2007, with the completion of Pavilion Kuala Lumpur Mall and The Gardens Mall, the fear wos that the market was incapable af supporting two similarly pasitianed malls, and in the case of The Gardens Mall, skepticism was high because of ils association with Mid Volley Megamall’s mass market. = Bul now if hos become dear thot not only is there roam for @ premium fashion mall in the city but alsa anather one in the suburbs as thoreis very ile overlap in the catchments of bath, 1 Today, Mid Volley Mogamall is no longer the largest by size compared with Sunway Pyramid {including upcoming phases) and 1 Utama Shopping Centre. Yet it continues to draw crowds The answer is the its catchment is much wider than that of is other 2 compettars, due to its more central location 1 Perhaps Mid Valley Megomall is naw also benefiting fram the higher end The Gardens Mall, in that The Gardens Mall now hos premium and luxury goods to offer which the former cannot. This mey in some ways suggest that premium offers can reinforce the slrongih of the mid and mass offer. [Tha rest of this page has been intentionally left blank} ver Procery Mars Repent Page 60 CBRE Melos tem nen B62Chapter 5 Review On REIT Portfolio 5.9 Outlook '= Till date, Mid Volley City has been able fo otfract shoppers from Kuale Lumpur ond across Klang Valley mainly due to its standing as one of the largest mixed-use developments in Molaysio. Its strategic location and popularity of the entire development fociltaled strong shopper traffic historicolly ond this trend is expected to continue in the future, = In the future, inereased competiion would be in the shope of retail developments over 1.0 million sq ft in net letable area such as Empire City Mall in Damansara Perdana, Boustead development in Cachrane, i-City Mall in Shoh Alam, IO] City Mall in Putrajaya and @ few more similar types. Certainly in the immediate oftermath af the intraductian of these new malls, there vill be o dilution in the market far everyane including Mid Valley Cty. But os has happened in the post, this wauld be temparary because af the natural grawth af the Klang Valley's papuletian. This coupied with other positive market dynomies should underpin o robust retail morket in the future = Hence, going forword, the ‘est is reolly not about whether Mid Valley City con survive the ‘onslaught of more retail space supply, but whether it ean sustain its ctraction given more of the same available offers to shoppers. Today, after 12 yeors, the sentiment is that Mid Valley ‘Megamall is o great place to shop not only because of its phenomenal offerings, but somehow the physical effect is that af a slightly tired building. This is symptomatic of the physica life of buildings ond thet of the relcil industry in particulor. Nowadoys, reteilers hove to keep Upgrading their shops to stay relevant, moll operators likewise have to keep up with trends to stay relevant. What this suggests is that the Mid Volley Megomall will be expecting some copitel ‘expenditure when newer malls come up in the medium term, in order to stay competitive. = Ageinst this background, the good news is that Asia is now @ major attraction, retailers who because of the uncericinties in the Wesien community, are looking east for their future expansion. Hence the increosing number of new entries thot we hove all been wishing for many yeors such os H&M ond perhaps Abercrombie & Fitch. IN is also possible that trends are changing ‘ery fast in terms of the type of fashion and F&B offerings, we are seeing already o significant trend in wholesoling across Asia, from Korea to Toiwan fo Bangkok ond now Moloysia, which is beginning to dictote fast fashion in terms of both margins ond size of shops. It is therefore likely that Iwo types of impacls will be seen here in Malaysia, which is thot fast fashion from Asia would force many shops to grow smaller whist fast fashion from Europe will go the exact opposite in dictating very large format. This may very well be to the advantage *e Mid Volley Megomell ond The Gorcens Mall in thot the smeller format could boost Mid Velley Megomall rental income whilst the larger farmats could reinfores its attraction if and when its lorger tenants become obsolete or unattractive, the space con be reconfigured to accommodate these tenants. 1© The prospects are good for retail in the country, in that Kuala Lumpur retail indusity is wide ond excting, and Kuola Lumpur has good infrostructure such os logistics support, ond with the inevitable ond continued growlh of tourism into Malaysia, both the retail industry and olso Mid Volley City will see sustoinable growth for years to come. CBRE}Moonia 2 . Page 61APPENDIX G ‘TAX CONSULTANT'S LETTER ON TAXATION OF IGB REIT AND UNITHOLDERS tk pwe TAXATION ADVISER’S LETTER ON TAXATION OF IGB REIT AND UNITHOLDERS IGB REIT Management Sdn Bhd Level 2, The Garden South Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur Am Trustee Berhad Level 22, Bangunan AmBank Group 55, Jalan Raja Chulan 50200 Kuala Lumpur 03 AUG 2012 Dear Sirs, TAXATION OF IGB REAL ESTATE INVESTMENT TRUST (“IGB REIT”) ‘This letter has been prepared for inclusion in the Prospectus for IGB REIT to be issued in connection with the offer of units in IGB REIT ‘The taxation of income for both IGB REIT and the Unitholders are subject to the provisions of the Malaysian Income Tax Act 1967 (the “Act”). The main provisions are contained in Section 61 of the Act, which deals specifically with the taxation of trust bodies in Malaysia as well as guidelines issued by the tax authorities specifically on the REITs, 1. TAXATION OF IGB REIT IGB REIT will be regarded as Malaysian resident for Malaysian income tax purposes since the Trustee of IGB REITs resident in Malaysia, 1.1 Taxation of income The income of IGB REIT, consisting of rental, interest (other than interest which is exempt from income tax) and other investment income derived from or accruing in Malaysia (after deducting tax allowable expenses), will be taxable at the normal corporate tax rate (currently at 25%). ‘The tax transparency system under Section 614 of the Act however, exempts IGB REIT from such taxes in a year of assessment (“YA”) if IGB REIT distributes at least 90% of its total taxable income in the same VA. PricewaterhouseCoopers Taxation Services Sdn Bhd (464731-M), Level 10, 1 Sentral, Jalan Travers, Kuala Lumpur Sentral, P.O. Box 10192, 50706 Kuala Lumpur, Malaysia T: #60 (3) 2173 1188, F: 460 (3) 2173 1288, wivw,pwe.com/my ca-k pwe If less than 90% of its total taxable income is distributed in a YA, then the tax transparency system under Section 61A of the Act would not apply and total taxable income of IGB REIT would continue to be taxed, currently at the prevailing rate of 25%. Income which has been taxed at IGB REIT level will have tax eredits attached when subsequently distributed to Unitholders. Dividends received by IGB REIT, if any, may have tax credits attached, representing tax deduction at souree at the prevailing tax rate of 25%. Such tax credits will be available for set off either wholly or partly against the tax liability of IGB REIT. Any excess of the tax credits over the tax liability will be refundable to IGB REIT. Generally, gains on disposal of investments by IGB REIT are regarded as capitals gains and hence, will not be subject to income tax. 1.2 Real Property Gains Tax Gains on disposal of investments by_a REIT will not normally be subject to income tax. However, where the investments represent real properties and shares in real property companies*, such gains will be subject to real property gains tax (“RPGT"). With effect from 1 January 2012, any gains on disposal of real properties or shares in real property companies would be subject to RPGT at the following rates: Disposal time frame Rates Disposal within 2 years of aequisition 10% Disposal after 2 years and within 5 years of acquisition 5% _ Disposal after 5 years of acquisition RPGT exempted 1.3 Exempt Income Since REITs are considered to be unit trusts, tax exemption is available on certain income including interest or discount income from the following investments: (a) securities o bonds issued or guaranteed by the Government; (b) debentures or Islamie securities, other than convertible loan stocks, approved by the Securities Commission ("SC"); (© Bon Simpanan Malaysia issued by Bank Negara Malaysia; (@__ Interest income from Islamic securities originated in Malaysia, other than convertible loans stock issued in any eurreney other than Ringgit Malaysia and approved by the SC and Labuan. Offshore Financial Services Authority; and (©) Donds and securities issued by Pengurusan Danaharta Nasional Berhad. Interest paid or credited by any bank or financial institution liecnsed under the Banking and Financial Institutions Act 1989 or the Islamic Banking Act 1983 are tax exempted. Offshore sourced income received by IGB REIT from overseas investimcnt will also be tax exempted. "A real property company is a controlled company which owns or acquires real property or shares in real property companies with a market value of not less than 75 per cent ofits total tangible assets. A controlled company is a company which does not have more than 50 members and is cantralled by not more than 5 persons. c2