[RAM] RAM Ratings assigns preliminary ratings to Al-Salam REIT's maiden proposed Guaranteed Senior and Perpetual Sukuk

RAM Ratings has assigned preliminary AAA(fg)/Stable and A3(s)/Stable ratings to Al-Salam Real Estate Investment Trust’s (Al-Salam or the REIT) proposed Guaranteed Senior Sukuk Tranche of up to RM500 mil (Guaranteed Tranche) and Subordinated Perpetual Sukuk of up to RM500 mil (Perpetual Sukuk), respectively. Both the Guaranteed Tranche and Perpetual Sukuk will be issued via wholly owned funding vehicle ALSREIT Capital Sdn Bhd (the Issuer) under a proposed RM3 bil Senior Sukuk Wakalah and/or Subordinated Perpetual Sukuk Wakalah Programme (Sukuk Wakalah Programme). 

The Guaranteed Tranche rating is enhanced by an irrevocable and unconditional guarantee from Credit Guarantee and Investment Facility (rated AAA/Stable/P1 by RAM), while the Perpetual Sukuk is notched down from the REIT’s long-term corporate credit rating to reflect its subordinated position and the risk of profit cancellation. Al-Salam’s credit profile incorporates a “moderate” likelihood of support from Johor Corporation Berhad (JCorp), whose ratings were affirmed at AAA/Stable/P1 on 25 July 2025 (click here). As Johor’s state economic development corporation, JCorp plays a strategic role in shaping and spearheading sustainable socio-economic growth.

In acting as Al-Salam’s ultimate sponsor, JCorp drives the REIT’s overall strategic direction. Listed on Bursa Malaysia, Al-Salam primarily invests in Shariah-compliant real estate assets and is one of only five Shariah-compliant REITs in Malaysia. The REIT holds a diversified portfolio of 53 properties (the Portfolio), valued at RM1.24 bil as at end-July 2025. The Portfolio is well-diversified across sectors including the retail, office, industrial and education sectors in strategic locations across major Malaysian towns. 

With a firm foothold in Johor, the REIT may benefit from the state’s strong investment and growth potential afforded by the Johor-Singapore Special Economic Zone and the Johor Bahru-Singapore Rapid Transit System Link (RTS). One of the REIT’s flagship assets, KOMTAR JBCC, for which turnaround efforts are underway, sits in close proximity to the RTS. Another credit positive is the Portfolio’s triple-net lease arrangements which reduce income volatility and provide earnings visibility, although tenant concentration remains a risk. 

Moderating its credit profile are Al-Salam’s leveraged balance sheet and weak debt protection metrics. The REIT’s leverage ratio, at 48.7%, is the highest in the industry while its fixed charge cover ratio was a weak 1.17 times as of end-December 2024. These metrics are expected to improve with the planned issuance of RM50 mil of perpetual sukuk, while the Guaranteed Tranche, which will refinance the REIT’s existing floating rate debt, will strengthen the funding profile of the facility. Aided by anticipated improvements, the forward leverage and fixed charge cover ratios, while still underperforming the industry median, are projected at 46% and 1.60 times, respectively, over the next three years. 

Al-Salam’s new leadership, in place since late 2024, is focusing on asset rejuvenation and improving the REIT’s balance sheet profile as immediate priorities. Over the medium term, management aims to expand the Portfolio through third-party asset acquisitions outside of JCorp Group. The Portfolio may, however, still benefit from the group’s pipeline of properties. 


Analytical contacts
Lim Chern Yit
(603) 2708 8302 
chernyit@ram.com.my

Darrel Tiang
(603) 2708 8219
darrel@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my