Felda insists has good experience in hotel business, defends London buy

KUALA LUMPUR, Nov 4 — Felda’s ownership of eight other hotels has given it enough experience to ensure its latest investment in London would turn profits, the body’s chairman Tan Sri Isa Samad said today in defence of the controversial RM500 million purchase.

The Federal Land Development Authority chief dismissed criticism that the state plantation giant was risking taxpayers’ money by investing outside its core businesses, insisting that Felda’s investment in the property sector was a sound a business decision.

“We are already running eight hotels, what more expertise do you want?” He told a press conference after attending a Felda event held at its new office here.

The serviced apartment is one of the biggest in London with 198 apartments across 13 period stucco-fronted buildings over 105,044 square feet.

Penang’s DAP Chief Minister Lim Guan Eng claimed the property was bought at RM100 million more than its market value. He also raised concerns over the profitability of the investment, as Felda, with its core business in commodity plantation, has neither prior expertise nor intimate knowledge in the business of running hotels.

Last month, Lim had asked Isa to own up to the “real reasons” behind Felda’s decision to invest some RM700 million in the hospitality and information technology sectors.

Chided by Isa for being a busybody, the opposition lawmaker retorted that the Felda chairman owed an explanation to the one million-plus Felda settlers the reason for the land authority’s decision to spend nearly RM600 million to buy two hotels and a further RM110 million to acquire a 25 per cent stake in public-listed Iris Corp instead of parking their money in a field related to agriculture, its core business.

Today Isa said Felda’s investment in the hotel industry was normal and described it as part of the conglomerate’s programme to diversify its portfolio for expansion.

“It’s normal, what we want to do is expand. What is the problem? Tabung Haji has done it, the EPF has done it,” he said, referring to the Muslim Pilgrimage Board and the Employees Provident Fund, two state funds known to have invested in the hotel industry.

He then claimed the only party which opposed Felda’s London investment was the DAP.

“No one else has any problem with the decision, its a good move. The only one with the problem is the DAP,” he said.

Putrajaya has also defended Felda’s latest acquisition. Deputy Minister in the Prime Minister’s Department Datuk Razali Ibrahim insisted today the purchase will bring yield, although he could not give an estimated figure.

The cost to buy the hotel or serviced apartments was £98 million (RM502 million), but valuation on paper is £115 million and, according to our research, that place can bring in profit because it has an occupancy rate of 90 per cent every month.

“The investment is an opportunity for the subsidiary company, but I can’t answer if the investment can bring profit or if the capex will be enough,” the Muar MP said.

Razali added that it is important to not “put everything in one basket”, in justifying the Felda’s move to invest in non-agricultural sectors. Felda now owns nine hotels in total.

There are seven subsidiaries under Felda, three of which are not involved in its core business.

They are Felda Global Ventures Middle East Sdn Bhd, Grand Borneo Hotel Sdn Dhd, and its investment arm, FIC, all of which are being monitored closely, Razali added.