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Stung by criticisms, Felda to stop buying hotels

State plantation giant Felda will stop investing in the hospitality sector after it came under fire for buying a £98 million (RM497 million) London serviced apartment complex, said Deputy Minister Datuk Razali Ibrahim (pic, right).

The Deputy Minister in the Prime Minister's Department said the oil palm giant will focus on its current stable of hotels, two of which are located in Malaysia.

"As of now, Felda has no plans to buy other hotels. The conglomerate will focus on its current hotel operations," Razali said in a written parliamentary reply last week.

Felda currently owns three hotels – Hotel Sri Costa in Malacca which it purchased for RM24 million, Grand Borneo Hotel in Sabah costing RM86 million and the RM497 million Grand Plaza serviced apartments in Bayswater, London.

All three were bought in the past one year.

Razali said since 1990, Felda, through its subsidiaries, has managed six residences in Perak, Terengganu, Johor, Pahang and Sabah.

The Malaysian Insider had reported the London purchase had shocked industry players over the price paid by Felda Investment Corp (FIC) UK Properties. The property located in London's Bayswater suburb is a popular area among Malaysians living in London.

Critics had said Felda should invest in ventures related to its core business of plantations rather than property or tourism.

In justifying the purchases, Razali said Felda wanted to penetrate the tourism sector both within and outside the country in an effort to strengthen its non-core businesses.

As such, the planter had chosen both Malacca and Sabah for its presence in the tourism industry before spreading its wings to United Kingdom, which it felt was a location with good potential.

Earlier, Razali (pic, left) had insisted that Felda's investment in London would bring yield, although he could not give an estimated figure.

"The cost to buy the hotel or serviced apartments was £98 million, but valuation on paper is £115 million (RM575 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," he had said.

DAP secretary-general Lim Guan Eng had asked Felda chairman Tan Sri Mohd Isa Samad to own up to the "real reasons" behind Felda's decision to invest nearly RM600 million in the hospitality sector, saying that the company needed to explain to its settlers, numbering over a million.

Isa had defended the purchase of the London hotel, saying that it was not an "extraordinary issue".

"Tabung Haji also bought few buildings in London,” he said last month, referring to the Muslim pilgrims’ board.

He added the service apartment was ranked number one by Google search and 75% of sales was done online.

The Grand Plaza is one of London's largest serviced apartment buildings, containing 198 units across 13 period stucco-fronted buildings over 105,044 sq ft. – November 4, 2013