'How did Felda London hotel value rise 20pct in 6 months?'

When it comes to the Federal Land Development Agency’s (Felda) London hotel buy, it is either a case of a spectacularly good buy, or something fishy is going on, DAP says.

Its Bagan MP Lim Guan Eng said that this is because London-based property valuers had valued the Grand Plaza Service Apartments at £80 million, or 22 percent less than the purchase price, six months before the purchase.

Even more interesting, Lim (right) said, the government claims the property value shot up an additional 17 percent, compared to purchase price, merely a month since its purchase.

“We are giving the opportunity to Felda to explain why in March 2013, the value was £80 million, in September 2013 £98 million and in October £115 million,” he said at the Parliament lobby.

In a reply to Lim, who is DAP secretary-general, Deputy Minister in the Prime Minister’s Department Razali Ibrahim said Felda has made profit on paper as it bought the property for £98 million, but the value is now £115 million.

Savills in its March 2013 report on the Grand Plaza said that the value is between £77.4 million to £80 million depending on the method of valuation.

Malaysiakini has also sighted a more recent report by another London real estate company which echoes Savills findings.

Knight Frank’s report on hotels in London for July-September 2013, when Felda purchased the Grand Plaza, said the guide price for the property is £85 million.

‘Not chickenfeed’

Lim said that although the Savills valuation was made in March 2013, it would likely be the time when negotiations began for the purchase.

“You don’t start negotiating to buy a property in September to buy it in September,” he said.

“The minister cannot just say now its £115 million. Show the proof. You can't just be plucking numbers from the air. It doesn’t make sense.”

He added that the figures are not “chickenfeed” as when converted into Malaysian ringgit, run into hundreds of millions.

“The difference between the valuation price and the purchase price is about RM100 million,” he said.

Razali had also said that the Grand Plaza is a prime investment property, as it has more than 90 percent occupancy.

The Savills report also stated that the Grand Plaza is a “good lettable stock” due to “high occupancy levels”.

The report also found that its central London location is an advantage as the area has rental growth forecasts from 26.4 percent to 24 percent in the five-year period ending 2017.

The deputy minister also said that Felda has chosen to venture outside its core business into the hotel industry to diversify its income stream.

To this, Lim said: “To diversify, go into areas that you have intimate knowledge and expertise.

“What does Felda know about running a hotel? (It) is doing plantations!

“It must be a business related to oil palm, unless you want to tell me they are planting an oil palm tree outside the hotel,” he said.