11
Jun
16

How Felcra ended up committing RM687m for a free office

How Felcra ended up committing RM687m for a free office

In early 2015, the Federal Land Consolidation and Rehabilitation Authority (Felcra Berhad) was set to have a new headquarters without having to pay a single sen.

All it had to do was allow developer WZR Group to fund and build a mixed development project, which included a 35-story office tower, a 43-storey residential tower, and a retail mall on its prime land in Jalan Sultan Yahya Petra (Jalan Semarak) in Kuala Lumpur.

“Felcra’s application to carry out a mixed development project costing RM550 million… and to be developed by WZR; is approved as Felcra does not have to issue any funds to bear the costs of the project,” read a letter from Minister of Finance Incorporated on Feb 18, 2015, sighted by Malaysiakini.

According to those familiar with the matter, Felcra would get 12 floors in the office tower as well as a banquet hall, while WZR would recoup its investment by leasing the rest of the office space and from the sale of the residential units.

All was well, and Prime Minister Najib Abdul Razak launched the project, dubbed Menara Felcra, in May 2015.

Fast forward one year, this sweet deal has turned sour.

Instead of getting a free new headquarters, Felcra is now forced to fund the entire project.

Malaysiakini learned that WZR had gone from project developer to a contractor hired by Felcra because it didn’t have the money to bankroll the development.

“What happened was that the contractor (WZR) failed to secure funding from a bank,” said individuals who were aware of the matter on condition of anonymity.

They also revealed that WZR had subsequently argued it would be better for Felcra to fund the project itself.

WZR, they claimed, had told Felcra that it could make better profits as a property developer instead of just being the landowner.

A government-owned conglomerate, Felcra aims to develop the rural sector and is involved in construction, engineering and trade.

WZR reportedly told Felcra it would own an asset worth RM1.1 billion based on the project’s gross development value (GDV) instead of just RM288 million if it bankrolled Menara Felcra.

The funder-turned-contractor also allegedly said Felcra would earn RM26.4 million per year from renting commercial plots and the convention hall, in addition to collecting revenue from the parking lots.

Felcra ended up agreeing to take over the project after a meeting on Jan 21 this year, thus requiring it to fork out additional money.

Bung Mokhtar: Not an issue

According to a letter from Minister of Finance Incorporated addressed to Felcra chairperson Bung Mokhtar Radin on April 12, WZR is now the project’s contractor in charge of design and construction, while development has been taken over by Felcra Properties Sdn Bhd.

The letter also stated that WZR is to be paid an initial capital of RM20 million for ground work, and will have a contract not exceeding RM687.5 million for its work on the now expanded lot, to be paid on an interim basis based on development progress.

When asked about WZR going from developer to contractor, Bung told Malaysiakini that it was “not an issue”.

“Everything that happened in the meeting was decided in a full Felcra board of directors meeting and was agreed to by MKD (Minister of Finance Incorporated) as a shareholder,” said the Kinabatangan MP.

Bung, who is also Kinabatangan MP, added that WZR had won the Menara Felcra project through open tender.

He declined to comment further on the issue citing “strategic” reasons.

WZR managing director Ahmad Kamal Kasani also declined to comment when contacted, saying he was in Mecca.

Malaysiakini has also contacted the Finance Ministry for a response to these allegations.

Previously, Malaysiakini has reported alleged discrepancies in the circumstances that led Felcra to make a RM150 million unit trust investment.

Documents sighted by Malaysiakini appeared to indicate that Bung might have told the board of directors one thing, but informed the Finance Ministry something else when seeking approval for the investment.

However, Bung, declined to comment on this issue, describing the allegations as the “work of traitors”.

…more
How Felcra ended up committing RM687m for a free office
7 June 2016

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