KUALA LUMPUR: Felda Investment Corp Sdn Bhd (FIC), the wholly-owned investment arm of the Federal Land Development Authority (Felda), will mainly focus on the operations of its hotels in 2015 after spending RM2 billion in investments so far, said FIC CEO Mohd Zaid Abdul Jalil. – Original source

FIC has been on acquisition mode since it was established in August 2013, having spent half of its RM2 billion investments on five hotels, which includes the Grand Plaza Serviced Apartments and Grand Plaza Kensington, both in London. “We have made substantial investments for the past one year, especially in the areas of hospitality and we want to see some results,” Zaid told SunBiz in an interview recently.

FIC manages 12 hotels under its portfolio, which includes the two London hotels, the Grand Borneo Hotel in Kota Kinabalu, Sabah, Grand Plaza Kuching in Kuching, Sarawak and Grand Beach Resort in Port Dickson, Negri Sembilan as well as seven hotels owned by Felda. Zaid said FIC “did not start from zero”, referring to the seven Felda hotels that kickstarted FIC’s involvement in the hospitality industry, as these hotels were already fetching good returns for Felda. At the same time, he said the hotels are also creating employment for the Felda community. “Hotel is a long term industry. We’re not only looking at the operational return but we’re also looking at capital returns from the assets we own,” explained Zaid.

He said it took FIC a year to prove that it has the capacity, capability and experience to run the Grand Plaza Serviced Apartments in Bayswater, London, its first overseas asset before deciding on acquiring its second hotel (Grand Plaza Kensington) in London.

“Initially there were issues on why we acquired a hotel in London, why Felda wants to move into hospitality as Felda is known as a plantation house but we proved the critics wrong. For the past one year or so, the Grand Plaza Serviced Apartment has done well and the average occupancy rate for the whole year is 90%. We’ve seen the results and we’re making good returns out of it. We’re also looking at the capital appreciation of the property in London,” said Zaid.

On when it expects to reap its investment for the £60 million Grand Plaza Kensington in London, Zaid said the average timeframe in the hotel industry is 12 to 15 years and it is confident the hotel operations would provide good returns. Although not planning for further acquisitions, he said FIC will also not turn away good assets that are reasonably pricing, as it can leverage on the strength of Felda to invest.

“For the past three to four months, our acquisition has been very significant and it doesn’t mean that we just continue with acquisitions only. Probably at times we may want to consider disposing some of the assets that we have to unlock some of the value and using some funds to invest in new assets,” said Zaid.

He added that FIC is in preliminary talks with state authorities to build its first hotel in an effort to expand its presence in the hospitality industry. “If it materialises, it will be a new hotel to be built, not through acquisition. That could be another entrance to the (hospitality) industry and probably doesn’t require significant financial commitments if we can work together as a JV (joint venture) partner.”

However, Zaid stressed that talks are still in the early stage for the project, which is located outside the Klang Valley and FIC will take about six months to decide on the offer as it needs to conduct studies beforehand.

“For us to invest, we have to be convinced that the market is there, the people are there, as well as the occupancy rate. There is no rush for us because we already have 12 hotels (under FIC’s portfolio). If it’s something viable, we’ll consider,” said Zaid.

Besides hospitality, which makes up half of its revenue, FIC’s investments are also in property and oil and gas. Its current asset allocation is 50% property, 40% hospitality and 10% oil and gas. On this, Zaid said it will revise its asset allocation from time to time and re-look its strategy.

“It (asset allocation) depends on the industry and the market sentiment. For the next two years, people are expecting the property market to slow down so probably we need to consider reducing the stake in property, moving into other areas of business.

“Hence the need to revise asset allocation on a periodic basis. As the current market is not good, so every six months we have to re-look. The need to get the best returns for our investments is a pre-requisite,” said Zaid. FIC has 800ha of landbank in Malaysia, consisting of land in the Klang Valley, Johor, Malacca, Negri Sembilan and Perak that can take some 10 years to develop. Its 72%-owned property developer Encorp Bhd will be given the priority to undertake these commercial development projects.