This article first appeared in The Edge Malaysia Weekly on December 20, 2021 - December 26, 2021
HAP Seng Consolidated Bhd has emerged as the new owner of Wisma KFC in Jalan Sultan Ismail, Kuala Lumpur, after purchasing the asset from Singapore-based property developer and manager Royal Group for RM190 million, according to documents sighted by The Edge.
The sale comes three years after Royal Group purchased the building from the Employees Provident Fund (EPF) for RM116.5 million. Royal Group, which also owns the DoubleTree by Hilton in Ampang, had planned to renovate it and operate a 430-room luxury hotel. However, the group has now managed to flip the asset for a handsome profit of roughly RM73.5 million before costs.
It is understood that the purchase by Hap Seng, via its wholly-owned indirect subsidiary Sunrise Spring Sdn Bhd, forms part of Hap Seng’s plans to expand into the hospitality segment.
Hap Seng operates offices and a small retail component near Wisma KFC. It is noteworthy that near the junction of Jalan Sultan Ismail and Jalan P Ramlee, which is a stone’s throw away from the Petronas Twin Towers, Hap Seng already owns three prime high-rise office blocks — Menara Hap Seng 1 (former MUI Plaza), Menara Hap Seng 2 and Menara Hap Seng 3 (formerly Hap Seng Star), which is adjacent to Wisma KFC.
When contacted for confirmation and its plans moving forward, an official from Hap Seng tells The Edge that it is unable to comment as plans are still fluid.
Hap Seng in its annual report for the financial year ended Dec 31, 2019, said that “The [property development] division has also diversified into hotel ownership.”
In May 2019, US-based Hyatt Hotels Corp, signed a management agreement with Hap Seng to operate a Hyatt Centric brand in Kota Kinabalu, Sabah. The hotel will be a 22-storey building with 220 guestrooms. It was originally scheduled to open this year, but Covid-19 disrupted its plans. The hotel is reported to be located within walking distance of Jesselton Point and 10km from the Kota Kinabalu International Airport.
Another hotel that Hap Seng will be opening is the Hyatt Regency Hotel Kuala Lumpur, which is also a brand under the Hyatt group. The hotel — which will comprise 450 rooms — will be located within the KL Metropolis and is a 70:30 joint venture with Naza TTDI Sdn Bhd, a Naza Group company. Both the hotels in Kota Kinabalu and KL Metropolis are designed by world-renowned Japanese architect Kengo Kuma.
Wisma KFC, once the headquarters of KFC Holdings (Malaysia) Bhd, has a gross floor area of 342,145 sq ft and occupies a 0.5-acre freehold plot. It also had 268 parking bays.
The EPF sold the long-vacant office building to Expert Rewards Sdn Bhd, a company controlled by Royal Group. Expert Rewards then obtained approval from Dewan Bandaraya Kuala Lumpur (DBKL) to convert the office building into a luxury hotel with over 400 rooms.
It is learnt, however, that Hap Seng plans to offer larger-sized rooms and reduce the number of rooms. Thus, it is likely to submit a fresh application to DBKL for approval to renovate the asset.
A source tells The Edge that Royal Group, prior to the sale, had signed a management contract with Hyatt Hotels for the property to operate a Hyatt brand hotel. If true, Hap Seng could effectively have three Hyatt group hotels under its stable once the three hotels are completed.
Meanwhile, the first hotel scheduled for opening is Hyatt Centric Kota Kinabalu in the third quarter of 2022, whereas Wisma KFC may open for business at the tail-end of 2023.
Back to Royal Group, a Companies Commission of Malaysia (SSM) website search reveals that the shareholders of Expert Rewards are Royal Group Capital Pte Ltd (75%) and Power Rich Investment Pte Ltd (25%).
A previous search lists the shareholders as Royal Group Capital Pte Ltd (50%), Wasimah Bashir Ahmed Osmanbhoy (30%) and NMM Pte Ltd (20%). It is understood that Wasimah was possibly the company’s 30% bumiputera shareholder.
The directors of the company are Phang Lee Kah, Asok Kumar Naraindas, Bobby Hiranandani Asok Kumar and Manoj Dhamoo Punjabi. Forbes lists Asok Kumar as Singapore’s 28th richest individual with a net worth of US$1.6 billion (RM6.7 billion).
Royal Group is led by Asok, who set up Royal Brothers with older brother Raj Kumar. However, the brothers went their separate ways 12 years ago with Raj setting up Royal Holdings.
Commenting on the sale of Wisma KFC, an observer says, “There is no definition of flipping but it does seem like they (Royal Group) seized the opportunity.”
However, another industry observer characterises the sale by Royal Group to Hap Seng as “flipping” the asset. “They did not operate it ever, nor did they complete the renovation,” he points out. It appears that the EPF may have been able to fetch a higher price for the asset had it waited a little longer to sell while Hap Seng missed an opportunity to buy the asset at a much lower price from the EPF.
This is not the first time that Royal Group has tried to sell an asset a few years after purchasing it. In 2015, it bought the Cititel Express on Jalan Tuanku Abdul Rahman from IGB Bhd for RM37 million. The following year, it bought the non-operational Hotel Empress Kuala Lumpur, located a few metres from Cititel Express, for RM40 million. The hotels were renovated and reopened as Hilton Garden Inn North and Hilton Garden Inn South.
In 2018, it entered into an agreement to sell the asset to Thailand-listed Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust (SHREIT) for an estimated RM240 million. It was reported that the sale would have given Royal Group RM65 million in profit after deducting its initial investment and renovation cost.
A year later in 2019, SHREIT aborted the deal citing concerns over the volatility in the Thai and global capital markets.
Bursa Malaysia-listed Hap Seng is involved in six core businesses namely plantation; property investment and development; credit financing; automotive; trading; and building materials.
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