The Auditor-General's Report 2019 (Series 1) found the re-development of Bukit Bintang Plaza (BB Plaza) in Kuala Lumpur unsatisfactory as UDA Holdings Bhd had lost RM118.34 million in revenue up to 2018.
On top of that, the urban developer has to bear cost totalling RM25.21.
The loss in revenue was due to the closure of the 18-storey building that was constructed in the 1970s at the intersection of Jalan Sultan Ismail and Jalan Bukit Bintang.
Also, UDA has yet to receive the full payment of RM336.6 million from a special purpose vehicle (SPV) created to develop the BB Plaza site, that is adjacent to Sg Wang Plaza.
The SPV is a joint-venture company, set up by UDA and Tan Sri Syed Mokhtar Albukhary-controlled Tradewinds (M) Bhd.
The report said this affected UDA's cash flow, preventing it from carrying out other development projects and embarking on land purchase.
UDA and Tabung Haji Hotel & Residence Sdn Bhd (THHR) were the two government-linked companies with the most unsatisfactory levels of governance out of nine audited federally.
This was revealed last week by auditor-general Datuk Nik Azman Nik Abdul Majid, when presenting the report.
The iconic BB Plaza, which has been a vital asset for UDA for more than three decades, is being redeveloped to make way for an MRT station and to blend in with the transformation of Jalan Bukit Bintang.
In its place, the SPV was supposed to build a 60-storey tower atop a 12-storey retail podium, with the MRT running underground.
It was reported that the redeveloped site will offer luxury condominiums with a gross development value (GDV) of RM3 billion.
The SPV was supposed to purchase the 8,973 square metre plot from UDA for RM374 million. It agreed to pay 10 per cent of the selling price upon signing the purchase agreement with UDA in June 2014, and settle the remaining 90 per cent upon the fulfillment of other pre-conditions under the agreement by both UDA and the other joint venture party.
The SPV, however, failed to fulfill some of the pre-conditions set 10 months after the agreement was signed, and had requested for a time extension from UDA to fulfil them, the report said.
The UDA board approved an extension to February 2016 with a four per cent interest charged per year, but the JV partner in the SPV continued to request an extension to pay the remaining 90 per cent of the selling price amounting to RM336.6 million.
UDA informed the audit department that it has hired a solicitor to start legal proceedings on the matter and has served notices of demand to the respective parties.
On UDA's financial position, the report deemed the company stable as it recorded a net profit for three consecutive years.
However, on its development activities, the report noted that there were weaknesses as only two to three projects were successfully implemented from eight to 13 projects planned every year, while eight out of 10 projects that were implemented between 2016 and 2019 had delays.
Overall in 2018 and 2019, the sales performance of properties achieved their respective targets of 93.7 per cent and 101.3 per cent following the decline in sales targets by 55 per cent, from 828 units (2016) to 371 units (2019).
On THHR, Nik Azman said there was poor corporate governance in THHR, and advised that the functions of the company's chairman, directors, chief executive and company secretary are enhanced.
The company was advised to also review its standard operating procedures, strategic planning and key performance indicators, and internal auditing.
The mandate for THHR is to manage and operate three hotels owned by Tabung Haji. They are Hotel Kelana Jaya (THKJ), TH Hotel Penang (THHP), and TH Hotel Kota Kinabalu (THKK).
The company also manages and operates TH Hotel Alor Setar (Kedah) and TH Hotel & Convention Centre Terengganu. A third hotel, TH Hotel Sarawak, is not in operation, currently, this is according to the report.
In the report, it was highlighted that the operating hotels had a low occupancy rate of only 37 per cent and 45.9 per cent (2016-2018), lower than the target of 50.9 to 61.7 per cent.
The occupancy rate was based on the average number of rooms sold in the three hotels. The average number of rooms offered was 36,788 to 38,887 rooms a year, said the report.
The revenue derived by the three hotels throughout the period (2016-2018) was between RM16.48 million and RM18.68 million compared to the target of between RM26.07 million and RM28.02 million.
"This low achievement was due to unaggressive marketing and promotional activities, conditions of hotel premises and facilities as well as competition," said the report.
The report stated that the hotel facilities were far from satisfactory, with damaged fittings and furnishing, making the rooms unfit to be occupied by guests.
Further, the report stated that debt arrears exceeding 90 days amounting to RM204,427 still has not been collected.
Sumber: New Straits Times