The Federal Land Consolidation and Rehabilitation Authority (Felcra) has admitted to taking over the financing of the mixed development Menara Felcra project from WZR Property Sdn Bhd.

However, it denied that there was an initial deal for Felcra to receive office space and a banquet hall within Menara Felcra for free in exchange for WZR to build the tower on its own finances.

“The allegation that Felcra would get an office tower and convention centre for free is completely untrue,” it said in a statement today.

Malaysiakini on Tuesday reported that under the initial plan, Felcra would allow WZR to build a 34-storey office tower and a 43-storey residential tower on its prime land along Jalan Semarak which WZR can then lease out for profit.

In exchange, WZR will grant Felcra 12 floors of office space as well as a banquet hall.

In the statement today, Felcra noted that the initial plan was for WZR to finance the project but it was later decided that Felcra's subsidiary Felcra Properties Sdn Bhd (FPSB) will finance the project.

Even though Felcra denied the initial free office space deal, it did not explain what Felcra would get in return had the original plan went ahead with WZR having to finance the project on its own.

“In the beginning, WZR was appointed as contractor to design, build and finance the development along Jalan Semarak.

“After a study was conducted on the design, build and finance concept proposed by WZR, it was found that it would impact Felcra’s interest cost, therefore the Finance Ministry Incorporated (MKD) shared its views and advised the (Felcra) board of directors to reevaluate the concept and look at the financial impact and cost if there were delays in terms of the sales of residential and commercial units.

“After considering MKD’s views and advice to reevaluate the whole project in detail, the board of directors agreed to proposed to the shareholder (of Felcra) MKD for the project to be granted to WZR for design and build only with a cost of no more than RM687.5 million where Felcra will pay the contractor on an interim basis based on the development progress.

“This concept of project finance is normal in any construction projects,” it said.

It added that was subsequently presented to MKD on April 12 and was subsequently approved.

“All proposals for the appointment of contractor as well as changes to the terms were presented to and approved by the board of directors and subsequently agreed upon by the Finance Ministry, with the Urban Wellbeing, Housing and Local Government Ministry also being informed,” it said.

Felcra denies WZR had financial problems

Felcra also denied that WZR did not end up financing the project due to financial problems.

“The selection of WZR as contractor was made based on the company’s financial capability, expertise and experience in construction.

“The allegation that the contractor had financial difficulties is completely untrue as Felcra had made detailed evaluation about the capabilities of all companies that had bid for the construction at Jalan Semarak,” it said.

It said that WZR status as the project contractor has always remained unchanged but Felcra will need to foot the entire cost when the construction is completed.

It added that FPSB financing the project is not an issue and Felcra has no intention of taking any of the space when the construction is completed.

Felcra also clarified that the initial project cost was RM520 million and not RM550 million as reported and the cost had increased to RM687.5 million as it was revised to cover a larger area.

“The increase in cost was due to the increase in plot ratio and this will give higher value return to Felcra,” it said.

Felcra said the initial gross development value was RM850 million but is now estimated at RM1.1 billion after the revision.

It added that Pembinaan BLT Sdn Bhd, which MKD asked Felcra to engage to evaluate the cost of the project, found that it was reasonably priced.