A-G’s Report: Melaka govt lost RM4.6 million in hotel venture

audit-melakaPETALING JAYA: A Melaka state agency’s decision to buy back a hotel it had sold 13 years earlier led to losses amounting to RM4.57 million, the 2016 Auditor-General’s Report reveals.

The report said the Melaka State Development Corporation (PKNM) built the MITC Hotel in Ayer Keroh in 2002 at a cost of RM15.94 million.

Two years later, the completed building was sold to Syarikat Intelek Edaran (SIE) for RM22 million, under a deal in which SIE would pay a 10% advance with the balance to be paid over a 10-year period.

A 10% penalty was agreed for late payments.

SIE took up a RM15 million loan from SME Bank Berhad for the purpose of the purchase, but failed to pay a balance of RM4.71 million a year later.

With an outstanding amount of RM4.71 million, SIE appealed to PKNM to agree to a new repayment schedule of 51 months, effective June 2005, with a 5% late penalty applicable for late repayments.

The audit found that despite SIE owing PKNM the RM4.71 million, the ownership of the hotel on the grant had been changed as the bank had released the full loan to PKNM.

Eleven years later, SIE still owed PKNM a total of RM3.16 million.

With the hotel facing foreclosure and SIE in the midst of being wound up, PKNM began negotiations to buy back the hotel.

Overall, PKNM lost RM4.57 million in arrears and late penalties owed to it, interest payments and legal costs.

Citing a memo in April 2016, the A-G’s report noted that PKNM chairman, Melaka Menteri Besar Idris Haron, discussed buying back the hotel for RM19 million.

According to the report, this would be done through a RM25.70 million bank loan to finance the purchase (RM17 million), refurbishment (RM7.56 million) and the goods and services tax (RM1.14 million).

“The total repayment of the loan is RM50.70 million, including RM25 million in interest,” the audit report said.

“An audit analysis found that PKNM suffered losses of RM4.57 million in arrears and an additional RM160,000 to repurchase the hotel.”

PKNM had since said it was trying to recoup the money owed to it through a restructuring of repayments, the report noted.

It added that the repurchase of the strategically-located MITC Hotel was part of a business diversification plan to boost tourism and the hotel industry.

Earlier this month, NST Online reported that the MITC hotel opened its doors again, two years after it had ceased operations.

General manager Sazali Sabri was quoted as saying that the hotel was acquired and redeveloped by PKNM at a cost of RM30 million.