Tabung Haji defends RM1.32bil London property acquisition process

Tabung Haji, Malaysia's pension fund, has defended its RM1.32 billion acquisition of Great Minster House in London, stating that the investment process adhered to its established evaluation and approval procedures. Due diligence, financial assessments, and commercial evaluations were conducted, including the property's acquisition from Singapore-listed Sinarmas Land Ltd in 2022.

This response arrives following questions from the Business Times regarding the safeguards and approval mechanisms surrounding the 2022 purchase, which was outside the scope of the Royal Commission of Inquiry (RCI) investigating Tabung Haji's management and operations from 2014 to 2020. The RCI's report had recommended implementing stricter criteria for board appointments, expertise among board members, restrictions on active politicians serving on the board, greater separation of ministerial responsibilities, and enhanced investment oversight.

Dr. Muhammad Najib Razali, a property economics professor at Universiti Teknologi Malaysia, emphasized that the acquisition should be seen as part of Tabung Haji's broader investment portfolio rather than an isolated property transaction. He suggested that the investment should have been evaluated against the fund's exposure to the UK property market, London offices, the British pound, and dependence on individual tenants.

The expected return should also have been compared to alternative investments with similar risk levels, incorporating factors such as interest rate changes, property yields, rental growth, currency fluctuations, and potential lower eventual selling prices. Najib stressed that a strong investment process should have tested scenarios, including interest rate hikes, increased property yields, higher refinancing costs, or prolonged periods of the property value falling below its acquisition price.

Former Tabung Haji executives, including Datuk Seri Amrin Awaluddin and Tan Sri Azman Mokhtar, have been approached for clarification on the acquisition process, but both indicated that the matter should be directed to Tabung Haji management for further information. The RCI's recommendations, which have seen approximately 75% implementation, aimed to strengthen governance, board expertise, accountability, and investment oversight.

Business Times highlighted that the ultimate success of Great Minster House will depend on its financial performance, but the acquisition has underscored the importance of robust safeguards when managing depositors' money.