- "Khazanah Nasional Bhd was never involved in the process. As the asset was in the hands of the Singapore liquidator, all of Sim Leisure Group's dealings were through the liquidator."
KUALA LUMPUR (June 20): Singapore-listed theme park developer and operator Sim Leisure Group Ltd has clarified that KidZania Singapore was a failed asset that closed its doors in 2020 and went into receivership under a Singapore liquidator, from which the group bought the discontinued indoor family attraction's non-movable assets.
It said it took up a bid from the liquidator for KidZania Singapore's non-movable assets at the height of the pandemic towards the end of 2020 and then took two years to negotiate the lease for the facility with Sentosa Development Corp.
"Khazanah Nasional Bhd was never involved in the process. As the asset was in the hands of the Singapore liquidator, all of Sim Leisure Group's dealings were through the liquidator," it said in a statement on Monday (June 19).
It also said it took significant risks in bidding for the assets as it could not physically check them because the country was in lockdown and they could not travel, so the condition of KidZania Singapore's assets and the cost of renovating it were unknown at the time.
"Sim Leisure Group still needed to secure the lease from the building owner, Sentosa Development Corp. Without the lease, the asset would be redundant. As the asset is a non-movable asset, it cannot be moved to another building and therefore has only one use. Sim Leisure Group still needed to secure the license agreement from the licensor KidZania Mexico. There was still great uncertainty at the time of how long Covid-19 would last," Sim Leisure said, adding these factors could have led to the investment not being realised.
Hence, the bid was considered high risk for Sim Leisure Group, it noted.
It was responding to allegations that it had acquired KidZania Singapore at an "unreasonable price" of SG$110,000 (RM380,000), when Khazanah and Boustead Holdings Bhd — whose joint venture entity Riang Ria Pte Ltd previously owned KidZania Singapore — had invested S$48 million into KidZania, which opened in July 2016 on Sentosa Island. Riang Ria is 80%-owned by Khazanah's leisure and tourist arm Destination Resorts & Hotels Sdn Bhd and 20% by Boustead's wholly owned Boustead Curve Sdn Bhd.
The asset disposal reportedly prompted Prime Minister Datuk Seri Anwar Ibrahim to say that the government would have a meeting with Khazanah to discuss the matter.
“In taking over failed assets like KidZania Singapore where we have been criticised for the purchase price, the general public do not understand that a failed theme park can end up as scrap metal most of the time, such as MAPs (Movie Animation Park Studio of Perak) in Ipoh. Unlike other failed assets such as hotels, resorts etc which can be repurposed into residential apartments or other commercial use, failed theme park projects have very limited use," said Sim Leisure Group founder and executive chairman Datuk Sim Choo Kheng.
Khazanah, in a statement last Friday, said despite Rakan Riang's best efforts to achieve a stable financial position for KidZania, the pandemic and economic effects that followed had dampened ticket sales and affected commercial partners, which impacted its overall financial performance.
"This led to a voluntary winding up and the appointment of a liquidator on June 11, 2020, to recover and liquidate all the assets of Rakan Riang and to distribute the proceeds of sale to all creditors. Sim Leisure, the new operator of KidZania, purchased all non-movable assets from the liquidator and proceeded to negotiate a franchise licence with KidZania Mexico.
"The decision by Sim Leisure to restart KidZania in Singapore as per their announcement dated June 12, 2023 is unrelated to DRH or any of our subsidiaries, as Rakan Riang’s operation licence was terminated in June 2020," it added.
Sim, meanwhile, said there are many challenges facing the theme park industry in emerging markets and that they are a high risk, "because it is a highly specialised business, which explains why so many projects fail".
Most investors in this region, however, do not have the experience and expertise to run such a business, he said. "It's a bit like a person who has done first-aid training trying to be a heart surgeon."
Most are not even really in the theme park business but are only using the assets to add value to their developments to sell real estate or to cross promote their other businesses. Some are operated by governments with good intentions to catalyse tourism, he said.
"Most of them are cross-subsidising the attraction business. The subsidisation of these businesses is not sustainable; what happens once all the condos are sold or the main business is no longer lucrative as it once was? They are different from us at Sim Leisure Group; we live, eat and breathe theme parks — it's all we do," he said.
Investors, he added, should think carefully before investing in theme parks. "It's not all about buying equipment, or engaging IP (intellectual property) owners or foreign expertise. Ironically, these are the main reasons they fail. (And) unfortunately, there are more failures on the way — it is inevitable," Sim added.