SINGAPORE – The Singapore Land Authority (SLA) had acted properly in leasing out the properties at 26 and 31 Ridout Road, and there was “every reasonable, commercial basis” for the transactions, said Second Minister for Law Edwin Tong on Monday.

Setting out SLA’s approach to heritage properties in its portfolio in a ministerial statement, Mr Tong told Parliament the authority adhered to its internal processes and standards in the marketing, valuation and leasing of the two colonial black-and-white bungalows.

Law and Home Affairs Minister K. Shanmugam’s wife signed a three-year lease for 26 Ridout Road in 2018, while Foreign Minister Vivian Balakrishnan’s wife signed a three-year lease for 31 Ridout Road in 2019, with options to extend their tenancies.

In his statement, Mr Tong said the terms of both leases were standard and did not deviate from usual processes, noting that the SLA’s valuation department did not know the prospective tenant for 26 Ridout Road was Mr Shanmugam.

He also told the House that SLA is studying the feasibility of longer leases of 30 or 60 years for entire black-and-white bungalow estates, so that a private developer can come in as the master leaseholder and rejuvenate the entire estate, and reap the benefits over the longer lease period. 

Managing agent had discretion on marketing properties

Responding to Mr Zhulkarnain Abdul Rahim (Chua Chu Kang GRC), Mr Tong said there was no requirement for all residential state properties available for rent to be listed on the State Property Information Online (SPIO) portal at the relevant times in 2018 and 2019.

Instead, SLA and its managing agents had discretion on how to best market the properties to maximise occupancy, including whether to list the properties they managed on the portal.

Mr Tong said the authority had in 2007 required open bidding due to high demand, which entailed listing all residential properties managed by its managing agents on the portal.

As the market softened, the authority adjusted its policy to allow direct letting for specific estates, especially those with occupancy of below 80 per cent.

Mr Tong said SLA and its managing agents would avoid listing all vacant properties online when market conditions are poor or occupancy in certain estates is low. The occupancy at Ridout Road estate in January 2018 was 71 per cent.

“Listing all properties would result in them visibly competing for the limited demand. This runs the risk of driving the price down, depressing outcomes for the landlord,” he said.

DTZ Facilities & Engineering had managed both properties up to March 31, 2018, followed by Colliers International Consultancy & Valuation from April 1 that year.

For 26 Ridout Road, the managing agent would have marketed the property through usual methods such as tapping private agents, advertising on social media and putting up “To Let” signs, Mr Tong said.

For 31 Ridout Road, the managing agent also chose to list the property on the SPIO portal.

Valuation of black-and-whites

On how black-and-white properties are valued, Mr Tong said a comparable property is considered, taking into account factors such as location, floor area and the property’s physical condition.

The gross floor area (GFA), which represents the available live-in space for the tenant, is the “guiding component” in determining the rent, he said. This is because GFA usually has a larger impact on the marketability of the property, compared with land area.

Other factors such as the property’s condition and location are also relevant, he added.

Mr Tong noted that rental trends of black-and-white bungalows tend to follow the general market, which was “weak and generally on a downward trajectory” for the relevant period from 2017 to 2019.

“The demand for leasing generally, and black-and-whites specifically, was much lower at that time... compared with today,” he said.

Comparing black-and-white bungalows with private detached homes in good class bungalow (GCB) areas, he noted the average land area rent per sq ft was three to five times higher for these detached homes than comparable rents for black-and-white bungalows.

“One reason for this is the average land area for black-and-whites is usually larger than private detached homes in GCB areas,” Mr Tong said.

Consultants engaged to determine works

Mr Tong also elaborated on the works undertaken by SLA for both homes, which were gazetted for conservation in 1992.

SLA invests a significant amount in upkeeping and maintaining such properties, owing to conservation requirements and restoration guidelines, he noted. 

He said the authority tries to undertake works in the lead-up to a confirmed tenancy to avoid disruptions for existing tenants and ensure the cost of works done can be recovered from a prospective tenant.

External consultants were engaged to identify the necessary maintenance works for both properties, Mr Tong said.

For 26 Ridout Road, works on structural items such as timber beams and columns cost about $375,000.

An additional $140,000 was spent on “the usual sprucing-up works prior to the commencement of a tenancy” at the property, including painting, pest control and the removal of mould.

Meanwhile, extensive works on the roof of 31 Ridout Road and other heritage features cost about $452,000, and the sprucing-up works cost about $118,000, Mr Tong said.

Mr Shanmugam spent more than $400,000 on improvement works at 26 Ridout Road, while Dr Balakrishnan spent about $200,000 on improvement works at 31 Ridout Road.

Mr Tong said both ministers made their lease offers at a time when the rental market was depressed, and made substantial capital expenditure to renovate the properties.

These upgrades will be returned to SLA, if SLA wishes to keep them.

“This would add value to any subsequent tenancy for SLA, and be set off against the works which SLA had to undertake to renovate and refurbish the properties,” said Mr Tong.

He said SLA has been adjusting the structure of tenancies to provide more flexibility, such as longer tenancies of five years, with an option to extend for another four, in cases where tenants are prepared to commit larger sums of capital expenditure to enhance the properties.

Addressing questions from Non-Constituency MP Hazel Poa and Mr Leon Perera (Aljunied GRC) on the trees that were cut down within both properties, Mr Tong said that the National Parks Board approved all removal of trees more than 1m in girth.

The felling of any mature tree with a girth of more than 1m must be approved in writing by the Commissioner of Parks and Recreation. 

On development plans for black-and-white properties, Mr Tong said these plans are driven by masterplanning considerations such as heritage value, location and possible uses.

The plans aim to strike a balance between preserving heritage and reallocating land for other uses, he added.

He noted that while some heritage bungalows have been retained and leased out for residential use, others have been demolished in a cluster to make way for newer developments, like 174 of them in Seletar Camp. Others have been repurposed for different uses, including commercial and retail spaces.

Mr Tong said removing black-and-white bungalows located amid a landed enclave such as Ridout Road, which is zoned for landed properties, would not change the area much. “The cleared land can only then be similarly used for low-intensity development,” he said. “It would not be possible to put the site to other uses... next to the landed enclave.”