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SLA’s million-dollar refurbishment of ministers’ houses at Ridout Road: Economically justifiable and politically defensible?

The recent revelations from reviews conducted by Senior Minister (SM) Teo Chee Hean and the Corrupt Practices Investigation Bureau (CPIB) concerning the rental of state properties on Ridout Road by Ministers K Shanmugam and Vivian Balakrishnan have ignited intense debates across Singapore.

Despite these reports finding no evidence of corruption, criminal wrongdoing, or conflict of interest, they nonetheless expose a captivating financial puzzle within the operations of the Singapore Land Authority (SLA).

The SLA, responsible for managing Singapore’s state properties, finds itself in the spotlight due to its management of these rentals.

The reports reveal that the SLA spent a hefty S$515,400 to refurbish 26 Ridout Road, a property rented by Minister K Shanmugam, who also supervises the SLA in his role as Minister for Law.

The spending didn’t end there – the SLA expended an additional S$172,000 for site clearance, greenery replanting, and fencing, bringing the total expenditure to S$687,400.

In addition, the SLA spent S$570,500 to repair 31 Ridout Road. However, the report does not specify the cost of greenery clearance for the property, although satellite imagery shows extensive clearing when the Minister for Foreign Affairs began his tenancy.

These costs far exceed two years’ worth of rent collected from Mr Shanmugam, who pays a monthly rent of S$26,500 for a nine-year lease, and Dr Balakrishnan, who pays roughly S$20,000 monthly for an eight-year lease.

The situation grows more complex considering the properties’ land sizes, particularly for 26 Ridout Road. Initially spanning 9,350 sqm, the property expanded to 23,164 sqm after Mr Shanmugam offered to maintain the adjacent land.

The report argues that the rent for 26 and 31 Ridout Road is consistent with other black-and-white houses in the vicinity.

However, it fails to provide a detailed comparison of land sizes, particularly given that 26 and 31 Ridout Road overshadow many SLA-maintained black-and-white bungalows.

Moreover, it notably omits the rental details of comparable properties, thereby hindering public examination of the comparisons’ validity and appropriateness.

Table from report on rental of Ridout estates by the two ministers

The report justifies this rental agreement by claiming that the 26 Ridout had been vacant since 2013 before Shanmugam decided to rent it in 2018 and that 31 Ridout had been vacant for five years before two unsuccessful bids were made below the prevailing Guide Rent.

This assertion raises two significant issues.

First, it suggests SLA’s failure in maintaining the properties, resulting in an inability to lease the space or fetch a price above the guideline as the state of the property does not justify the guideline rent.

Second, it prompts questions about whether the SLA would have launched such considerable refurbishment efforts for an average tenant.

How would an average tenant, evaluating the state of the properties, anticipate that the SLA would spend over half a million dollars refurbishing the property for them upon signing the lease? Particularly since these tenants, who are expats, would probably rent on a two years + two years extension arrangement in most cases.

Can the SLA provide any examples where it has spent as much as it did on the two Ministers’ rented properties for the other estates it manages?

The CPIB highlighted a lack of precision in the SLA’s usage of the term “Guide Rent”, which led to the misconception that Mr Shanmugam’s offer exceeded the Guide Rent. In truth, his rental payment of S$26,500 matched the correct Guide Rent for the property.

The odds of a person making an exact bid on the Guide Rent, including the S$2,000 for additional refurbishment costs, have been likened by some netizens to winning the lottery.

Furthermore, while average citizens experience rental fee increases of as much as 70%, as reported recently by Reuters, Mr Shanmugam’s rental appears to be locked in for a nine-year period, and Dr Balakrishnan’s rent doesn’t seem to reflect market trends, implying potential economic losses in a rapidly inflating rental market.

Just a brief walk from 26 Ridout Road is a 28 times smaller estate listed on PropertyGuru, that commands a monthly rent of S$65,000. How does this align with market norms?

While SM Teo’s report seeks to absolve the ministers from any allegations of misconduct, it unintentionally raises more questions about the arrangement’s origins and financial viability.

Moreover, it brings into question whether these arrangements comply with the spirit of the Ministers’ Code of Conduct, introduced in 1954, which mandates that “a minister must scrupulously avoid any actual or apparent conflict of interest between his official responsibilities and his private financial interests”.

The forthcoming parliamentary session next week, where these issues will be addressed, is keenly awaited as the public eagerly anticipates the ministers’ responses.

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