Wednesday, March 18, 2009

Get master tenants to pass on benefits to property users

I AM an entrepreneur running a small and medium-sized enterprise (SME) and am heartened by the Government's bid to alleviate the effects of the downturn with several measures, one of which is to provide rental rebates to properties leased from JTC Corporation, the Housing Board and Singapore Land Authority (SLA).

These rental rebates, which comprise 15 per cent of the rents payable, are intended to help tenants, licensees and lessees by lowering their costs and steadying their cashflow.

My company has a staff strength of 15 and we are located in a building as sub-tenants of a master tenant who leased the building from the SLA. We renewed our lease with SLA's master tenant in mid-2008. Then, our master tenant, a listed company, informed us that due to market conditions, it would have to raise the rents.

It was a take-it- or-leave-it offer and we stayed after renewing our lease with a 110 per cent increase in rent. Several smaller tenants in our building had to move out and the master tenant found no problem filling the vacancies.

Recently, we received a notice from the master tenant that it would pass on 'some of the rebate' received from the SLA. This amounted to less than 6 per cent of our current rental rate.
In other words, our master tenant saw it fit to retain most of the rental rebates passed on by the SLA.

Much as I appreciate the Government's generous gesture, its aim has been diluted. The rebates are meant for actual tenants - businesses who occupy the premises and hire employees - thus saving jobs.

While master tenants are certain to point out that they too hire employees and have commercial decisions to make and account to their shareholders, it must be pointed out that they would have enjoyed savings for premises occupied by their employees and would also enjoy a business boost in being able to attract more tenants for any unoccupied units with the rebate scheme in place.

Any entitlement to retain the rental rebates - not because it physically occupies the property but because it happens to be a property master tenant - unwittingly makes the Government a windfall provider.

In my company's case, I understand that our master tenant also occupies an SLA property for its other operations, so it has enjoyed a double-boost.

While a perfect policy is impossible, the current one on rental rebates should perhaps be tweaked to achieve its full effect.

Tan Suan Tiu

Source: Straits Times, 18 Mar 2009

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