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Want more hip Dempsey clusters? Don't award land to highest bidder

Since 2013, the Singapore Land Authority has used price and quality (PQ) evaluation criteria to award land parcels. It is one factor behind the appeal of Tanglin Village, which houses the popular Dempsey Hill cluster of eateries. More use of such PQ evaluations that look beyond a tenderer's highest price can create more appealing destinations for customers.

A stone's throw away from Orchard Road, the verdant Tanglin Village offers visitors respite from the shopping crowd.

Being easily accessible by car with free parking, but relatively far from public transport nodes, also means it can target specific consumer segments: the well-to-do, cosmopolitan set drawn to its leafy, bohemian chic ambience.

Now, the renowned Dover Street Market is set to open there - kicking the enclave's hip factor up a notch with the entry of the multi-label concept store conceived by Comme des Garcons' Rei Kawakubo.

Also being planned is a restaurant and bar by renowned French restaurateur Jean-Georges Vongerichten. A new dining concept will feature signature dishes from around the globe.

The announcement on Dec 15 after Como Lifestyle was awarded the 5,268 sq m plot of state land has got the thumbs up from Tanglin Village's other tenants.

Mr Nicholas Ng, general manager of Country City Investment (CCI), which runs the Dempsey Hill cluster of upmarket eateries, admits that he was initially worried about the tender outcome but was relieved after finding out who won.

He said: "We know who Como is, their background and the names they can bring in. Initially, there was some concern over who might win. But their plan complements what we already have at Dempsey."

Como Lifestyle is a subsidiary of fashion doyenne Christina Ong's Club 21, whose ventures include the eponymous retailer and luxury hotel brand Como Hotels and Resorts. Mrs Ong is the wife of property tycoon Ong Beng Seng.

Como Lifestyle was awarded the tender to develop Blocks 17 and 18 in the Dempsey cluster of Tanglin Village after a price and quality evaluation. It won despite offering less than a third of the rent its competitor did. Mr Lee Seng Lai, SLA's directo
Como Lifestyle was awarded the tender to develop Blocks 17 and 18 in the Dempsey cluster of Tanglin Village. ST PHOTO: MARK CHEONG

Experts think the new project will seal the deal for Tanglin Village.

"It's edgy, it's artistic and appeals to the well-heeled. It fits in with the current target market (of Tanglin Village)," said Singapore Polytechnic senior retail lecturer Sarah Lim, adding that other tenants with similar offerings will be attracted to the area, creating a "multiplier effect".

This gels with the Singapore Land Authority's (SLA) hopes for the site.

In announcing the winner, Mr Lee Seng Lai, SLA's director of land operations (private) division, said the aim was to "rejuvenate and bring new and exciting concepts to Dempsey".

The Singapore Tourism Board also expects Como Lifestyle's "international experience and competency" to "significantly contribute to creating and sustaining the vibrant Dempsey atmosphere and Singapore's tourism scene".

AN UNLIKELY WINNER

But these plans would not be in the pipeline if the SLA had done the usual: Award tenders based on price alone.

Como Lifestyle offered to pay a monthly rent of $106,300 for an initial lease term of three years, renewable up till Dec 31, 2022.

It won despite offering less than a third of the $350,000 per month its competitor, D Prime, did. The property management company proposed to open a fish market and dining concept there - its first foray into the food and beverage business.

Como Lifestyle won as the bulk (60 per cent) of SLA's decision was based on quality of concept - which included the proposed idea, the operator's track record and business sustainability - with a smaller emphasis (40 per cent) placed on price.

A RARITY

The SLA awarded 72 tender sites between Jan 1, 2013 and Dec 15 this year, 27 of them based on price and quality (PQ). Of these, 26 were for childcare and kindergarten sites to improve the quality and affordability of pre-school centres on state properties.

The Tanglin Village site is the first PQ tender site for retail and food and beverage (F&B) use since the SLA started making such evaluations in November 2013. When asked how it decides which sites to assess this way, the SLA said: "Where the concept of a bid is crucial to the developmental requirements of the state property."

WHAT MAKES A DESTINATION

When there is a strong story line, the place can attract visitors and consumers. Create a buzz. This helps the establishments to pay their expenses through income generation from the business.

DR LYNDA WEE, adjunct associate professor of marketing and international business at Nanyang Technological University 

But it can be argued that quality, especially when this includes an operator's track record and business sustainability, is crucial to the success of almost any development - not just Tanglin Village's.

Take the case of Admiral Hill, a leisure hub that was to have risen on the site of the Old Admiralty House - a national monument built in 1939 to house Royal Navy officers.

The developer won the tender in 2007 after offering to pay $40,000 a month in rent - more than $5,000 above the guide rent for the 4ha site in Sembawang. It then announced plans to build a country club, golf driving range and rock-climbing facilities there.

By 2009, nothing had come to fruition and frustrated sub- tenants, who signed up on the strength of the proposed plans, could no longer make ends meet and moved out. When queried then, the SLA said that it "does not interfere with the business development and marketing plans of the master tenant".

An illegal school and a workers' dormitory were later found to have sprung up on the site and were ordered to shut down. The SLA eventually terminated the contract of the developer for failure to pay rent.

Over in Guillemard Road, the former Singapore Badminton Hall has not fared much better.

The historic site - which was the vote-counting station for the 1962 merger referendum - became a restaurant and prawn-fishing facility after the Singapore Sports Council's (SSC) 30-year-lease expired in 2008. It was not renewed as much-higher commercial rents would have kicked in thereafter.

During the SSC's tenure, national badminton matches were held there. Players practised their sport and courts were rented out for use.

The restaurant and prawn- fishing facility shut in 2011. Now, there is no master tenant and the site houses a mish-mash of trades, including a rock-climbing facility, childcare centre, spa, tuition centre and offices. This is despite a high demand for badminton courts across the island, according to the Singapore Badminton Association.

PRICE IS NOT ALWAYS RIGHT

To make any development a destination, a unique and compelling differentiator is needed and "the price bid alone does not reflect that", said Dr Lynda Wee, adjunct associate professor of marketing and international business at Nanyang Technological University. "When there is a strong story line, the place can attract visitors and consumers. Create a buzz. This helps the establishments to pay their expenses through income generation from the business."

This, ultimately means more money in state coffers.

In fact, tender decisions based on price alone could be detrimental.

"It means a higher chance that the site goes to greenhorns who rashly outbid their competitors without a sound business plan," said Ms Lim, who added that they may have a concept that does not gel with the target market or needs of an area.

This could quickly spiral out of control. Few customers means slow trade. Sub-tenants, unable to pay the bills, move out. This forces the master tenant, who has committed to high rents, to scramble to secure any new tenant to make ends meet.

"The place ends up looking like a pasar malam (night market), with no cohesive culture," said Ms Lim.

And, arguably, the far-flung sites and unlikely success stories are most in need of a PQ evaluation.

Such sites, added Dr Wee, require visitors to put in extra effort to get there.

"Hence, it must be worth the effort," she said, adding that the ability of the concept to attract crowds and have them return regularly is crucial in such instances.

MAKE A QUALITY DECISION

As Singaporeans become more well-travelled and sophisticated, they will seek increasingly unique experiences.

Local destinations need to give them, as well as tourists, a good reason to keep returning.

Setting up a fast-food eatery in the Arab quarter or a major supermarket in Tanglin Village may make economic sense for the landlord, but what effect would it have on the area as a whole? The narrative of a place has economic value beyond a few high rentals.

SLA's move to award the Tanglin Village site based on quality is a good start. Perhaps now is the time to ramp up efforts to introduce a more holistic tendering process for state land across the board.

This way, we might just see more success stories like Tanglin Village around.

A version of this article appeared in the print edition of The Straits Times on December 29, 2015, with the headline 'Want more hip Dempsey clusters? Don't award land to highest bidder'. Print Edition | Subscribe