SINGAPORE – When Parliament sits on Monday, MPs will discuss the rental of two state-owned bungalows in Ridout Road by two ministers.
The matter had come under scrutiny over the past few weeks, when it emerged that Minister for Foreign Affairs Vivian Balakrishnan and Minister for Home Affairs and Law K. Shanmugam had separately rented 31 Ridout Road and 26 Ridout Road, respectively.
Opposition politician Kenneth Jeyaretnam first wrote about the bungalows in a blog post on May 6.
The leader of the Reform Party said he had “received information from a number of sources” that the two ministers were “occupying two of Singapore’s most prime residential properties in Ridout Road”, and questioned if they could possibly be paying the “market rent”.
In response to media queries on the issue, the Singapore Land Authority (SLA), which manages state properties, said on May 12 that both ministers had rented the properties through a bidding process, with Mr Shanmugam the sole bidder for 26 Ridout Road and Dr Balakrishnan the highest bidder for 31 Ridout Road.
But in the weeks that followed, the matter continued to pique public interest.
With the properties managed by SLA, some questioned whether it was appropriate for the ministers to have rented them.
More allegations were made by various websites, with claims that the ministers had cut down trees illegally and got SLA to pay for work done on a car porch, among other things.
There was also speculation online about the circumstances under which the ministers came to rent the properties. Was there any conflict of interest? Did either of them receive preferential treatment?
Acknowledging the discussions, Prime Minister Lee Hsien Loong said on May 23 that a review into the issue was to be conducted by Senior Minister Teo Chee Hean, with the findings to be made public before July’s Parliament sitting.
1. CPIB probe
PM Lee directed the Corrupt Practices Investigation Bureau (CPIB) to investigate the matter on May 17.
It was tasked to look into whether there was any corruption or criminal wrongdoing, and it concluded after a month-long investigation that there was none.
Both ministers and their spouses, as well as former and current officers of the Ministry of Law, SLA, National Parks Board (NParks) and property and managing agents, among others, were interviewed.
The CPIB also combed through documents related to the rental transactions.
What it found was that Mr Shanmugam and Dr Balakrishnan did not receive any preferential treatment or privileged information. There was also no evidence to suggest any abuse of position by the ministers for personal gain, it said.
The Attorney-General’s Chambers has agreed with the findings and recommendations, and directed that no further action be taken as the facts did not disclose any offence. The investigation into the matter is closed.
2. SM Teo’s review
A review was also conducted by SM Teo to look at whether there were any wider policy and process issues beyond the scope of CPIB’s investigations.
Issues examined included SLA’s decision to rent out the properties, the setting of rental rates, extent of works done to refurbish the properties, as well as the setting of the tenancy periods.
In calling for this review, PM Lee had said: “This must be done to ensure that this government maintains the highest standards of integrity.” He said both ministers had spoken to him and had asked for a review independent of their ministries and agencies.
Speaking to the media after the review was announced, Mr Shanmugam had said: “We need this sort of approach, regardless of who is involved, to make sure the system operates with integrity. We cannot let doubts about the integrity of ministers fester and be left unaddressed.
“I have nothing to hide. We should set out the facts, lay them before Parliament and the people. That is the only way to retain trust.”
Separately, Dr Balakrishnan told reporters on the same day that he was “very glad that Prime Minister Lee agreed to have this review, and to publish all relevant facts and findings before we have a full debate in Parliament”.
3. The Ridout Road bungalows
The properties at the centre of the matter – 26 Ridout Road rented to Mr Shanmugam, and 31 Ridout Road rented to Dr Balakrishnan – are two 100-year-old bungalows in the Ridout Park area, which is designated one of the 39 Good Class Bungalow Areas by the Urban Redevelopment Authority.
They are among the 600 or so black-and-white bungalows in Singapore, once the homes of colonial-era government officials and senior military officers.
Built in the early 1900s, the houses in the mock-Tudor style are marked by their distinctive dark timber beams and fittings, and white-washed walls.
Now managed by SLA, a statutory board under the Minister of Law, black-and-white bungalows are located in central areas like Scotts Road, Goodwood Hill, Malcolm Park and Bukit Timah, as well as in more rustic areas like Alexandra Park, Sembawang, Changi and Seletar.
Some 15 per cent of them have been designated as conservation properties, including 26 and 31 Ridout Road.
The land area of 26 Ridout Road is 23,164 sq m, while the floor area is 856.5 sq m, and the land area of 31 Ridout Road is 9157.36 sq m, while the floor area is 824.3 sq m.
4. SLA’s processes
SLA rents out such properties in two ways.
The first way is through an open bidding process.
In this method, the property is listed on the State Property Information Online (SPIO) website for at least 14 days, during which SLA, or the appointed managing agent, will organise an open house for people to view the place. This is followed by a five-day period for people to put in their offers.
The tenancy will be awarded to the highest bidder, and the tender results will then be published on SPIO for six months.
The second way of renting out the properties is through direct tenancy, under which the SLA or the managing agent will accept offers submitted directly to them for a specific property.
In both methods, tenancy is awarded subject to the guide rent being met, among other criteria such as a prospective tenant’s financial standing. Which method is chosen for each property depends on the prevailing market dynamics.
When the property market conditions are good and demand exceeds supply, almost all the vacant bungalows will be listed on SPIO as “strong interest and take-up are likely”, SM Teo’s report said.
When market conditions are poor and supply exceeds demand, or the occupancy rates for specific estates are low, “publishing complete listings of all vacant properties online would result in these properties visibly competing for the limited demand, and thus may not help the landlord maximise outcomes of occupancy and rental rates”, the report added.
5. Leases kept to standard processes
SM Teo’s report concluded that there was no deviation from SLA’s prevailing guidelines and processes in the two transactions.
When the properties were leased to Mr Shanmugam in 2018 and Dr Balakrishnan in 2019, it was not a requirement to list all available black-and-white bungalows on SPIO, and SLA and the managing agents could decide on whether to do so.
Both 26 and 31 Ridout Road were advertised through “for lease” signs placed at the gates. Additionally, 31 Ridout Road was listed on SPIO.
The 26 Ridout Road bungalow had been vacant for more than four years since December 2013 before it was rented to Mr Shanmugam in June 2018.
He had asked the Law Ministry’s then deputy secretary in January 2017 for a list of properties available to the public to rent, and then visited some of these properties, all of which had “for lease” signs prominently displayed, said the report. In January 2018, he appointed a property agent to represent him in the transaction to rent 26 Ridout Road.
Until then, the property had not attracted any bids, and Mr Shanmugam was the only bidder.
His bid of $26,500 per month matched the guide rent and was accepted, and in June 2018, his wife signed the tenancy agreement of three years, with the option to renew for the following three years, and the three years after.
In June 2021, the tenancy was renewed for the second three-year period, with rental remaining the same.
Similarly, 31 Ridout Road had been vacant for more than six years before it was rented to Dr Balakrishnan from October 2019.
Mrs Balakrishnan had come across a “for lease” sign at the property and had contacted the managing agent in September 2018.
The agent asked for rent of $19,000, and Mrs Balakrishnan put in an offer in November 2018 at that amount.
Since it was the highest bid, and also above the guide rent of $18,800, the SLA accepted it.
Before that, there had been two other unsuccessful bids – $12,000 in July 2018 and $5,000 in August 2018, which were below the prevailing guide rent.
Mrs Balakrishnan signed a tenancy agreement of three years, with the option of renewing it for two years, and another two years after.
At the end of the first three-year period in October 2022, she asked for a renewal of another three years plus two years, instead of the original two years plus two years.
This was allowed with rental increased to $20,000, taking into consideration the prevailing market conditions.
Questions had been raised about the tenancy terms, and the review found that they were within the maximum allowable term of three years, with the option to renew for three years and another three years, that SLA can grant at any one time.
The agency considers factors such as how much the tenant will likely spend to improve the property in deciding whether to grant a longer tenancy, the report said.
Since all approved improvements undertaken by tenants will become the property of the Government when the property is returned, a longer tenure would allow for such expenses to be spread out over a longer period.
For 26 Ridout Road, Mr Shanmugam had undertaken improvement works costing more than $400,000, and for 31 Ridout Road, Dr Balakrishnan had carried out works totalling more than $200,000.
6. Lack of precision in guide rent
In both cases, the guide rent was not disclosed to the ministers and their wives, said the report.
This is the reserve rent which all bidders must minimally meet, and is based on the prevailing market rate as assessed by valuers from the SLA or the managing agents.
CPIB said that access to information on guide rent was limited to the leasing department at SLA.
However, the bureau did find a “lack of precision” in SLA’s use of the term “guide rent” in relation to 26 Ridout Road. This was the only issue it found.
While SLA had assessed the guide rent for the property to be $24,500, this was not accurate.
This is because it subsequently determined that the minimum rent to be paid should be $26,500.
The agency had spent $172,000 clearing part of the land and fencing it, and the extra $2,000 a month was meant to recover the cost of these works over the rental period.
Given this, the SLA should have assessed the guide rent to be $26,500 instead, said CPIB.
This would make Mr Shanmugam’s offer equal to the guide rent, and not above the guide rent as SLA had said earlier in a May 12 statement, CPIB noted.
The bureau said this lack of precision had “carried over into the second valuation for the renewal of the lease” for 26 Ridout Road, and was discovered when it investigated the matter and informed SLA.
CPIB added that this issue with deriving the guide rent had not resulted from any ill intent on SLA’s part, and there was also no evidence of abuse of position in bad faith with regard to the valuation.
All bids and direct offers for black-and-white bungalows are measured against the properties’ guide rents, which help to ensure that such properties are rented out at fair market rate.
To this end, the guide rent takes into account factors such as location, use, floor area, physical condition of the property and prevailing market conditions, said SLA.
Reference is also made to rentals of comparable properties, and recent rental transactions for other black-and-white bungalows, it added.
7. Land area for 26 Ridout Road increased
The plot for 26 Ridout Road had more than doubled during the rental process after SLA decided to redraw the boundary of the property to include an adjacent piece of land. As a result, the land area went from 9,350 sq m to 23,164 sq m, said the report.
During a visit to the property, Mr Shanmugam had noticed thick and overgrown vegetation on an empty slope adjacent to the place, and expressed concern about possible health and safety risks from snakes, mosquitoes and fallen trees. Through his property agent, he negotiated with SLA on clearing the land before leasing the property.
He also doubted that the land would be maintained to a level that would keep these health and safety risks at bay, and offered to maintain the land at his own cost, even though it was not within the boundary of the property.
CPIB said in its report that Mr Shanmugam stated he had not wanted to lease this additional land as there would be legal obligations.
But the SLA decided that if Mr Shanmugam was to maintain the land at his own cost, it would have to be included in the tenancy.
The SLA then included the land within the boundary of 26 Ridout Road, and paid $172,000 to clear it, replant greenery and erect fencing.
This cost was then factored into the rental, through the additional $2,000 a month.
Maintaining this additional land is estimated to come up to about $25,000 a year for Mr Shanmugam, said the report.
“SLA would otherwise have had to incur the maintenance costs to keep the plot free of disamenities,” it added.
8. Rents comparable with those of nearby properties
When it emerged that the two ministers were renting the bungalows, which are state property, speculation had also arisen about whether they were benefiting unfairly from favourable rental rates.
The review found that this was not the case.
Both ministers paid rents at fair market value, and not below market valuation, said the report.
The $26,500 paid by Mr Shanmugam and $19,000 paid by Dr Balakrishnan were in line with those of other properties in the area.
In 2018, the rental per floor unit area for 26 Ridout Road was $30.94 per sq m per month.
This was comparable with the rentals of other Ridout colonial bungalows, ranging from $26 to $33.33 per sq m per month.
A bungalow of similar size in the same estate, with a total floor area of around 800 sq m, was rented out in June 2018 for $32.50 per sq m per month. This translates to a monthly rent of $26,000.
Meanwhile, the rate for 31 Ridout Road was $23.05 per sq m per month, slightly below the range for other Ridout properties in 2019.
But this was due to the condition of the property, said the report, and the amount was still comparable with other properties of average condition at the time.
These rental rates were also not far from the average rent per sq m per month for private bungalows near Ridout Road estate, which was $38.83 in 2018, and $27 in 2019, the report showed.
When the tenancies of both properties were renewed after the initial three years, a revaluation was done to peg the rentals to the market rate, bringing up the rental for 31 Ridout Road to $20,000 a month.
9. $1 million spent on refurbishment
As the properties had been left vacant for many years and were in disrepair, SLA spent $515,400 on fixing up 26 Ridout Road, and $570,500 on 31 Ridout Road.
Works done included general building repairs, such as ceiling works, as well as repair of floor cracks, tiles, gas pipes and broken windows.
The properties also needed electrical rewiring, horticulture works, road and fencing repairs, as well as termite treatment.
For 26 Ridout Road, water pump and sewerage repair works were also done.
As for 31 Ridout Road, SLA did roof repair and water-proofing works, and also replaced the water tank.
SLA said the works were necessary to make properties habitable before they were handed over.
The review concluded that the works on the two Ridout Road properties did not go beyond what the agency normally does as a landlord.
Similar works had also been done on other black-and-white bungalows in Malcolm Road and Orange Grove Road within the last five years, it added.
These properties ranged in size from 480.2 sq m to 742 sq m, and the works had cost between $408,800 and $1,132,800.
They included similar repairs, as well as asbestos removal and structural repairs in some cases.
SLA said that the valuation of such properties would have factored in the condition of the bungalows after the works had been done.
In addition, a cost-benefit analysis is also undertaken to ensure that the rental received for the properties would more than justify the works over the expected period of use, which can be 10 years or more, it added.
10. No conflict of interest
The review found that the ministers had conducted themselves properly, and there was no abuse of power or conflict of interest resulting in unfair advantage.
A code of conduct for ministers, in place since 1954 and updated in 2005, clearly states that a minister must ensure that there is no real or perceived conflict between their official duties and private interests.
In the case of the transaction involving 26 Ridout Road, a conflict of interest could have arisen as SLA is an agency under Mr Shanmugam’s Ministry of Law.
Having recognised this potential conflict of interest, he had taken steps to eliminate it, and prevent any actual conflict from arising, said the report.
He did this by removing himself from the chain of command and decision-making process.
He informed the then deputy secretary of the ministry that he would recuse himself from any discussion related to the rental, and also instructed the deputy secretary to approach then Senior Minister of State for Law Indranee Rajah should any matter require ministerial-level oversight.
He also informed SM Teo of the matter, and asked Ms Indranee to go to the Senior Minister if any issue had to go beyond her.
As it turned out, no matter was raised by the SLA to the Ministry of Law throughout the process.
The then SLA chief executive declared on March 29, 2018, to the then permanent secretary of the Ministry of Law, giving assurance that the rental was determined by SLA valuers independent of SLA leasing officers, and confirming that the tenancy agreement was a standard form used for all other tenancies.
In the case of 31 Ridout Road, no conflict arose because Dr Balakrishnan’s official responsibilities did not include overseeing SLA.
The managing agency responsible for 31 Ridout Road was also explicitly told by SLA that “there was no policy for VVIPs (very very important persons)“, and all tenants were to be treated equally.
11. Parliament to discuss matter; MPs pose 23 questions
MPs from both sides of the aisle have posed questions for Monday’s Parliament sitting, centred on how both properties were advertised, the transparency of the bidding process, SLA’s standard operating procedures and the terms of the lease agreements.
For instance, Mr Zhulkarnain Abdul Rahim (Chua Chu Kang GRC) asked how SLA had marketed the two properties, while Mr Don Wee (Chua Chu Kang GRC) asked whether SLA has a transparent process to list all such properties available for rental.
Leader of the Opposition and Workers’ Party (WP) chief Pritam Singh asked how the Government will assure the public that both ministers did not receive any privileged information, while Mr Leon Perera (Aljunied GRC) asked what SLA does when the bungalows are vacant for long periods.
Non-Constituency MP Leong Mun Wai asked why SM Teo was tasked to review the ministers’ tenancy instead of someone from another branch of government, such as a Supreme Court judge.
These questions will be addressed in four ministerial statements by Mr Shanmugam, Dr Balakrishnan, SM Teo and Second Minister for Law Edwin Tong.
