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Recent decisions show extensions are no longer a certainty.
By Kalpana Rashiwala in Singapore
The market used to assume that the Singapore government would top up leases for sites to 99 years as they came up for redevelopment. A series of recent decisions - in which the authorities either declined lease extensions or allowed them, but for shorter terms - has called that assumption into question.
Property players say these decisions could affect investment sales of 99-year leasehold properties, or at least the way such deals are structured.
In January, when the proposal for Market Street Car Park's redevelopment into an office tower was made public, owner CapitaCommercial Trust said that the authorities had declined to top up the lease for the site, which has another 65 years to run.
More recently, the market learned that the former Crosby House site at 71 Robinson Road - which is being built into a new office block - had its lease extended in April, not to the usual 99 years but 85 years and 10 months instead. This was apparently to match the remaining lease term of the SIA Building next door. It has also been reported that no extension was granted for Marina House last year, which is proposed to be redeveloped, although the HMC Building nearby obtained a 99-year extension earlier. Sources say another building at Cecil Street has also had its extension application rejected; the Urban Redevelopment Authority (URA) may have plans for the location.
In recent years, the Singapore government has extended leases of nearby sites to the original 99-year term, including 1 Shenton Way (being redeveloped into One Shenton), NatWest Centre (being redeveloped into The Clift) and the HMC Building.
The decisions appear to run contrary to the perception that the government would generally agree to extend leases, so long as the planned redevelopment scheme is in sync with the URA's long-term vision for the area.
Instead, the Singapore Land Authority (SLA) said: "The government will generally allow leases to expire, without extension." It noted that the state generally sells land on leasehold "to allow it the flexibility to reallocate land to meet socio-economic needs".
"However, the government has considered and allowed lease extensions based on whether the proposed redevelopment is in line with state planning intentions and long-term development plans, and factors such as whether there would be significant intensification, or greater optimisation of land use. That remains the government's policy," the SLA said.
The SLA evaluates each application on its merits and in consultation with the relevant agencies. The specific circumstances of each development dictate whether it should be given a lease extension - and for how long.
The URA said it evaluated requests for extensions based on "a range of planning considerations in relation to the specific location and context of the area". This approach gives the state flexibility to review the longer-term plan for the area, "as and when the existing leases expire or come in for extension in future, and to reconfigure the parcels, if required, to provide for better land utilisation".
In the Central Business District, for instance, the considerations may vary from streetblock to streetblock, URA said, when queried about the unusual lease top-up to 85 years and 10 months for 71 Robinson Road. "This lease period is sufficient to allow for the owner to redevelop the site to a new modern office building," the URA added.
Ong Choon Fah, the executive director of the property consultancy DTZ, said: "In the past, the government may have been pretty liberal in topping up leases. Now, they have to think of Concept Plan 2011 and how to accommodate a long-term population of 6.5 million people. So they have to be more creative and safeguard land for the future, by having a common lease expiry period."
Mrs Ong said there were still many "pencil buildings" on tiny plots in the CBD. "It would be more efficient if the government has common lease expiry periods for adjacent plots so that they may amalgamate them into bigger land parcels and resell them in future."
"It's more efficient to intensify land use for bigger land parcels. Globally too there's a trend of mixed developments, with a live, work, play environment. It's more environmentally friendly and reduces commuting time. For that too you need bigger sites."
Published in Business Times (Singapore) on June 4, 2008
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