Dear Madam Halimah Yacob

On 5 May 2023 I raised concerns in a series of social media posts on my blog about two properties managed by the Singapore Land Authority (SLA) which are being tenanted by two senior Cabinet Ministers Shanmugam and Balakrishnan.

On 13 May in response to my concerns, SLA issued a statement confirming that Senior Ministers Shanmugam and Balakrishnan are the tenants of the two compounds on Ridout Road which they inhabit for their own use. The statement is otherwise devoid of useful facts but SLA said that more details will be provided on this issue at the next parliamentary session in July.

SLA properties are state assets on land managed as part of our reserves for the nation. As such these SLA assets fall within your remit as President under your duty both to safeguard the reserves and also in the interests of fairness, to prevent them being used just to benefit a select group at the expense of all Singaporeans.

We are lectured frequently by Government Ministers on the need to ensure that the state receives the full market value for the land it owns. Otherwise, the Ministers say, it would constitute a drain on Past Reserves and be unfair to future generations of Singaporeans. As recently as March 2023, Indranee Rajah, Minister in the Prime Minister’s Office, was reported by The Straits Times as saying in Parliament that excluding “land costs in pricing HDB flats would not only erode Singapore’s reserves but also benefit only a select group of flat buyers at the expense of all Singaporeans.” In the light of Ms Rajah’s remarks, there are legitimate concerns that Mr Shanmugam and Mr Balakrishnan are not paying the full market value that could be realised for the properties and are enjoying a benefit from State assets only available to a select few and that this is therefore a drain on the reserves.

There is a clear conflict of interest here. Why has Mr Shanmugam been allowed to rent a property from SLA when the authority managing these properties is under his control as Minister of Law? Even the statement by SLA exonerating him and Balakrishnan would have come within his remit. Would you not agree that this conflict of interest is egregious and that in the circumstances he should NOT have been allowed to bid and that there must therefore be serious doubts over whether the tender process was open, fair and without favour? This matter is serious enough to warrant a Committee of Inquiry (COI)

Whereas I have no confidence that a transparent complete and fair account of this issue will be presented in Parliament in July, I have no doubt that many MPs will make long speeches taking up the bulk of the Parliamentary session. A few inoffensive and vague questions will be asked by both sides of the house (for faux balance) and then an ad hominem attack will be launched on me from a place where the senior ministers enjoy parliamentary privilege and I have no right of reply. Then we will hear no more.

Without a COI chaired by an independent judge how are we to find out which procedures were adhered to in the process that led to these two senior Ministers being able to rent these two enormous state owned properties at a time when they already owned prestigious and large family homes? This involves two of our most senior Cabinet Ministers. The properties are not mere Good Class Bungalows or ordinary B&Ws. One of the properties sits on the largest residential plot of land in the entire nation after the Istana. One of the most puzzling aspects is why would the Ministers rent at all, given the lack of security and stability that tenure offers, without some kind of sweetheart deal?

More concerns are raised by SLA confirming that Shanmugam was the only bidder for his property. How convenient! Without the price being tested in a free and open market how can SLA confidently state that the rental rate achieved was market value? Even more concerning is that both Ministers appear to have been able to renew their leases for a further three years without a new auction. Ordinarily tenants of these properties do not enjoy any security of tenure and this aspect alone makes them an odd choice for housing senior ministers.

SLA states that the rents paid are above the market guide rate. Again an Inquiry would need to investigate this claim. I have provided some realistic market valuations below. SLA provides no details as to the guide rents or what the Ministers’ initial rents were and whether this was revised upward or indeed downward at the renewal stage. It also provided no information on what the previous tenants had been paying in rent.

Critical to the market guide rent valuation is the matter of the property upgrading. Was the rent rate low and had the properties been empty for a few years because without security of tenure no ordinary tenant would take on the cost of improving the property? As landlord did SLA, contrary to normal commercial practice, make the tenants responsible for maintenance and upkeep? Was that condition relaxed for the incoming Ministers?

I understand that there have been extensive renovations under the new tenancies including new kitchens, tennis courts and swimming pools. A comparison of the maps shows new structures and the back (kitchens and former servant area) of one property to have been extended in two directions. There are of course new structures serving as guard posts. Alarmingly aerial photographs show that the properties, in what can only be described as an act of ecological vandalism, have been cleared of trees.

What tenant would undertake such expansive work at their own cost when they could lose the property after two years? Were they in fact promised unlimited renewal of their leases without obstruction? Did one or both tenants enjoy a rent free period whilst these improvements were under construction. Did the state in fact pay for any of the renovations or does it now pay for the ongoing maintenance or upkeep making the rents rate very advantageous and offering a benefit not available to other potential tenants? These are simple yes or no questions that SLA must answer.

I have calculated based on other sale transactions of Good Class Bungalows (GCB) that the value of the land per square foot should not be less than $1100 per square foot (and probably considerably more) which makes the two properties’ combined valuation not less than $440 million. However these properties by sheer size alone are unique and do not really have a comparison unless someone in your office has done a valuation for the Istana.

On a 1% yield the market rental for 26 should be not less than $2.6 million a year while the rental for 31 should be not less than $1.4 million. But this surely is well below the long term real rate of return on the assets of Temasek, GIC and MAS that the Finance Minister uses to calculate the amount of the Net Investment Returns Contribution (NIRC) that is added to the revenue side of the Budget every year. This appears to be not less than 2% p.a. If we apply the same rate to the land reserves then SLA should be aiming to achieve a rental of over $5.2 million p.a. for 26 and $2.8 million for 31 Ridout Road. Even that rate is extremely undemanding as the rental yield from private property in Singapore is currently over 3% (see here)

It is difficult to see how the two Ministers could afford to pay even a 1% yield based on their salaries or even using family wealth or past earnings. Even were the rentals’ arm’s-length, transparent, free of conflict and represented the true open market value, it is clear that the properties would fetch more if they were redeveloped as either public housing or as private condominiums. I have calculated that together the two properties should be worth over $1 billion after development costs and as much as three or four times that (see here) This should be of great concern to your office.

SLA may argue that these properties and the other historic bungalows it manages represent part of the unique heritage of Singapore that must be preserved and that the land on which they sit is a “green lung”. If this is so then why were the two Ministers allowed to clear most of the ancient trees that stood on these properties, apparently to build amenities for themselves like swimming pools and tennis courts? I understand that permission is required to fell any trees with a girth of 1 metre or more. Were the requisite permissions obtained? If they are heritage properties then why are they only being leased to senior Ministers who already own other large landed family properties where they can relax? How does that represent fair use for Singaporeans?

I have a good record for highlighting and finding constitutional breaches and failures to follow the correct procedures. In 2012 I identified a failure to seek Presidential approval for a loan (although I was denied standing to press this in court). Subsequent to the public interest shown when I raised the constitutional breach, the Auditor General discovered a second loan issued without Presidential approval (see my blog here). This second loan was recalled and the President’s approval sought in the correct manner. Madam President, have you been made aware by parliament of these State assets being enjoyed by the Ministers? Given my insight into the valuations and Ms Rajah’s statement that achieving anything less than full market value for the land would be an unacceptable drain on the reserves, benefitting a select few at the expense of the vast majority of Singaporeans, would you not agree that your approval should have been sought for these lease agreements?

Finally, SLA stated that Mr Shanmugam notified a senior Cabinet colleague about his intention to bid for the property. There are very few Cabinet Ministers senior to Mr Shanmugam. I do hope that senior colleague was not our PM. Previously in connection with his problematic purchase of condos at Nassim Jade, we were told that Mr Lee Hsien Loong, our then DPM, was not aware that he had been offered the condos at a deep discount being unaware of the going market value. I respectfully suggest he would not be the best person to recognise a current guide rent and advise on it.

Yours sincerely

Kenneth Jeyaretnam

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam