Property analysts were reportedly stunned by a bid of S$1.43 billion for a land parcel in Yishun town centre, submitted by companies from the Frasers Centrepoint group. It was 47.4 percent above the second-highest bid of S$969 million from a Far East Organisation-led consortium. There were three other bids, at S$930 million, S$875 million and S$705 million.
The most likely reason soon became clear. As owners of Northpoint, adjacent to the site, and the only significant shopping mall in Yishun town centre, Frasers Centrepoint would want to dominate the market for retail space in the locality. But such domination would mean, in effect, a local monopoly.
Competition rules should have kicked in. Frasers Centrepoint should not have been considered eligible for bidding.
The 99-year leasehold site was put up for tender by the Housing and Development Board (HDB) in June. Diagonally across Yishun Avenue 2 from Yishun MRT Station, it is roughly where the existing bus interchange is. The site use is for a mixed commercial and residential development, with a Gross Floor Area of 123,254 sq metres. Of this, about 48,500 sq metres can be for commercial use. The development, however, must include a new bus interchange and a community club.
The site is a huge one, and interested parties must be confident that they can handle a project of such scale. Together with the complexity of the requirement (incorporating a bus interchange and community club), analysts say this is the possible reason why it attracted only five bidders.
How huge can be seen from the map provided by HDB. Compare the area delineated in red with nearby Northpoint Shopping Centre.
There’s goes a chunk of the park
I said to myself: That’s funny, I don’t remember there being such a large piece of land there, even allowing for a bus terminal. So I took a look at Onemap.sg, and was disappointed to see that the land parcel ate up about 30 percent of the existing Yishun Town Park. Another 10 percent of the park is marked as “proposed town plaza”. In the map below, I overlaid the tendered parcel (broken red lines) over Onemap. The existing town park is outlined in green. A good part of it, as you can see, is within the tendered land parcel.
The steady reduction of green spaces is a reason why many Singaporeans complain of feeling boxed in.
Windfall profits mean pain in the average guy’s pocket
Although Frasers Centrepoint put in the highest bid, HDB has not yet announced the result. However, it is very likely that they will accept their bid.
Today newspaper quoted Ku Swee Yong, Chief Executive Officer of International Property Advisor, as saying, “Frasers will enjoy many synergies and besides the heavy footfall in the area, they will be able to drive traffic to their Northpoint to increase returns,” explaining their high bid. But this means that to secure an economic return on their astounding bid, they’d have to keep rents for commercial spaces high. Who suffers? Small businesses. Consumers. Everyone in Yishun.
There is no other significant shopping centre in the area. Nor do current plans (see the black-and-white map above) make any provision for new shopping malls for the foreseeable future. In any case, given the more-than-double increase in commercial space (see box at right), it might not make economic sense to build another mall in Yishun for a long while to come. Given this scenario, it seems quite contrary to the public interest to permit a single landlord to so dominate a town centre with respect to modern retail space. Thus my argument that competition rules should come into play, barring this developer from the site.
Whoopee, our government will get richer
A counter argument is that it would be perverse for the government to lose out on an extra $461 million — the difference between Frasers Centerpoint’s and the second highest bid — by rejecting the top bid. But that in itself illustrates the kind of warped priorities we labour under. Is it always a good thing for the government to get richer and richer?
The cash will be sucked into state reserves — that’s a principle that the government applies. Land is a state asset and any value obtained from monetising it goes into state reserves, not the operating budget. Given the practice so far, the reserves will be entrusted to either the Government of Singapore Investment Corporation or Temasek Holdings to invest, and both will likely move the money offshore in doing so. Outside of the inescapable debate as to whether they make a hash of such investments, the fact will remain that by sucking an extra $461 million out of Singapore, there will be a deflationary impact.
Meanwhile Yishun residents shopping in Northpoint and the new mall will pay higher prices to help tenants pay higher rents, for without leasing competition, shopkeepers can’t negotiate for more reasonable rates. So what will happen, in a nutshell, is that money will flow from the pockets of Yishun residents to shopkeepers, to the landlord, to the government, to GSIC and Temasek, and then out of Singapore. Only a small part of future investment returns from GSIC and Temasek is going to return as government expenditure and feed back into our domestic economy.
Seen in this light, the counter argument stinks.
Crank up competition law
On a more general note, either our competition law is weakly worded or we’re too laid back about enforcement. There are so many areas where we should be battling market dominance or duopolies, from mainstream media to taxi companies to telcos. That however, is a subject for a different day. What this case shows — and why I feel it important to draw readers’ attention to it — is that we shouldn’t only speak of market dominance Singapore-wide. Localised dominance can be just as damaging to consumer and commercial tenants’ choice.
We need a heightened and more fine-grained appreciation of competition rules.