Singapore's 'stingy nanny' abates and outshines Hong Kong with rental relief to ease retail pain during coronavirus pandemic

Lam Ka-sing and Pearl Liu
April 20, 2020 10:50 AM SGT
Singapore was called a "stingy nanny" city state a decade ago, for a low welfare budget relative to its wealth as the world's third-richest country. That stinginess is changing, as Asian retailers confront their worst business slump in decades in a time of the coronavirus pandemic.
Since the government unveiled S$60 billion (US$42 billion) in stimulus package two weeks ago, an A-list of landlords " some of which majority-owned by state investment arm " have rushed to share the goodies with businesses to protect jobs. The government even enacted a law, just to make sure of that.
That is music to the ears for Bluebell group, the region's biggest distributor of luxury retail brands with US$2 billion in sales, who pays some of the most expensive retail space in malls across Singapore, Hong Kong and Japan.
"The landlords in Singapore have been more understanding and the government has been giving out subsidies, including property tax rebates, which they can pass to tenants," said Nelly Ngadiman, managing director for Southeast Asia at Bluebell. "We have seen a slowdown in sales since February, a bit later than Hong Kong."
Nelly Ngadiman, managing director for Southeast Asia at Bluebell. Photo: Handout alt=Nelly Ngadiman, managing director for Southeast Asia at Bluebell. Photo: Handout
The swift response is a stark contrast to Hong Kong, where landlords have offered what the industry calls "slow-drip" concessions to retailers even as sales cratered under months of social unrest, long before the pandemic pushed Hong Kong to unveil its record HK$137.5 billion (US$17.7 billion) relief package.
While no two programmes are similar, the level and readiness of policy support could shape impressions and decisions among investors long after the current public health crisis is over. Both financial hubs compete for everything from initial stock offerings to talents and billionaires.
Singapore's gross domestic product per capita is estimated at US$105,689 based on purchasing power parity basis, according to the International Monetary Fund, or 1.6 time more than Hong Kong in 10th place. It attracted the stingy moniker from The Economist a decade ago for its antipathy towards public welfare.
These days, the government through its state investment arm owns equity stakes in some of the city's biggest landlords, notably its 51.5 per cent holding in CapitaLand, and 32.9 per cent stake in Mapletree Commercial Trust, according to Bloomberg data.
Maggie Hu, assistant professor of real estate and finance at the Chinese University of Hong Kong, said it boils down to ownership structure and relative affordability factor.
"Singapore landlords offer more generous rent concessions partly because the move is pushed by the government," she said. "It is related to the fact that most of the big developers there are government controlled or influenced."
In Hong Kong, the biggest retail landlords are in private hands, Hu said, and rent policies are driven by individual companies depending on the financial situations of each landlord.
Samy Redjeb, who oversees the Hong Kong, Macau and Taiwan operations at Bluebell, could do with Singapore-style backing. Hong Kong's landlords, in its opinion, have not gone far enough to shore up the local retail industry at its darkest hours last year.
"The level of support today is far from sufficient for retailers to survive" despite the government's appeals to the landlords, Redjeb said. Most of the concessions are on base rental, on a monthly review basis, and extracted "through very tense negotiations," he added.
One of those tense moments included an unprecedented strike by some 200 retailers in February to close their shops for a day in major malls across the city to demand for rental relief. The landlords, though, were unbowed by the strike.
Stewart Leung, chairman of the executive committee at Hong Kong Real Estate Developers Association, the powerful guild for one of the pillars of the city's economy, came to the defence for the government and the big developers.
Hong Kong, whose economy is closely intertwined with mainland China, faces great difficulty in pushing forward some "really harsh" measures under political constraints, he said in an interview with South China Morning Post.
"Singapore is a country, it can immediately do what it needs to do by issuing an order," Leung said. As a special administrative region of China, "sometimes it is not possible to take big actions in Hong Kong, which will draw a lot of different voices," he said.
"Big companies have their own difficulties," Leung added. "They also want to keep their staff and business. If even the big companies close down, the situation would be even more difficult."
Even as the coronavirus pandemic has hastened the slump in retail sales across the Asia-Pacific region over the past 12 months, the damage has been uneven.
Hong Kong's economy has suffered over a longer stretch of beating due to anti-government protests since June last year. The nativist undertone of the protests deterred many mainland Chinese business travellers and tourists, the lifeblood for the city's hospitality and retail industry.
Hong Kong's February retail sales slumped by a record 44 per cent, as an escalating coronavirus outbreak in mainland China kept mainland Chinese tourists away from Hong Kong, casting a pall on the annual shopping festival during the Lunar New Year holiday.
In Singapore, retail sales slid by 8.9 per cent, the steepest in 12 years. In February, tourist arrivals crashed 94 per cent in Hong Kong, shrinking by a more moderate 57 per cent in Singapore.
Under the plan of Chief Executive Carrie Lam Cheng Yuet-ngor, the Hong Kong government would pay 50 per cent of workers' salaries for six months, subject to a cap, to protect 1.5 million jobs, among others.
A handful of government-backed landlords have come to its aid. Link Reit, which acquired most of its properties from the Housing Authority, expanded its tenant relief plan to HK$300 million from HK$80 million. MTR Corporation has extended its half-rent incentive for small to medium sized tenants to April.
Even so, Hong Kong's private developers have not gone the full distance of waiving rents for retail tenants. Sun Hung Kai Properties, for example, would "closely monitor" the impact in April before deciding on any relevant relief measures.
The developer, the city's largest mall owner under Asia's third richest Kwok family, lowered retail base rent by 30 to 50 per cent on a case-by-case basis in February and other undisclosed relief in March.
Singapore's bag of goodies included a waiver on property tax this year, benefiting owners of more than 58,000 qualifying retail and food-and-drink properties, and a rent-free April for most retailers. The state will also subsidise 75 per cent of employees' wages this month for companies in all sectors of the economy.
Major landlords in Singapore immediately sprang into action. The biggest of them, CapitaLand, a unit of state investment arm Temasek Holdings, has committed S$100 million to support its retail tenants. Other landlords have waived rents for April.
The law ministry on April 7 introduced a bill to let businesses and individuals defer certain contractual obligations such as rent and loans, for a certain duration. Under the proposed law, landlords would not be allowed to kick out their tenants, or repossess the premises.
The new law "flips the balance of power towards tenants, and that has helped," said Loh Lik Peng, founder of Unlisted Collection of restaurants in Singapore.
Still, Singapore's example "is an exception," said Kevin Tsui, associate professor of economics at Clemson University in South Carolina. Even New York, facing worse pandemic conditions, has not taken that legal route, he added.
The coronavirus pandemic has infected more than 2.1 million people globally, and killed at least 145,000 people through April 17.
Hong Kong, whose people have worn masks since the beginning, has kept the total to only some 1,000, with single-digit daily cases lately. Singapore has been seeing an outbreak of more than 300 cases each day, taking the tally to over 4,400 at last count, with 10 fatalities.
With a nationwide election due by April next year, the government of Singapore is keen to prevent a deeper economic slump to appease its citizens. Its projected 1 to 4 per cent contraction this year would be the worst since at least 2001, according to Bloomberg data.
Its "stronger medicine" could be seen as a response to a wider fallout as infection cases grew on the back of what analysts opined as three mistakes in its initial assessment of the pandemic.
Derek Tan, head of Singapore property research at DBS Group Holdings, said Singapore landlords are more generous than their peers in Hong Kong because their strategy is to retain tenants. Replacing departing tenants would be very difficult in a market downturn.
"Landlords have realised the tough situation, that if you do not offer more [rent reduction], you will just lose the tenants," he said. "They will be under a high risk of having no tenant and no cash flow."
Tan also noted that Singapore landlords have "more financial flexibility" because they did not suffer from the impact of anti-government protests. Their peers in Hong Kong might offer more rebates if the Hong Kong government also shuts down the malls, he added.
That remains to be seen. Among Hong Kong restaurant operators, the verdict is clear. With rents eating up 30 per cent of revenue, 99 per cent of them decried the support from the government as insufficient, according to a survey by Save Hong Kong F&B, a coalition of 600 restaurants with more than 10,000 workforce in the catering industry.
"Unfortunately, landlords think they rule Hong Kong, not the Chief Executive," Alan Lo, co-founder of restaurant operator Classified Group, said during a webinar this week. "Frustration in the retail and F&B business is reaching a breaking point, where people are ready to just give the keys back to the landlord."
The Swatch Group, the world's biggest watchmaker by sales, believes Singapore landlords are more attuned to the fallout in the retail industry.
"There are some landlords who are very empathetic, cooperative, and understand the situation, and there are some greedy landlords," a spokeswoman in Hong Kong said. "Singapore is more cooperative, also driven by the local government. Hong Kong is just the contrary."
(With additional reporting by Ryan Swift and Liu Yujing in Hong Kong)
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This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
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