Small businesses whipsawed by Covid-19 crisis get some financial relief

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/ EdgeProp Singapore
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April 3, 2020 9:00 AM SGT
SINGAPORE (EDGEPROP) - George Tan, proprietor of Gem Fresh Yong Tau Foo, recalls sitting at one of the tables in his F&B outlet at Bugis Cube sometime in the middle of March and thinking that fortunately, business there had been “quite stable”. In contrast, for his new outlet at Food Republic food court in Orchard Road’s Wisma Atria, which opened just last December, business had fallen 50% since the outbreak of Covid-19 in February, when travel restrictions were first imposed.
From left: George Tan, proprietor of Gem Fresh Yong Tau Foo at his Bugis Cube outlet, together with Victor Ng, MCST vice chairman of Bugis Cube Victor Ng; and Henry Mok, MCST chairman of Bugis Cube (Photo: Samuel Isaac Chua/EdgeProp Singapore)
From left: George Tan, proprietor of Gem Fresh Yong Tau Foo at his Bugis Cube outlet, together with Victor Ng, MCST vice chairman of Bugis Cube; and Henry Mok, MCST chairman of Bugis Cube (Photo: Samuel Isaac Chua/EdgeProp Singapore)
His outlet on the second level of Bugis Cube had been a crowd-puller for the strata-titled retail mall since it opened in 2015. It was a spin-off from the famous My Favourite Cafe Yong Tau Foo shop at Lucky Plaza. A typical day would see 300 to 400 customers, many of whom work in the area. “We depend mainly on the office crowd; we don’t depend on tourists,” says Tan. Hence, business was down just 5% for the month of February and the first two weeks of March.
Over the past 10 days, however, Tan saw his daily receipts at Bugis Cube fall about 30%. He recently implemented food delivery to supplement the loss in dine-in sales.
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Having been in the F&B, retail and trading businesses in Australia, Malaysia and Singapore for nearly three decades, Tan says: “I’ve never experienced anything like this. It’s getting really scary in the sense that we don’t know what’s going to happen next or how long this [Covid-19 pandemic] is going to last. That’s what gives me sleepless nights.”
For Tan and the other F&B, services and entertainment businesses at Bugis Cube — a 197-unit, 999-year leasehold strata-titled retail mall on North Bridge Road — stricter safe-distancing measures that included the closure of all places of entertainment including bars and cinemas for at least a month, until April 30, have led to a significant drop in footfalls. Regular patrons have also stayed away, amid the stricter safe-distancing measures for public places, and as more companies adopt work from home (WFH) policy for staff.
 Tan: I’ve never experienced anything like this. It’s getting really scary in the sense that we don’t know what’s going to happen next or how long this is going to last. That’s what gives me sleepless nights (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Tan: I’ve never experienced anything like this. It’s getting really scary in the sense that we don’t know what’s going to happen next or how long this is going to last. That’s what gives me sleepless nights (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Rental relief

“As a businessman, I can understand the landlord’s position because they have a mortgage to pay,” says Tan. “By the same token, we need to be in it together. I still have to pay wages and rent, and it’s coming out of my pocket every month. It’s just too tough already.”
Staff wages and rents are the two biggest overheads for any business, and F&B is no different. Under the Jobs Support Scheme for F&B firms announced in the Supplementary Budget on March 26, the government will provide a total of 50% wage offset.
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“In the meantime, we are negotiating with the landlords to see how much assistance they can provide,” says Tan. “The landlords are working with us, but their hands are also tied. So what can we do?”
Tan received a 13% rental rebate for three months from his landlord. “That doesn’t really help much,” he says. “They tell me that the rental income cannot service their loan commitments as it is, and they cannot offer more rebate.”
 Empty corridor on the fourth level of Bugis Cube following stricter safe distancing measures which came into effect from March 27 (Photo: Albert Chua/EdgeProp Singapore)
Empty corridor on the fourth level of Bugis Cube following stricter safe distancing measures which came into effect from March 27 (Photo: Albert Chua/EdgeProp Singapore)
On April 1, the government rolled out a Covid-19 (Temporary Measures) Bill. The measures are aimed at providing relief for businesses hurt by Covid-19 for the next six months. For instance, tenants of non-residential property who are affected by Covid-19 cannot have their leases terminated. This covers rental payments due on or after Feb 1, 2020, and agreements entered into before March 25, 2020.
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However, this does not remove the cotractual obligations, but merely “suspends” them for a prescribed period, according to the bill. Hence, rent will continue to accrue and remain payable.
“This helps relieve cashflow problems, but tenants’ liabilities still remain to be paid at a later date,” says Tan of Gem Fresh. “Well, I guess the government can’t bail out everyone, especially investors who speculated in the property market.”

Deferment of principal payment

on loans

On March 31, the Monetary Authority of Singapore (MAS) together with the Association of Banks in Singapore, the Life Insurance Association, the General Insurance Association and the Finance Houses Association of Singapore, announced measures to provide some financial relief for individuals and small and medium-sized enterprises (SMEs).
The MAS together with financial institutions announced measures to provide some financial relief for individuals and small and medium-sized enterprises (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The MAS together with financial institutions announced measures to provide some financial relief for individuals and small and medium-sized enterprises (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The measures include allowing the deferment of either principal payment or both principal and interest payments on residential property loans until Dec 31. Interest will accrue only on the deferred principal amount, and no interest will be charged on the deferred interest payments, MAS said. (See stories “Finance industry rides to the rescue as Covid-19 crisis deepens” and "Local banks go all out to assist Singaporeans")
For SMEs, payment of principal on secured SME loans can be deferred from April 6 until Dec 31, 2020. Interest remains payable, however, including additional interest accrued on the deferred principal amount.
Victor Ng, the vice-chairman and secretary of the management corporation strata title (MCST) board for Bugis Cube, is lobbying for a moratorium on both principal and interest for SME loan repayments.
The government has traditionally focused on the vulnerable groups, and rightly so. “But this time around, the equation is not that straightforward as all sectors have been hit,” says Ng. “If they don’t cut the cost for landlords, then landlords can’t help their tenants, and tenants in turn have to lay off workers. It’s a chain reaction.”
Ng (left) is lobbying for a moratorium on both principal and interest for SME loan repayments; Mok believes a moratorium on principal will only defer loan repayments for cash-strapped business owners (Photo: Albert Chua/EdgeProp Singapore)

SME tenants, SME landlords

While the nine-month moratorium period on the principal repayment for SME loans is a welcome relief as it reduces the monthly loan amount, the drawback is that interest is still payable, points out Ng. It could increase further as interest on the principal is deferred, not waived, he adds. “No moratorium on interest payment is disappointing because interest makes up a huge chunk of the monthly loan instalment,” he laments. “Moratorium on interest should be provided on conditions such as redeployment of this amount towards rebuilding, reinvesting or reinventing the business or staff processes.”
Henry Mok, chairman for the MCST for Bugis Cube, agrees. “A moratorium on principal will only defer loan repayments for cash-strapped business owners,” he observes. “It does not provide any monetary relief to help sustain businesses.”
The Covid-19 temporary measures relief bill takes away the pressure of eviction or forfeiture of deposits from tenants. But from a landlord’s perspective, there is a risk that tenants may abuse their rights, says Mok. “Without any contractual obligation, tenants can easily walk away from their responsibility.”
If the assessor allows a six-month rental deferment for a tenant, and the commercial landlord also applies for a six-month moratorium on his mortgage, the latter still has to pay the compound interest on the loan for the six-month period. For instance, if a strata shop unit at Bugis Cube has a monthly loan repayment of $4,033.51, the principal is deferred but the interest charge of $1,666 a month is still payable under a six-month moratorium. This still works out to 2.96% interest cost per annum. There is also a risk that a tenant may terminate the tenancy contract after the six-month relief ends, adds Mok.
The exterior of the six-storey Bugis Cube, a 197-unit, 999-year leasehold, strata-titled retail mall located on North Bridge Road located opposite Bugis Junction (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The exterior of the six-storey Bugis Cube, a 197-unit, 999-year leasehold, strata-titled retail mall located on North Bridge Road located opposite Bugis Junction (Photo: Samuel Isaac Chua/EdgeProp Singapore)
“How the benefits translate down to businesses on the ground is still a gray area and the banks are working out the actual mechanics,” says Clive Chng, associate director of Redbrick Mortgage Advisory. “There isn’t 100% clarity. When the dust has settled, will these interest payments cause any adverse effects, since it’s not waived but deferred for six to nine months? Will the repayment be amortised over a similar or extended period, and what will the interest rates be? We are still seeking clarification from the banks.”

Fate of the pubs and entertainment venues

There has been no mention of compensation for pubs and places of entertainment that were forced to shut, says Ng. On the fifth level of Bugis Cube is the “entertainment zone”, where four units owned by Ng were leased to De Luxy Bar four years ago.
Since it closed with effect from midnight of March 27 under the stricter safe-distancing measures, the corridor on the fifth floor has become eerily quiet, unlike in the past, where it came alive after midnight.
“People liked to come to the club because of the ambience,” says Francis Yeo, proprietor of De Luxy Bar. Business started to decline just before the Lunar New Year, when China imposed a lockdown in Wuhan and other cities in Hubei province, which eventually extended to the whole country to contain the spread of Covid-19. Travel restrictions introduced in Singapore on Chinese passport holders, which took effect from Feb 1, also meant that Yeo’s Chinese waitresses could not return after the Lunar New Year holiday.
Under the stricter safe distancing measures, entertainment places including clubs, bars and karaoke lounges have to close until April 30 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Under the stricter safe distancing measures, entertainment places including clubs, bars and karaoke lounges have to close until April 30 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
On a month-on-month basis, his business fell 50% from January to February, estimates Yeo, and was down “a lot” from February to March. And now, he has to close for the entire month of April. Yeo’s concern is that if the closure is extended beyond April, “I won’t be able to take it”.
Ng had already extended a 10% rental rebate to De Luxy Bar for the month of March, and offered a 100% rental rebate for the month of April. But Yeo recognises that it is coming out of his landlord’s own pockets. “I know he can’t continue to give rent free,” says Yeo. “It’s very difficult.”
Yeo has a second entertainment outlet in Vision Exchange at Jurong East, which had to close for the month of April too. The owner of the strata-titled unit had also waived his rent for that month. “But I hope the authorities can help,” says Yeo. “The government asked entertainment places to close until April 30, but they never said what they were going to do to help us.”

100% property tax rebate

– ‘still piecemeal’

In the Budget 2020 announcement in February, the government had offered a property tax rebate of 15% for commercial landlords such as those at Bugis Cube. The average monthly rental rate for a unit on the fifth floor of Bugis Cube is about $3,550, estimates Ng. The unit was valued at $30,000 last year, which means the property tax paid was $3,000 (10% of property value). A 15% property tax rebate worked out to $450 per year or the equivalent of $37.50 a month. That translates to just 1% of the monthly rent of $3,600, Ng points out.
The entertainment zone of the fifth floor of Bugis Cube has been eerily empty as bars and places of entertainment have to remain shut until end April (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The entertainment zone of the fifth floor of Bugis Cube has been eerily empty as bars and places of entertainment have to remain shut until end April (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The supplementary budget announced on March 26 offered a 100% property tax rebate, which means a full $3,000 per year for Ng’s unit. That works out to $250 a month or the equivalent of 7% rental rebate.
“Seven percent rental rebate is still piecemeal,” says Ng. “I accorded 100% rental rebate to my tenant, the bar, because he was forced to shut down for the whole month of April.”
Even Mok’s tenants on the fourth floor of Bugis Cube, which has been themed as “the beauty floor”, have not been spared. These tenants are mainly in the services trade, predominantly hair salons, nail parlours, as well as beauty and wellness spas. “Many of our regular customers haven’t come lately because they are concerned about the Covid-19 outbreak and the rise in the number of cases in Singapore,” says the manager of Absolute Wellness.
Her business at Bugis Cube was down 40% in February, compared to January. It fell further in March. “Now we are worried about how the business will be affected in April, May and June,” she says. “We hope to get some help from the landlord.”
Tenants on the fourth level of Bugis Cube, which are predominantly hair salons, nail parlours, as well as beauty and wellness spas, have also seen a drop in business since February (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Tenants on the fourth level of Bugis Cube, which are predominantly hair salons, nail parlours, as well as beauty and wellness spas, have also seen a drop in business since February (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Besides the units at Bugis Cube, Mok also owns coffeeshops. One of his coffeeshops is located in an HDB block in the Teck Ghee area in Ang Mo Kio. Mok owns the coffeeshop unit at one end of the block, while HDB owns the other coffeeshop unit at the other end. Following the supplementary budget announced on March 26, HDB offered 0.75-month rental rebate for its qualifying tenants for the month of April, and another 0.75-month rental rebate for the month of May. This brings total rental rebate offered by HDB to two months.
Mok’s coffeeshop tenant at the HDB block in Teck Ghee asked if he could extend the same rental rebate. “Whatever property tax relief I got from the supplementary budget, I will pass on to the tenants. But anything more than that, it’s very tough for us as individual landlords,” he says.
Meanwhile, Tan of Gem Fresh says the temporary relief bill and SME loan moratorium will help. “But I feel that most of us would just close shop and reopen only when things have settled down,” he says. “Not only are we fighting for our livelihood, we are also risking our health to keep things going for as long as we can.”
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