SINGAPORE (Mar 27): My Awesome Café, located along Telok Ayer in the building formerly occupied by the Chung Hwa Free Clinic, has been doing a roaring business for the last six years.
But its fortune started to turn after Lunar New Year with the Covid-19 outbreak and as Singapore imposed travel restrictions. First, the Chinese clientele disappeared overnight in early February. As more companies encouraged their staff to work from home, about 50% of My Awesome Café’s regular clientele vanished, says SC Bong, co-founder of My Awesome Café with Franck Hardy.
Another 30% of its clients, the independent travellers who find the café on the tourist map, vanished with tighter travel restrictions and lockdown in cities around the world. Like most F&B operators, the co-founders of My Awesome Café now hope their landlord will offer some rental relief.
On March 26, the Singapore government announced a $48.4 billion Supplementary Budget with measures aimed at helping such businesses stay afloat and ease rental pressures in the face of the deepening Covid-19 crisis, which has ravaged the economy.
From 30% to 100% rebate
In particular, property tax rebates for retail malls were increased to 100%. Tricia Song, Colliers International head of research for Singapore, estimates that the property tax rebates could translate to 50% rental rebate for retail tenants for at least three months.
Commercial properties such as hotels, serviced apartments, tourist attractions and restaurants, will also enjoy a 100% property tax rebate, while integrated resorts will get a 60% property tax rebate. Office, industrial and warehouse landlords, which did not qualify before, will now enjoy 30% property tax rebates. (See Table).
According to See Wei Hwa, director of tax at KPMG, the 100% property tax rebate for qualifying commercial properties will result in cashflow support of up to 1.2 months of rent for companies in industries adversely affected by Covid-19. The newly announced 30% property tax rebate for other non-residential properties such as offices and industrial properties would result in cash flow support of “about 11 days of rent”, See estimates.
“I strongly urge landlords to fully pass on the rebate to tenants, by reducing rentals, to directly ease the cash flow and cost pressures faced by tenants,” says Deputy Prime Minister and Finance Minister Heng Swee Keat.
REITs and government agencies
The REITs have been swift to respond. Mapletree Commercial Trust (MCT) announced it is committing an additional $18 million of rental relief to its retail tenants. SPH REIT says it will “pass on fully” the total property tax rebates announced by the government on Feb 18, while the rebates announced on March 26, will be targeted at tenants whose businesses have been the most affected by the pandemic..
Government agencies are also encouraged to offer rental waivers to small hawkers, charities and businesses. Hawker centres managed by National Environment Agency will receive a rental waiver for three months, up from one month announced during Budget 2020.
Other governmental agencies such as JTC, Singapore Land Authority, HDB and Peoples’ Association will provide two months’ worth of rental waiver for tenants such as charities, and half a month for other tenants.
Meanwhile, HDB will also suspend all late payment charges for HDB homeowners who are struggling with their mortgage payments during this difficult period. Late payment charges on HDB mortgage arrears as well as government fees and charges will also be frozen for one year from April 1, 2020 to March 31, 2021.
Mall operators such as CapitaLand had announced earlier this month that it was offering rental rebates for two months to 1,000 tenants.
In February, following the Budget relief package, Frasers Property had also said that it was passing its 15% property tax rebate to tenants; while UOL rolled out its “assistance package” for the tenants at its malls.
Challenge for small commercial landlords
Small landlords of strata-titled retail malls said that the property tax concession offered earlier, “were not substantial enough to help our tenants”, says Henry “Happy” Mok, chairman of the Management Corporation Strata Title (MCST) for Bugis Cube.
The property tax rebate for the strata titled landlords at Bugis Cube was 15% then. The six-storey Bugis Cube has 197 units. A typical unit on the upper floors has an annual property value of around $40,000. A 10% property tax translates to $4,000, and 15% rebate to $600 a year. That works out to just $50 per month that can be passed on to the tenant. “It wasn’t very meaningful,” says Victor Ng, vice chairman and secretary of the MCST for Bugis Cube.
The average rental rate of a strata titled unit on the upper floor of Bugis Cube is about $2,800 to $3,000 a month. A 100% property tax rebate under this latest series of measures, will translate to about 11% to 12% of the monthly rental rate. “These rebates will definitely help,” says Mok. “The landlords can pass it down to their tenants as rental rebates.”
This article - Higher property tax rebates to keep businesses afloat is originally from EdgeProp.sg
