All in the name of progress

/ The Edge Property |

September 2, 2015 9:00 AM SGT

The rolling greens of the 40-year-old Jurong Country Club have been acquired by the government to make way for the high-speed rail terminus and new mixed-use developments for Singapore’s second CBD. Is it a fair trade-off?

Jurong Country Club (JCC) members celebrate national day every year with a friendly golf competition, where participants wear the national colours of red and white. For this year’s national day, in addition to the golf competition on Aug 9, a big screen will be mounted at the Golfers’ Terrace café for guests to view the National Day Parade. Free ice cream and souvenirs will be handed out.

“This year, we are also commemorating SG50 by paying tribute to our nationally loved king of fruits — the durian, treating members and guests to an ‘eat-all-you-want’ festival for a token entrance fee,” says JCC general manager Farrock Ebrahim. The durian feast started on July 18 and is sponsored by one of the club members.

The bittersweet taste of the fruit reflects the feelings of many of the 2,700 members at JCC, in light of the impending loss of the club. It was compulsorily acquired by the government on May 11 and was given an 18-month notice to vacate the premises and hand over the property by November 2016.

For them, May 11 is a date that is indelibly seared into their memory. That was the day the government announced JCC had been gazetted for compulsory acquisition as it had been designated as the site for the high-speed rail (HSR) terminus in Singapore. “This is in line with the government’s vision to develop Jurong into a second CBD and a new gateway to Singapore,” says URA in its joint announcement with the Land Transport Authority and the Singapore Land Authority (SLA).

The HSR will link Singapore and Kuala Lumpur, facilitating the cross flow between the two countries. While the HSR terminus will take up just 12ha (18%) of the total of 67ha occupied by JCC, the remaining land could be redeveloped into new mixed-use developments and community facilities to serve the Jurong community and HSR passengers. There could be a mix of offices, hotels, retail components and residences. “The decision to site the HSR terminus in Jurong East dovetails with the government’s plans to develop Jurong East,” explains URA.

‘Guillotine drop’ Most members share Yew Hong Eng’s sentiment on the news of the acquisition. “I was shocked, bewildered and then agitated when I learned of the acquisition,” says the 71-yearold retiree, who has been a member of JCC since 1984.

A second-generation member whose father joined the club in 1976 remembers vividly he was at the food court of Great World City when he heard the news. “I almost broke down,” says the member, who only wants to be known as David L, a lawyer by training.

Even when the Draft Master Plan 2013 was gazetted in November 2013, and JCC was listed as one of the six golf clubs earmarked for redevelopment, its members thought they were in a comparatively “safe zone” as the lease on their golf course is only expiring in 2035.

“We took comfort in the fact that we still had another 20 years on our lease,” says S Lim, another veteran member of JCC. “So, it felt like a drop of the guillotine on our heads when it was announced that the club is going to be the site of the HSR terminus. But why take the whole piece of land if you only need 12ha for the HSR terminus?”

JCC spent $23 million upgrading its 18-hole golf course from 2010 to 2012. Following the upgrade, the golf course propelled into the ranks of the “Top 10 golf courses in Singapore” in 2013. Further plans had been made to upgrade the clubhouse in line with the newly renovated golf course. An initial proposed budget of $4 million was approved in March for the clubhouse’s renovation. A second and third stage of renovation was slated, which will see the upgrading of the swimming pool complex, the rest of the facilities in the clubhouse and the carpark to the tune of $15 million. All those plans have since been mothballed.

The club has different classes of membership. Transferable golfing membership was priced at $65,000, while social club membership was priced at $16,000. “We understand that the lease tenure gets shorter with each passing year, but we have been able to command a premium because we have continued to upgrade our club, and we intended to continue selling memberships for the next five to 10 years,” says David. “We have the capacity to grow our membership from the current 2,700 members to 5,000 over the next 10 years.”

The open market value of JCC’s transferable golf membership was worth $45,000 prior to the announcement of the acquisition. Following the announcement, however, the club froze all membership transfers. The reasons were twofold: to prevent membership sales to unsuspecting buyers and to stop speculators from snapping up the club’s memberships in the hope of a windfall from the eventual payout.

“Right now, the club membership has no value,” laments S Lim. “Who is going to buy a club membership from you when the club is closing in November 2016?”

Intangible losses While members are resigned to the fact that the acquisition will proceed according to the stipulated timeline, many are still bristling over how the announcement was made. “It was very high-handed,” laments Koh, a club member since 1977. “National development is important for the economy and the country. As citizens, we recognise that. I do business in a lot of different countries and I’ve seen how other governments raise money to line their own pockets and not for the good of the country. So, we are fortunate to have a good government that looks after its people’s interests.”

To Koh, there are intangibles in the club that no amount of monetary compensation could make up for their loss. “The family nucleus that took us years to establish [would be] disrupted,” he remarks. “The government has to look at it from a different point of view. What we want is continuity. I’m a member of the pioneer generation. If the government is really looking after the pioneer generation, then let us have an alternative place where we can continue enjoying these recreational activities.”

Even though he is a member of two other clubs that are more prestigious, namely the Sentosa Golf Club and Singapore Island Country Club (SICC), Koh regards JCC as his “home turf”. “It gives me the ‘family feel’ that I cannot find in the other clubs,” he says.

Retiree Yew intended to spend his golden years at the club, where he has made many friends over the past 30 years. “To join a new club and start all over again is unthinkable,” he says. When the club closes, Yew sees himself playing much less golf and spending more time at home. “I won’t know where to go,” he says. “Now, I can go to the club at any time and find friends to spend my time with. To play golf in Batam and Johor requires planning and playmates. It’s not as easy to gather friends.”

Harsh truths As with all compulsory acquisitions, landowners are only notified on the same day the announcement is published in the government gazette, according to an SLA spokeswoman, in response to queries. “This is to ensure parity of information flow and transparency, in order to prevent undue speculation or use of privileged information prior to the announcement of acquisition via the government gazette,” she says. “Information related to compulsory acquisition is market-sensitive.”

“No one is really given advanced notice under the Land Acquisition Act,” says Joseph Liow of Straits Law Practice LLC. “There is a need, from time to time, for the government to acquire land to achieve a wider good.”

Whether the acquisition is fair to the members of JCC, Liow replies, “We’ve got to keep in mind that we are not talking about private homes being acquired here. As a golfer myself, I’m sad to see the club go. But at the end of the day, it’s just a golf club. The fairness of the matter lies in the fact that the government will pay compensation based on market value.” JCC has appointed Knight Frank to work out the value of its land, and law firm Rajah & Tann as its legal adviser.

As the compulsory acquisition of an entire private golf and country club is unprecedented in Singapore, what constitutes “market value” has been a subject of intense speculation among golfers and non-golfers on the island.

David points to the latest land sale in Jurong East, which was the sale of the 0.9ha, 99-year leasehold plot for a hotel development to Genting Singapore in November 2012. The price was $238.2 million, or a record price of $1,167 psf per plot ratio. This translates into about $265 million a hectare, he adds. “In light of that, would JCC’s 67ha site be worth $265 million? We understand that progress has to happen, but we just want to make sure we are compensated fairly.”

The market value of a golf club is not comparable with the market value of what the land would fetch if it was a residential or commercial property or, say, a potential hotel site, observes Liow of Straits Law. “The compensation will be based on the current use of the land, which is as a golf course. It will not be based on future use of the land or its redevelopment potential.” In any event, Liow doubts that JCC could have redeveloped the land for other uses as the lease on the land is specifically for use as a golf course.

What is the price for a golf club and golf course? Various approaches can be used to determine the market value of a golf club and its land, says a property consultant, who declined to be named. Under the Land Acquisition Act, owners will be paid the market value of the acquired land as at the date of the gazette notification, he explains. The most relevant method of valuation is the comparable sales method. Since there are no recent comparable sales, two other approaches could be used.

One approach is the replacement cost method, which is used for valuing properties with little or no market transactions. Under this method, the value of land is added to the value of improvements made to derive the market value. To arrive at the value of the land, one can be guided by the property tax assessment by the Inland Revenue Authority of Singapore, development charge schedule rates and the government’s offer for sale of social club land, says the consultant. Any enhancements to the real estate — for instance, the $23 million spent on revamping the golf course — will also be taken into consideration, he adds.

JCC could be offered an alternative recreational site to establish a social club. For example, Keppel Club’s lease will expire in 2021, and the site has been rezoned for redevelopment into housing. While there is no replacement golf course, Keppel was recently offered an alternative land parcel on Arcadia Road for use as a social club. That gives an indication of what the land value of a social club would be, says the consultant.

Another way is to look at the different sources of revenue generated by the club as an investment property as well as the collective value of the memberships, he adds. These include current membership fees, potential sale of additional memberships, rental income from tenants, such as the F&B outlets and retail shops, as well as corporate events and golf tournaments hosted at the club. “The discounted cash flow model will then be used to derive the market value of the club,” says the consultant. “The market value reflects the price that a potential buyer will pay.”

A case in point is Pearls Centre, which the government announced in August 2012 it was acquiring for redevelopment and for building the new Thomson MRT line. In 2013, SLA offered the affected tenants and owners a payout of $450 million, including ex gratia payments, and 99.2% of them accepted that compensation. Knight Frank is believed to have represented SLA in that compulsory acquisition.

Perils of a golf membership in Singapore When the Land Use Plan was announced in 2013, the Ministry of National Development had said the government will free up land with low-intensity uses, such as golf courses, for redevelopment to meet more essential needs, such as housing and public infrastructure. That put into question the security and value of golf club memberships and caused many golf club members to turn pale under their tan.

Singapore has 17 golf courses (14 private and three public) sitting on about 1,500ha of land, the majority of which is 30-year leasehold sites.

SICC had the lease on its Island Course extended until 2040. One of its 18-hole courses at the Bukit Course had its lease extended to 2030. However, the other 18-hole course at the Bukit Course will be allocated for a public course to be run by the labour movement for the general public upon its lease expiring on Dec 31, 2021.

The Tanah Merah Country Club was offered a new lease until 2035 for its Garden Course and until 2040 for its Tampines Course. However, the government acquired 10ha of the Garden Course for Changi Airport’s new taxiways. This in turn affected six out of the 18 holes of its Garden Course, three tennis courts and two storage sheds.

The National Service Resort & Country Club lost its nine-hole Air Force Course and part of its nine-hole Executive Course, which sat on land with a Temporary Occupation Licence that expired in August 2014 and was not renewed. Part of the land was required by the Civil Aviation Authority of Singapore for the construction of two new taxiways and realignment of the existing Changi Coast Road.

Last year, SLA announced the acquisition of over 258,336 sq ft of land for the construction of the Thomson-East Coast MRT Line. About three quarters of the land came from the Laguna National Golf & Country Club. The area acquired, however, constituted less than 1% of the club’s total space.

‘Can’t fight it’ “In the case of JCC, there are no direct comparables in Singapore,” notes Tan Keng Chiam, JLL’s head of valuation advisory services. “It is therefore a landmark case. All the other clubs will be watching this very closely as it will set a precedent for future acquisitions.”

While Tan understands the emotional distress associated with compulsory acquisition, “it would have been more painful had it been their homes that were being acquired”, he adds. “This is, after all, a recreational site. We have to recognise that in Singapore, given our limited resources, public interest has to take precedence over personal interests.”

And that has been the core principle of Singapore’s Land Acquisition Act, which was passed in Parliament in October 1966. It allows the government to compulsorily acquire private land for public purposes, such as the building of infrastructure, public housing and urban renewal.

In 1973, the Land Acquisition Act was amended with compensation pegged to values as at Nov 30 that same year. This statutory date for compensation lasted until Nov 30, 1987. “Over the 14-year period, property prices soared in Singapore,” recounts Tan Tiong Cheng, executive chairman of Knight Frank Singapore. At the time, it was necessary as the government was responsible for providing public housing, the clearing and resettlement of squatters, as well as building numerous infrastructural projects, he explains. The amendment allowed the government to compulsorily acquire land en masse at below market value for public purposes. “It was thus widely perceived as a Robin Hood legislation,” says Tan.

The second amendment to the statutory date came in November 1987 with compensation repegged to the market value as at Jan 1, 1986. Two further incremental changes were made, and it was only from 2007 that compensation is based on market value, adds Knight Frank’s Tan. “We know we can’t fight against the Land Acquisition Act,” says S Lim. “We’re talking about the camaraderie, the friends we have made, and that is something we will lose. I can express such feelings until the cows come home but none of the authorities is going to care. That’s the reality of a compulsory acquisition. I know how it feels from personal experience because my home was acquired to make way for the building of a highway.”

SLA understands that acquisitions can be difficult for the affected parties, says its spokeswoman. “Hence, we do not undertake acquisitions lightly and do so only after careful study and consideration of all other alternatives,” she adds. “The acquisition of JCC is necessary as the land is needed for comprehensive redevelopment and to build the terminus for the HSR link to Kuala Lumpur. The HSR link between Singapore and Kuala Lumpur was first announced in 2013.”

Industrialisation era Some would argue that without the Land Acquisition Act, which allows the government to acquire large tracts of land, Jurong might still be a crocodile-infested swamp today.

In the 1960s, the unemployment rate was 10%, owing to the influx of people looking for work in Singapore after the war. The government saw industrialisation as a solution to massive unemployment then. Goh Keng Swee, Singapore’s first finance minister in 1959, had a vision to turn Jurong into a prime industrial town. Jurong Industrial Estate was established in 1962.

The Economic Development Board was set up in 1961 and Jurong Town Corp (JTC), in 1968. These two agencies played a key role in bringing industrialists to Singapore, says Chua Yang Liang, JLL’s head of research and consultancy for Southeast Asia.

“Some people used to call Jurong ‘Goh’s Folly’,” recounts JCC member Koh. “But Goh was a great man, and a lot of us members of JCC responded to his call and came to join the Jurong community and set up our businesses here.” As Jurong prospered, social and recreational amenities sprouted, including Chinese Garden, Japanese Garden, Jurong Bird Park, Science Centre and Crocodile Paradise.

When JCC was developed by JTC, “it introduced a green lung amid the industrial estate”, recalls Joe Pereira, a pioneer club member since 1975, when the club first opened. “Back then, it was very affordable for young executives like us,” he says.

JCC was privatised only in 2003. While it has 2,700 members, the club sees 6,000 to 8,000 guests, including families. “Space for recreational activities was needed in Jurong, and JCC was developed for that purpose — both for locals and expats, as well as to attract people to live in the Jurong area,” adds Pereira.

The recently upgraded golf course at JCC, which was ranked among the top 10 golf courses in Singapore in 2013

New Jurong story A new blueprint for the Jurong Lake District was unveiled under the URA Master Plan 2008. It will see Jurong being transformed into a commercial hub, which, at 360ha, rivals Marina Bay in size. There will be two precincts: Jurong Gateway, which refers to the area around the Jurong East MRT station, and Lakeside, which is the area around Jurong Lake in the west.

A new Jurong Lake Gardens will be created by combining the existing Chinese and Japanese Gardens with Jurong Lake Park. The Jurong East MRT station is now the interchange for the North-South and East-West MRT lines. To further increase accessibility to Jurong, there will also be a Jurong Region Line and Cross- Island Line. The HSR will play a pivotal role in increasing connectivity between Singapore and Malaysia.

The Science Centre, which opened in 1977, will relocate to the new Jurong Lake Gardens. The new centre is scheduled to open in 2020, and it will be sited next to the Chinese Garden MRT station.

The transformation of Jurong Lake District into the second CBD has turned it into a new growth area. Prices of condominiums have soared above $1,100 psf. Many multinationals have also relocated there. The 550-room Genting Hotel Jurong opened in February, and the new Ng Teng Fong General Hospital has also opened recently.

“The whole environment in Jurong East is changing,” says a property consultant, who declined to be named.

The risk is that JCC could fade into history as an epilogue to the story of Singapore’s industrialisation era of the last 50 years. “That’s all part of renewal,” says an industry observer. “That’s the price we have to pay when we move from Third World to First World.”

This article appeared in the City & Country of Issue 689 (Aug 10) of The Edge Singapore.

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