Case Studies
The case studies are based on the author's real-life experience, working in support of the company. For confidentiality reasons, names and some non-material facts have been changed or omitted. Any resemblance is purely coincidental.
Managing Business Risks Not Subletting
To manage their business risks, the lessee restructured their 4 divisions into separate business entities. However, in the course of renewing their lease about 10 years later, 3 of these entities were found to have breached JTC subletting policy and hence, liable for substantial liquidated damages. Did the lease get renewed? What happened to the liquidated damages?
Company P, the lessee had 3 business segments, one of which related to construction projects. The other two segments were in maintenance and event logistics support.
Prudent Risk Management
As sub-contractors to other sub-contractors of main contractors, Company P were sometimes caught when sub-contractors ran into cashflow problems. This was prevalent when Company P restructured as the industry was going through a down cycle.
It was prudent for Company P to ring-fence the more volatile construction-related business from the more stable maintenance and events logistics. On hindsight, ring-fencing the volatile construction-related business, some 10 years earlier enabled Company P to grow steadily over the years and make plans to renew their lease.
Delink Lease Renewal From Sublet Breaches
Company P had a solid business plan for lease renewal for all their business units. This helped convince JTC to proceed with lease renewal while the sublet breaches were being addressed. More importantly, other than the sublet to their own business entities, they had no other sublets.
Harmonise Risk Management With Sublet Policy
Company P promptly acknowledged the unintended sublet breaches and cooperated fully with JTC. They undertook a review of their risk management strategy and worked closely with their legal and audit teams to formulate options that would be in harmony with JTC's policies. The process took several months as they had to renegotiate some contracts. JTC supported the efforts and were regularly updated on the exercise.
Liquidated Damages
As Company P had strong rationale for restructuring and cooperated fully when the breaches were discovered, JTC reduced the liquidated damages substantially.
Not All Sublets Are Created Equal
A JTC lessee would like to sublet some space to the regional HQ team providing support in human resource, finance and administration. As pure office sublet, this contravened the policy requirement for subtenant's usage to be industrial and comply with the 60:40 use quantum guideline. What were the factors that led to the sublet approval?
Company B are the manufacturing arm of a MNC with a regional office in Singapore located in the CBD. The regional office provide administrative support to all operating entities in the region. These were the considerations that led to the sublet approval.
Essential Functions
The functions performed by the HQ support team were essential functions of any organisation. Although these functions were "outsourced", they remain integral to the operations and value chain of Company B.
Exclusive Service
The HQ team serve Company B exclusively although they were part of the regional outfit supporting all regional entities.
Related Company
As the subtenant (which in this case was the regional HQ) were related to Company B, the subletting was considered a related sublet. No sublet fee would be charged.
Second Bite Of The Cherry?
A well-established SME have outgrown its existing facilities. The most viable option was to obtain a new plot of land from JTC and use the proceeds from the sale of the old one to fund the investment. Would this not constitute having a second bite of the cherry - selling the existing site for a handsome profit and getting another one from JTC at highly subsidised rates? What compelled JTC to support the project?
These were the steps they took:
- Develop a bold and ambitious plan
- Mobilise support from economic agency
- Pace execution and adjust to changing market situation
- Build trust and give back
World Class Facilities
In Company K's bold and ambitious plan, they aimed to more than double floor area and production capacity within 3 years. They would invest in world class production equipment and develop one of the most advanced research and innovation laboratory.
Company K benchmarked the best in the industry as well as those outside their industries. They took innovative approaches to keep cost low without compromising their goals. Even before their new facilities were completed, they competed for many prestigious and profitable projects. But they did not abandon their old customers, many of whom were fellow SMEs.
Agency Support
Mobilise support from ESG. Company K demonstrated how the industry would benefit from their success and a readiness to share their success with the industry. Actively participate in pilot projects with the agency.
Execute With Agility
Markets change. Pace investments according to market demands and capital availability. Be ready to respond to black swan events. When the COVID-19 pandemic struck, Company K was well prepared. Business slowed but with a diversified market and loyal customer base, Company K weathered the storm with minimal impact. They found new opportunities and seize them.
Build Trust & Give Back
Be a role model, share experience with the industry. With a world class facility in place, Company K embarked on expanding its international markets by fostering strategic partnerships with foreign companies to gain market access and capital. Company K also embarked on a pilot programme to attract and develop talents for industry.
