The Singapore Land Authority (SLA) has launched a tender for the former Alkaff Mansion.
The site near Mount Faber can be leased for the following uses – as a restaurant, spa, art gallery or museum.
SLA will issue an initial three-year tenancy term, which is renewable for another two terms of three years.
However, several analysts said that it will be challenging to develop the site into something successful.
After several years of disuse, the former Alkaff Mansion appears in a state of disrepair now.
In its heydays, it was a choice location for weddings and a fine-dining restaurant.
Authorities are now seeking to improve the conservation site at Telok Blangah Green.
The tender aims to get developers to set up an art gallery, spa and museum or transform the site into a restaurant.
“In terms of location, it has both advantages and disadvantages. It is located on a hill, offers a great view of the surrounding, but at the same time, because of the location, it is also a bit secluded, and a bit far from the main road, which makes it less noticeable to the shoppers or the diners around there,” said Nicholas Mak, a property lecturer from Ngee Ann Polytechnic.
“This means that the business which is operating there will need a lot of time and effort and resources to market the business.”
Market watchers believe that it will cost at least half a million dollars to make the site suitable for business use, and that hefty price tag might dampen the potential interest.
The 97,000-sq-ft site is estimated to have monthly rentals of around $28,000, with a gross floor area of about 13,000 sq ft.
However, market watchers said that more innovative rental models could boost interest in the site.
Mr. Mak said: “Typically, (in a) land tender process, they look at the price alone, but because of the uniqueness of this site, the authorities will have to look at the concept or the ideas or the product that the operator would bring to this site. And not just look at the rent itself.”
“The government should perhaps also take a stake in the development of this place, because it is going to take a substantial amount of investment to repair it. Perhaps the authorities could share the risk with the operator by offering a lower rent in the first few years of the operation until the business has established itself and has gathered a loyal group of customers. And then the authorities can share the rewards after that by perhaps pegging the rents as a percentage of the operating income.”
Chua Yang Liang, head of research at Jones Lang LaSalle in Southeast Asia, said: “The retail market has over the last few years gone into a two-tier pricing mechanism, where you have a base rent plus gross turnover; that is to assist the tenant so to speak, for the landlord to be engaged in the business model, while I understand that for most of the state properties, such a model is not quite common yet, this is one possible option to look into.”
The former Alkaff Mansion is the first conservation site that will be released this year.
Analysts expect around five more in the coming months.
“Presently, it is a very suitable time for the government to release more sites, but at a gradual pace to capitalise on the expected increase in tourist arrivals,” said Mr. Mak.
Mr Chua said: "It won’t surprise me that there will be more of such sites available, especially with economic conditions improving, and the regional economy picking up, where tourism is expected to improve."