Character Montessori’s monthly rent in Punggol Road is an eye-watering $32,050 for a building with an indoor space of under 500 sq m.
That it was almost forced to close down after being in arrears in payments to its landlord, the Singapore Land Authority (SLA), has cast a spotlight on the rents that childcare centres face.
What Character Montessori paid is not unusual in the sector, based on checks of other recent open site tenders. Some centres in Housing Board void decks pay monthly rents of about $20,000 for sites with a floor area of about 500 sq m.
This is despite efforts by the authorities to curb rental costs. In 2013, the Early Childhood Development Agency and the SLA stopped the practice of awarding sites to the childcare firm that offers to pay the most. Such a practice often sparked bidding wars among operators and pushed up fees for parents.
In the new tender-evaluation process, the bid price makes up only half the score, with the rest – the “Q-score” for quality – made up by other criteria such as the fees the childcare centre charges as well as its track record.
In the case of the Punggol Road site, the last open tender took place in 2014.
There were 12 bidders. The highest bid was $32,555 and the lowest was $19,000. Character Montessori – which had occupied the site since 2007 – bid $32,050, more than double the rental rate it had paid previously.
The top bidder, Kindle Preschool, did not get the site as it had a low Q-score of nine points out of 50. Character Montessori tied with Knowledge Universe at 89 points overall out of 100, with equal scores in the bid price and quality components. It was eventually selected through a random ballot.
Character Montessori’s founding principal Grace Yong blamed the high rent as a reason it had delayed making payment. “The doubling of rent increased our costs significantly and impacted our cash flow more than expected,” she wrote in appeal letters to MPs.
Queried over why the company had gone ahead to bid at a rate that it could barely afford, Ms Yong argued that the bid price “still plays a key role” in the awarding of sites. “If the bid price we offer is less than the average price among the bidders, we lose some points (in the score),” she told The Straits Times.
The average bid was about $25,710 for the Punggol Road site.
The proportion of operating costs that goes to rent varies across centres, as this partly depends on how many teachers the centre hires, and can range from 10 per cent to as much as 50 per cent. But cost pressures come mainly from rent and staff costs.
A version of this article first appeared in The Straits Times.