The current rental dispute between department store Takashimaya Singapore and its landlord Ngee Ann Development (NAD), which is being fought in the High Court, is not the first time the longtime business partners have disagreed on rent.
In 2003 and 2008, the rent for the next five years was determined by an independent valuer - as provided for under the lease - after both sides failed to see eye to eye.
But in 2013, NAD and Takashimaya took a different approach to the half-decade rent review. They decided to each appoint a valuer and take the average of the two rental values.
Ironically, the agreement they signed in 2014 on how this valuation exercise was to be carried out is now the subject of their dispute.
The key issue is whether the valuation should take into account the existing space configuration. Takashimaya says yes, NAD says no.
The hearing came to an end last week and their lawyers - Allen & Gledhill acts for NAD while Wong-Partnership represents Takashimaya - have six weeks to file closing submissions, after which they have three weeks to reply.
NAD is 73.7 per cent owned by Ngee Ann Kongsi, a charitable foundation which runs educational and cultural institutions.
Takashimaya is a wholly owned subsidiary of Japanese department store chain, Takashimaya Co, which in turn owns 26.3 per cent of NAD.
Since 1993, Takashimaya has been the anchor tenant at the Ngee Ann City building, occupying 56,105 sq m, of which 38,000 sq m is used for its department store and 13,900 sq m is sublet to speciality shops.
The lease was for 20 years, with Takashimaya granted six options to renew for 10 years each. Under the lease, the rental rate is to be reviewed every five years; if they cannot agree on the value, it will be determined by a valuer.
In 2013, after Takashimaya exercised its first option, NAD proposed to revise the rent to $19.83 per square foot (psf) a month, more than double the existing rate of $8.78 psf.
This was based on a valuation report that reconfigured the layout to reduce department store space and increase speciality shop space. The latter commands higher rent.
Takashimaya rejected it.
After months of negotiation, both sides inked an agreement in April 2014 on the valuation exercise.
Ten days later, unbeknown to Takashimaya, NAD wrote to the two valuers, noting that they are not constrained by the existing space use.
Takashimaya found out in June 2014 only after the two valuation reports were issued and demanded an explanation. NAD said the failure to send Takashimaya a copy of the letter was an administrative oversight.
Both reports - which valued rent at $12.50 psf and $11.85 psf respectively - were based on theoretical configurations that reduced the area for department store use.
Both sides agreed to redo the valuation but reached an impasse on how it was to be done .
Takashimaya insisted that both sides agree on the "scope and basis" of the exercise before it can be carried out. It insisted that valuation should be based on the existing configuration, like it was done in 2003 and 2008.
NAD said nothing in the 2014 agreement required them to agree on methodology. It sued Takashimaya, seeking a court order to get it to instruct the valuers in accordance with their agreement.
This article was first published on April 11, 2016.
Get a copy of The Straits Times or go to straitstimes.com for more stories.