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ERA relists on SGX as APAC Realty

angela.teo@bizedge.com
Chua: The listing will enhance the value of the company and our reputation

Chua: The listing will enhance the value of the company and our reputation

 

The listing of ERA has been on the cards since Singapore-based private-equity firm Northstar Group acquired the real estate brokerage services firm from Hersing Corp for $130 million in 2013. “It has always been Northstar’s plan to list ERA on the Singapore Exchange within three to five years,” says Jack Chua, executive director and CEO of APAC Realty, operator of ERA.

APAC Realty has launched its IPO, with trading on the SGX to commence on Sept 28. The company has issued a public offer of 4.4 million shares as well as 44.5 million placement shares at 66 cents each. Another 39.2 million shares have been subscribed by cornerstone investors FIL Investment Management, Qilin Asset Management, Asdew Acquisitions and Azure Capital. Even the overallotment option of 9.75 million additional shares has been taken up. Net proceeds of $61.3 million will be raised, of which $27.1 million will be received by APAC Realty.

Pre-listing, Northstar’s and APAC Realty’s management own about 80% and 20% of APAC Realty respectively. Post-listing, their stakes will be reduced to 72%. “Northstar has always emphasised that the fund that invested in ERA intends to hold it for the long term,” says Chua. “Listing ERA is a demonstration of that intent.”

Subsequent to the acquisition of ERA in Singapore, Northstar also acquired ERA’s master franchise for Asia-Pacific from New York Stock Exchange-listed Realogy, which also owns Coldwell Banker, Century 21, Sotheby’s International and Better Homes and Gardens Real Estate brands.

ERA’s master franchise for Asia-Pacific will be for an initial term of 30 years until 2029, with an option to renew for another 30 years. It will cover 17 countries in the region including Japan, South Korea and Taiwan in North Asia, as well as Malaysia, Thailand and Vietnam.

 

From real estate brokerage to dim sum and back

Meanwhile, the ERA franchise has been in Singapore for 35 years, having first been brought in by Harry Chua (no relation to Jack Chua of APAC Realty), founder of Hersing Corp, in 1982. When Hersing Corp was listed in 1998, ERA became the first property brokerage firm in Singapore to be listed.

ERA has always been the largest real estate agency in Singapore: In 2011, it had more than 4,800 salespersons registered with the Council of Estate Agencies (CEA). That year, ERA brokered 35,000 real estate transactions worth close to $17 billion, according to Hersing’s annual report for FY2011.

ERA has also always been Hersing’s biggest revenue contributor. In FY2010, real estate brokerage services accounted for 85.2% of Hersing’s total revenue of $284.3 million. In FY2011, real estate brokerage services made up 84.6% of the group’s total revenue of $274.2 million.

It was following the delisting of Hersing Corp in 2012 that Harry Chua decided to put ERA on the market for sale. Prior to its delisting, APAC Realty’s Chua had been CEO of Hersing, having joined the firm since 1990. APAC Realty’s Chua was instrumental in driving the business. Besides the ERA Singapore franchise, Hersing had also owned the master franchise for Coldwell Banker in Singapore, remittance business under Western Union, self-storage arm StorHub and HC Design, a 20,000 sq ft warehouse outlet at Tampines, which offers interior design and furnishing services.

After Hersing was delisted, APAC Realty’s Chua became more focused on growing the Asia-Pacific franchise of Hong Kong dim sum chain Tim Ho Wan, which Harry Chua bought.

Following Northstar’s acquisition, however, APAC Realty’s Chua and a group of senior executives led a management buyout of ERA.

 

Retaining pole position

Until the middle of this year, ERA was the leading agency in Singapore, with 6,223 agents registered with CEA as at March.

On June 12, PropNex Realty announced a merger with Dennis Wee Group (DWG). The following month, it announced that 845 of the 1,063 (80%) agents from DWG had crossed over to PropNex. That meant PropNex officially became Singapore’s biggest real estate agency with 6,688 agents.

Last month, OrangeTee and Edmund Tie & Co (ET&Co) announced the launch of a new joint-venture company, OrangeTee & Tie. It marks the merger of the associate division of both companies, resulting in a sales force of more than 4,000 agents. This means OrangeTee & Tie will become Singapore’s third-biggest agency by number of associates, displacing Huttons Asia, which will now be in fourth place.

APAC Realty’s Chua says ERA’s growth has historically been “organic”. Even when its sales force grew from 4,800 agents in 2011 to 6,223 in March this year, it was through the recruitment of new agents or a team of experienced agents. “Mergers and acquisitions can be difficult sometimes, especially when there’s a difference in corporate culture,” he comments.

ERA had 21% market share in terms of sales force as at March, but it had a 37.5% market share in terms of transaction value, which includes both private housing transactions and HDB resales, according to APAC Realty’s prospectus.

 

Resales the biggest revenue contributor

Even though ERA has been involved in 20 new project launches since 2016, resale transactions (along with rental transactions) are its biggest revenue contributor, accounting for 74.4% of total revenue in 1QFY2017, and 74.3% of gross revenue for FY2016. ERA’s focus has also been predominantly in the residential resale and rental segment: Last year, it brokered $18.9 billion worth of property deals, up 29% y-o-y from $14.6 billion in 2015. About 60.5% of the deals last year came from private residential transactions; deals involving HDB flats accounted for 20.5%. Commercial and industrial transactions made up just 4.4% of total deals brokered by ERA last year.

This year alone, ERA was appointed marketing agency for eight of nine new project launches, including the 450-unit Martin Modern by GuocoLand; the 531-unit Hundred Palm Residences by Hoi Hup Realty, where units were sold out in one day; and mixed-use development Le Quest at Choa Chu Kang by Qingjian Realty. The firm has also secured a pipeline of new appointments, including City Developments’ upcoming 124-unit New Futura on Leonie Hill Road, and the new project in Serangoon Ville, which a consortium led by Oxley Holdings acquired en bloc for $499 million in July in a deal brokered by ERA.

With more collective sales entering the market, ERA will have the opportunity to participate in that segment of investment sales, adds APAC Realty’s Chua. ERA started an auction department early this year. It will now be the fifth real estate firm to hold monthly property auctions at Amara Singapore, joining property auctioneers at Colliers, ET&Co, JLL and Knight Frank.

 

ERA was one of the appointed marketing agencies for the 450-unit Martin Modern, GuocoLand’s latest luxury condo project

Source: GuocoLand

ERA was one of the appointed marketing agencies for the 450-unit Martin Modern, GuocoLand’s latest luxury condo project

  

Expanding footprint

APAC Realty owns the master franchise for ERA in Asia-Pacific, but holds just the Singapore franchise for Coldwell Banker. Today, Coldwell Banker has 21 franchisees. “It’s ideal for smaller agency owners who want to retain their company name but enjoy the association with an international brand such as Coldwell Banker,” says Chua. “It’s different from ERA, where we are operating the brokerage business.”

Chua intends to grow ERA’s regional footprint over the next two to three years. This will allow the firm to participate in the “cross-marketing” of projects — either bringing Singapore projects overseas or offering overseas projects to Singapore buyers.

He believes the participation of foreign buyers in the local property market is likely to increase in the coming years. In 2011, foreign buyers accounted for 18% of residential property transactions. In 2016 and 1H2017, they accounted for 7% of private-home transactions, reckons Chua. He attributes this to the property cooling measures such as the additional buyer’s stamp duty (ABSD) of 15% for foreign buyers introduced in 2013.

Chua says it is a good time to list APAC Realty now that the stock market has stirred, and the volume of transactions in the residential market has accelerated. “The listing will enhance the value of the company and our reputation,” he says.

 

This article, written by Cecilia Chow, appeared in EdgeProp Pullout, Issue 799 (Oct 2, 2017)

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