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AHEAD of a looming property upcycle, owners of Singapore's second-largest property agency are seizing this window of opportunity to execute a public listing.
ERA Realty Network has been put up for an initial public offering (IPO) along with other related businesses under APAC Realty, which launched the IPO at 66 Singapore cents per share, the registered IPO prospectus shows.
This marks a return to the Singapore bourse for ERA Realty, which was previously listed under Hersing Corporation that also owned other businesses outside of real estate services. APAC Realty chief executive officer Jack Chua, who has been helming ERA Realty as CEO, felt that the IPO's timing offers growth headroom for investors.
While there is no official dividend policy, APAC Realty is making a committment to pay out at least 50 per cent of profits as dividends this year and the next.
"We are now at the initial stage of a market run. For the next one year, everyone knows the market will be good, so it's only logical to list now," Mr Chua told BT.
With the local market recovering, he hopes to channel more resources to beef up the Asia-Pacific presence post-listing. This will in turn benefit the brokerage business in Singapore through cross-selling as he sees a return of foreign buyers.
The IPO consists of 48.9 million shares: 44.5 million shares to institutions via placement and 4.4 million shares to retail investors.
Concurrently, another 39.3 million shares will be sold to cornerstone investors Fidelity Investment, Singapore-based Azure Capital Pte Ltd, Soilbuild Group executive chairman Lim Chap Huat, and serial investor Wang Yu Huei.
There is a greenshoe option of 9.75 million shares. The retail offer closes next Tuesday, and trading of shares will begin on Sept 28.
APAC Realty's principal business is the wholly owned ERA Realty, now ranked second by agent strength with 6,272 agents as at last count.
It also holds the exclusive regional master franchise rights to Realogy's ERA brand for certain countries in the Asia-Pacific region as well as the master franchise rights to Realogy's Coldwell Banker brand for Singapore. Another wholly owned subsidiary, RIA, provides training, valuation and property management services.
Northstar Group acquired all of these businesses in August 2013 from Hersing's founder, one year after Hersing was delisted.
After property cooling measures were introduced from 2009 to 2013, net profit from these businesses slipped 30.7 per cent in 2015 to S$8.5 million despite a 6.6 per cent rise in revenue to S$232.6 million.
In 2016, net profit surged 87 per cent to S$15.9 million on the back of a 23.7 per cent jump in revenue to S$287.7 million. Singapore contributed to 99.9 per cent of 2016 revenue.
In the first quarter of this year, APAC Realty's net profit doubled to S$4 million on the back of a 20 per cent jump in revenue to S$67.2 million.
ERA Realty had held top spot in agent strength for six consecutive years till it was overtaken by the merger of Dennis Wee Group and PropNex Realty in June, a move that brought PropNex's strength to 6,858 agents at last count.
Northstar Group and APAC Realty's management now own 80 per cent and 20 per cent of APAC Realty respectively. Post-listing, their stakes will be proportionately diluted.
If the greenshoe option is exercised in full, Northstar Group and APAC Realty's management would retain 72 per cent in APAC Realty. Of the estimated net proceeds of S$55 million, S$27.1 million will be due to APAC Realty.
One overseas market that APAC Realty is eyeing post-listing is China, where it is studying the option of opening an office instead of appointing a franchisee. Other potential new markets include Australia and New Zealand.
A larger regional network will facilitate cross-selling, Mr Chua said. Prior to the introduction of the additional buyer's stamp duty in 2011, foreign buyers made up 18 per cent of private residential purchases here, compared to 7 per cent in 2016.
"Now, foreign buyers are coming back to Singapore," he observed. Chinese buyers, in particular, are returning as other markets have raised property taxes while Singapore's property prices, especially in the high-end segment, have softened.
"Many Singaporeans are also buying foreign properties, so establishing our foreign presence will allow us to advise Singaporeans better," Mr Chua added.
ERA Realty has lately appointed a sub-franchisee for Vietnam, adding to its franchisee network in Indonesia, Japan, South Korea, Malaysia, Taiwan and Thailand. It also inked a letter of intent with a third party to acquire ERA master franchise rights for Cambodia.
To weather property cycles better, Mr Chua said he is looking to expand the non-brokerage business of APAC Realty, which made up 19.1 per cent of gross profit for fiscal 2016.
The non-brokerage business is estimated to cover 30-40 per cent of APAC Realty's overheads currently; Mr Chua hopes that this could eventually cover 100 per cent of overheads.
To do so, there are plans to extend training services to the public, currently available only to agents, and expand the auction business, he said.