You are here
Merger of real estate agencies underway
A MERGER of three real estate agencies in Singapore - Global Property Strategic Alliance (GPS Alliance), MORE Property and Trillion Property - is said to be underway, and three other agencies could possibly join in the union.
If all six agencies come together, the new combined entity is expected to have a sales force of over 2,000 registered agents by the middle of next year, according to sources.
This could catapult the combined agency to fourth place after ERA Realty, PropNex and Huttons - which have 5,975, 5,667 and 3,257 registered agents respectively based on latest records of the Council for Estate Agencies (CEA).
While abysmal market conditions have prompted several tie-ups among realtors here mainly for joint marketing purposes, this is the first time that a major consolidation of agencies is taking place since the merger of five agencies some 11 years ago that formed today's PropNex.
A definitive agreement has not been inked yet - which would otherwise have required Australia-listed GPS Alliance to make a public disclosure to its shareholders.
Though the agencies have not sealed their union officially, agents and staff of MORE Property and Trillion Property have started sharing GPS Alliance's office premises at CPF Bishan Building when BT visited the office this week. GPS Alliance is renting some 9,000 sq ft of office space at levels two and six of the building.
GPS Alliance, which now has 478 registered agents, is said to be taking the lead in the proposed merger. MORE Property and Trillion Property have 185 and 45 registered agents respectively, based on the CEA's records.
Vestor Realty, which has a sales force of about 100 agents, was originally involved in the merger talks but decided not to continue, sources said.
When approached, Vestor Realty chief executive Colin Tan declined to comment except to say that his focus is to develop each agent he hires rather than gunning for numbers.
Under CEA regulations, the real estate agents' licences are tied to their respective agencies, so they need to renew their licences each time they switch agencies. Since the merger is going to result in a new combined entity, agents currently registered under the agencies involved will likely have to renew their licences with CEA.
GPS Alliance has been marketing some local projects such as Amara Holdings' M5 in prime district 9, CDL's Jewel@Buangkok and The Glades by Keppel Land and China Vanke, as well as overseas projects in the UK, Australia, Phnom Penh, and Thailand. Apart from its agency business that accounts for over 60 per cent of total revenue, GPS Alliance is also involved in property development and interior fit-out solutions.
In the financial year ended Dec 31, 2014, GPS Alliance marked a net loss of S$4.4 million following a net loss of S$6.1 million in fiscal 2013. Revenue slipped 9.1 per cent in 2014 to S$24 million, dragged down by a 23 per cent revenue decline in its real estate agency business amid a slump in both the primary and secondary property markets.
No filing has yet been made with the Accounting and Corporate Regulatory Authority (Acra) by MORE Property, which was incorporated in February 2013. Trillion Property is exempted from statutory audit requirements as an exempt private company that is solvent.
As property transactions fell off a cliff since 2013 after a series of cooling measures, some agencies have joined forces through alliances. But for now, not all alliances are panning out as originally intended.
Real Alliance, which was formed by C&H Group, RE/MAX Singapore and MORE Property, has not undertaken any joint marketing activities yet.
RE/MAX Singapore director Thomas Tan told BT that the alliance still stands, though there have not been opportunities for joint marketing efforts. Meanwhile, MORE Property has not indicated whether to stay in the alliance after it is merged with GPS Alliance and Trillion Property.
Project Alliance Group (PAG), an alliance formed by SLP International, OrangeTee, HSR International and Dennis Wee Realty to capitalise on their combined agents strength of around 5,500, has not undertaken much joint marketing efforts given the current lack of new projects.
When JLL Singapore acquired a 20 per cent stake in PropNex's project marketing arm PropNex International in August, the 170 sales associates from JLL Residential were invited to join PropNex, but some 60 of them specialising in good class bungalows and landed deals crossed over to ERA Realty instead.
Some market watchers felt that marketing alliances may be harder to execute compared to an outright merger given the inherent competition among independent agencies.
PropNex CEO Mohamed Ismail recalled that what started off as a franchise concept in 2000 among five smaller agencies evolved into a merger to form PropNex in 2004. "We realised that as small agencies, it was difficult to survive because we don't enjoy economies of scale," he said.
"Merger is the way to go, and I encourage other agencies to do so. It is not going to be an easy thing but if agencies can put away the ego on who should run and who should manage, then they will start to enjoy the economies of scale," Mr Ismail said.
Mr Tan of RE/MAX Singapore noted that in an alliance of agencies where there is no cross-shareholdings, "each agency will still have its own interests at heart" when it comes to decision-making. "When agencies can't see eye-to-eye on certain issues, they don't need to execute them," he said.
When it comes to a merger, however, there is the risk of agent attrition that needs to be contained and managed well, Mr Tan added.