APAC Realty to buy Indonesian ERA master franchisor for up to S$13.9m

REAL estate agency APAC Realty is acquiring the ERA master franchisor for Indonesia for up to S$13.85 million in cash and also taking direct ownership of the Thailand ERA master franchise through a partnership.

In Indonesia, APAC Realty will provide a loan of up to US$6.83 million (S$9.43 million) to PT Realti Jaya Abadi (RJA), a company owned by current PT ERA Graharealty chief executive Darmadi Darmawangsa and one Aan Andriani Sutrisno. RJA will use the loan proceeds to buy all of ERA Graharealty from PT ESA Realty Aditama and Moedjianto S Tjahjono, the current shareholders of the target.

APAC Realty will also provide up to US$3.2 million (S$4.42 million) in a five-year convertible loan to RJA. The loan is convertible at maturity or earlier at APAC Realty's option, into shares of RJA. The convertible loan is secured by a pledge of all of RJA's shares and bank accounts. If the loan is fully converted, ERA Graharealty will be an indirect wholly owned subsidiary of APAC Realty.

ERA Graharealty is a property brokerage in Indonesia with more than 6,900 agents across 103 offices. It posted about 10 trillion Indonesian rupiah (S$971.06 million) of transactions in 2017, and has an estimated market share of about 10 per cent of the secondary property market in Indonesia, APAC Realty said. Profit attributable to the target shares was about 4.65 billion rupiah in the year ended Dec 31, 2017.

APAC Realty CEO Jack Chua sees "significant near to mid-term upside" for ERA Indonesia as it creates new revenue streams, including from implementing ERA Singapore's project sales business model in the country.

"This will generate stronger margins and provide a healthy uplift to ERA Indonesia's reported net profit of 4.6 billion rupiah in FY17," he said.

In Thailand, APAC Realty has separately entered into a cooperation agreement with existing CEO and managing director of the ERA master franchisor in Thailand, Voradet Sivatachanon. Under the agreement both parties will incorporate two new companies, namely APAC Holding (Thailand) Co and ERA Holding (Thailand) Co to hold the ERA master franchise rights for Thailand.

Direct ownership would allow APAC Realty to be more strategically involved in developing the ERA business in Thailand, APAC Realty said. This includes cross-selling benefits between APAC Realty subsidiary ERA Singapore and ERA Thailand, as the operational structure would allow sales agents to work together to market and sell overseas properties to their respective customers. ERA Singapore will also build on its project marketing strengths to explore additional opportunities in the Thailand market.

ERA Thailand currently contains 400 agents while recording approximately 1,000 transactions per year, APAC Realty said.

APAC Realty added that the developments are part of its expansion plans to deepen its business presence in South-east Asia, which has recently seen an "uptick in buyer interest from overseas investors".

Past expansion moves include APAC Realty's establishing of a new franchise in Vietnam in mid-2017, followed by Cambodia in February 2018. Outside of South-east Asia, APAC Realty entered into a joint-venture agreement in August 2018 with two Chinese companies -  Zhong Zhi Sheng He Real Estate Investment Consulting Co and Bei Guo Tou (Shanghai) Equity Investment and Fund Management Co to tap into Hainan province's property market.