Asia-Pacific Strategic Investments buying real estate agency business

22 July 2015, The Business Times

SINGAPORE-LISTED Asia-Pacific Strategic Investments Ltd (APSIL) has proposed to acquire Global Alliance Property (GA) - the newly combined real estate agency business of Global Property Strategic Alliance (GPS Alliance) and MORE Property - for 5$2,75 million in cash and shares.

GPS Alliance's wholly owned unit Global Property Strategic Alliance (GP-SA) currently holds 70.91 per cent of GA while MORE Property owns the balance stake.

The issue price of APSIL shares to GPSA and MORE Property is not determined yet. For illustrative purpose, based on the computed price as at July 20, GPSA and MORE Property would end up with a collective 3.7 per cent stake in APSIL.

While the proposed consolidation of GPSA and MORE Property could help stem their financial bleeding for the past Iwo years, APSIL's proposed acquisition is in line with its plan to move into the real estate agency business.

In May, APSIL proposed to acquire Century21 Hong Kong, the sub-franchisor that grants the franchise rights of Century21 in Hong Kong and Macau.

When asked why APSIL is entering the agency business in a property market downturn. APSIL chief executive Choo Yeow Ming told BT: “The current trough in Singapore's property market presents us a good entry opportunity.” With a ready pool of real estate agents at GA, the proposed acquisition will help APSIL kick-start the new core business that it is trying to build as it prepares to divest its loss-making bereavement care services. Mr Chao explained.

GA will be helmed by Shawn Tan as chief executive officer. He is currently the CEO and key executive officer of MORE Property, which was a break-away from ECG Property in 2013.

Mr Tan told BT that GPSA and MORE Property have been talking to many mid-size and small agencies to join in the consolidation exercise. According to the Council of Estate Agencies' data, GPSA and MORE Property have 478 and 183 registered agents respectively.

“We acknowledge that the consolidation is necessary for smaller and mid-size agencies.' if they were to achieve economies of scale,. he noted. "Market conditions are not favouring mid and small agencies today," he said, adding that his firm was hit by rental costs and small margins.

As early as May, there were rumours that Australia-listed GPS Alliance was leading a consolidation of agencies in the industry. Its chief executive Jeffrey Hong told BT that the proposed deal with APSIL "is not a decision that was planned but something that came along the way".

Post-transaction, GPS Alliance will focus on being a developer, a land-lord, a property manager, and will be moving towards full property consultancy work. It is also looking to ramp up its interior fit-out solutions unit and extend its services outside Singapore, Mr Hong revealed.

Under a separate management agreement to be inked with GA, GPSA can earn a management fee of 10 per cent of the profit before tax (excluding management fee) in GA for two years - with an option to extend for another two years under certain conditions. 'there are still some synergies for us to work with APSIL further down the road," Mr Hong said.

GPSA has been strong in both local and overseas project marketing and will continue to serve its existing clientele of developers under GA. As for MORE Property, it has been mainly marketing international projects.

'For GA, in the next one to 1.3 years, our focus is on retention and recruitment,' said Mr Tan. "We are targeting by 2016 to have at least 1,500 agents to hit a critical mass to sustain better in the secondary market and on top of that, to be in a much better position to procure local and international projects.‘

Mr Tan cited the complementary strengths of GA and other upcoming businesses of APSIL. The latter had in May announced a cooperation agreement with China Real Estate Development Union Group Ltd and Oei Hong Leong Foundation to create an online property portal to serve overseas Chinese investors keen to invest in residential and commercial property in China and around the world.

According to Mr Choo, this property portal will be the key to APSIL's real estate agency business under GA. It provides a scalable plat form for affluent Chinese investors around the world looking for a seamless way to diversify their real estate portfolio, he added.

The slew of proposed deals by APSIL and a change in core business requires shareholders approval.