Is the latest merger between the associate teams of OrangeTee and Edmund Tie & Co a harbinger of further consolidation in the real estate agency business?
On Aug 28, OrangeTee and Edmund Tie & Co announced the merger of their associate agencies to create a new entity, OrangeTee & Tie. Currently, OrangeTee’s associate agency division has 2,938 agents, while ET&Co’s has 1,122. The combined entity will potentially have a sales force of more than 4,000 agents, making it the third-largest in Singapore come Jan 1, 2018.
“This merger has been a carefully considered exercise,” says Ong Choon Fah, CEO of ET&Co, at the press conference. “And we have planned for a growth trajectory that will make us a leading agency in Singapore, both through organic growth and mergers and acquisitions [M&As].”
On whether the group now harbours ambitions to become Singapore’s biggest player, Orange ee managing director Steven Tan says: “We don’t deny that size is important. If we have the scale, we can achieve many things — we will be more productive, see greater margins and can reinvest in the company to compete with external forces.”
Digitalisation and the sharing economy have disrupted many trad itional businesses, and the real estate sector has not been spared. “The market has responded by consolidating and rationalising,” says Tan.
Given the disruption in the real estate industry, competition could come from beyond traditional peers in the business, says ET&Co’s Ong. As such, the group is looking at how it can embrace technology, digitalisation and the sharing economy. “This calls for a radical change in mindset,” she adds.
Impact on agents
Agents of OrangeTee & Tie will be able to leverage the resources of both companies, such as innovative technology, comprehensive training programmes and access to project marketing opportunities with more than 50 existing residential projects, as well as at least six upcoming new launches with more than 5,000 units, says Ong.
Jeffrey Sim, senior vice- president of ET&Co, who focuses on bungalow sales, was among the agents present at the ceremony. “I feel quite positive about this merger,” he says. “The management at OrangeTee seems very sincere, and I appreciate that.”
Having joined DTZ Debenham Tie Leung in 1997, Sim has witnessed the company’s name changes over the past two decades — from Edmund Tie & Co to DTZ Debenham Tie Leung for 16 years, then DTZ, and back to Edmund Tie & Co in July 2016, subsequent to shareholders’ buying back the 69% stake held by Cushman & Wakefield. This was after the merger between DTZ and Cushman & Wakefield in September 2015.
For now, Sim is “leaning 80% towards joining the new entity”. If he does, he is quite confident that about 80% of his team of 120 associates will join him.
Given the new training and technology platform that will be available to him under OrangeTee & Tie, Sim feels he will also have the opportunity to groom a young team of agents to become “the future team of top producers”.
Rapid consolidation — mergers and alliances
The merger of the associate teams at OrangeTee and Edmund Tie comes just two months after that of PropNex and DWG. Following the merger, 88% of DWG’s agents moved over to PropNex, propelling it to the No 1 spot, with 6,747 agents as at Aug 22 (see table).
“The move by OrangeTee and ET&Co could be in reaction to the merger between PropNex and DWG,” says Nicholas Mak, executive director of ZACD Group, parent company of SLP International. More small and medium-sized agencies could be motivated to take stakes in each other’s companies or embark on an outright acquisition, he adds.
For instance, SRI, a real estate agency with 250 agents, has been approached by some larger players, proposing a merger. “ Being self-funded, profitable and commanding a respectable transaction volume in the resale market, we are exploring acquisitions of smaller agencies with like-minded culture and clientele rather than a merger,” says SRI managing partner Bruce Lye. He is already in discussion with “a few groups”, including divisions of the larger agencies.
Alliances have proven to be less successful, as some partners have put their company interests ahead of the alliance’s, notes ZACD’s Mak.
A case in point was Project Alliance Group, set up in 2014 by DWG, HSR International Realtors, Orange Tee and SLP International. The rationale was that with a combined sales force of about 5,500 agents, PAG would be able to go head-to-head with the “Big Three” — ERA Realty, Huttons Asia and PropNex — to pitch for project marketing appointments from devel opers. However, PAG dissolved within months.
But some property agencies are undeterred. Late last month, SLP Realty — the associate arm of SLP International — merged with Scotia Real Estate Group to form SLP Scotia, which will take off in January 2018. In early August, SLP Realty also formed an alliance with boutique agency LandPlus.
The lean years
Mak predicts there will be more M&As ahead. The current wave of consolidation is the result of the lean years of 2014 to 2016, which has put pressure on the smaller agencies.
Figures from the Council for Estate Agencies bear him out. In January 2014, there were 1,425 property agencies with a total of 31,783 agents. As at January this year, there were 1,286 agencies, with a sales force of 28,397 agents.
There are benefits to consolidation, not just in terms of sales force, but also resources in training and technology. PropNex, for instance, has invested more than $10 million over the past five years in training and development programmes for its sales staff. Meanwhile, SLP has budgeted $3 million for training and technological enhancements to support its agents.
OrangeTee was a first mover when it launched a proprietary platform, Property Agents Review, in February 2016 to enable customers to rate and review its property agents. PAR also showcases the agents’ transaction records. Early adopters last year saw an increase in commissions within six months after adopting the platform. To make it more effective, OrangeTee has tied up with Google Maps to enhance property search functions.
The PAR platform will be extended to all associates of OrangeTee & Tie. “Investment in technology is an ongoing process,” says Tan. “We set aside a budget every year towards building up our agents’ competencies, be it training or technological improvements.”
Shift in sentiment
With brighter prospects and improved sentiment in the property market, more people will be encouraged to re-enter the real estate agency business, adds ZACD’s Mak.
Developers have also been very active in acquiring land. So far this year, eight collective sales sites totalling $3.5 billion have been sold. Another eight residential and mixeduse development sites with residential components worth $3.3 billion have been purchased in government land sales. “With more project launches in the pipeline next year, there will be more opportunities for agents,” says a veteran property agent who declines to be named.
Given the size of the Singapore market however, “only the four bigger agencies can operate successfully”, reckons Prop Nex’s CEO, Ismail Gafoor. “Over time, only two agencies will dominate the industry.”
Time will tell whether he is right.
This article appeared in The Edge Property Pullout, Issue 795 (Sept 4, 2017) of The Edge Singapore.