HOMEGROWN property agencies PropNex Realty and Dennis Wee Group (DWG) have agreed to merge – a move that will see the combined entity become Singapore’s largest real estate agency with close to 7,000 salespeople.
This is set to nudge ERA Realty Network, which has 6,238 agents based on the latest count, to second place.
PropNex CEO Ismail Gafoor, who flagged the combined entity as “a force to reckon with”, told reporters on Monday that a memorandum of understanding was inked on Saturday after three days of intense negotiations.
“Beyond being the largest agency, obviously our market share is going to increase. Today, we are talking about 35-40 per cent of residential market share. With us coming together, we are likely to come closer to 50 per cent share,” he said, referring to all private and public housing sales and rental transactions.
Under this partnership, DWG’s 1,070 salespeople will be transferred to PropNex Realty as DWG group and licensed under PropNex, joining PropNex’s current 170 groups totalling 5,856 agents.
There is neither dollar value pegged to the strategic partnership – agents are full-commissioned and free to join any firm – nor is there any equity transfer between the firms.
But Mr Ismail said he is confident that at least 80 per cent of DWG agents will cross over in the next couple of weeks, given that the founder of DWG is not cashing out of the brokerage business but coming alongside with the agents. He also projected that PropNex’s agent strength would cross 7,000 by the third quarter, revealing that there are other smaller agencies and team leaders from other agencies looking to join PropNex.
DWG chairman and founder Dennis Wee, 65, will become PropNex Realty’s senior strategic partner. His son Denka Wee, DWG executive director, will be strategic partner at PropNex. The transition is expected to be completed by the end of next month.
Being part of PropNex will grant DWG agents immediate access to some 50 projects that PropNex is currently marketing for developers. DWG is marketing two or three Singapore projects currently, having shifted its focus to marketing international projects in recent years.
Mr Ismail said consumers can benefit from a wider choice of property listings and salespeople within the PropNex network. “As far as developers are concerned, with stronger outreach in the market, we are also able to better assist them in the selling of their new launches, especially for developers who are relatively stressed with the unsold units.”
Razor-thin margins in Singapore’s estate agency sector, due to the 90-10 commission split between the agents and the agencies, have made it critical for agencies to achieve economies of scale. An industry consolidation had in recent years seen the merger of Global Alliance Property with Century 21 (AsPac) last year, following the merger of Global Property Strategic Alliance and More Property in 2015 to form Global Alliance Property.
For DWG, it is ranked 6th in agent strength behind agencies Huttons, OrangeTee and Edmund Tie and Company Property Network – its agent count has been on the slide from over 1,500 in December 2014.
About two years ago, DWG ventured overseas, entering into co-development or bulk purchase of properties with strategic partners in Japan, Bangkok in Thailand, and London and Manchester in the UK. It currently has more than 50 employees across property development, investment and valuation. Its agency business accounted for over one-third of DWG’s US$60 million revenue in 2016, according to Mr Denka Wee.
He told reporters that his family “could have sold the company many times over” but they were looking for an agency that will provide value-add to their agents through strong training and support.
There was an offer to “double whatever PropNex was offering” just an hour before Monday morning’s press conference, said Mr Dennis Wee, adding that he has been looking for another agency to house his agents as his company wants to focus on other key businesses in property development, investment and valuation.
Mr Ismail posited that more consolidation in the industry is underway. In his view, Singapore’s small market size is able to support only two – at most three – strong brands.
The current PropNex was birthed out of a merger of agencies in 2000, after a franchise arrangement among five agencies did not work out. When JLL Singapore acquired a 20 per cent stake in PropNex’s project marketing arm PropNex International in 2014, its 170 sales associates were invited to cross over to PropNex.
Last year, PropNex’s net profit was up 5 per cent at S$9.23 million on the back of a 21.5 per cent jump in gross revenue to S$278.9 million. Mr Ismail is expecting PropNex agents to clock some 60,000 transactions this year, even before accounting for DWG group, up from 46,229 last year.
Outside of Singapore, PropNex has launched a regional franchise, starting with Indonesia where it now has close to 1,000 salespeople. It is looking to enter Vietnam next and is studying the franchise model of other countries in the region.