http://www.businesstimes.com.sg/arch...-boys-20140701

Published July 01, 2014

A property alliance to take on the big boys

Grouping of four agencies aims to address shrinking pool of buyers

By lee meixian

[email protected] @LeeMeixianBT


[SINGAPORE] The slowing property market has nudged four mid-sized property agencies - SLP International, OrangeTee, HSR International and Dennis Wee Realty - to form an alliance which will rival the two largest players in the market, ERA Realty and PropNex Realty.

The alliance, called Project Alliance Group (PAG), comes into effect today.

It will focus on marketing local residential projects - a sector which is becoming a "numbers game", said Steven Tan, managing director at OrangeTee, because developers now tend to go for bigger agencies with more salespeople and thus greater buyer reach.

Following the alliance, the four agencies will have a strength of almost 6,000 agents combined, overshooting ERA's 5,700 and PropNex's 5,600.

Some 20 to 25 current and future (about to be launched) projects will be added to a pool which salespeople from all four agencies will have information access to. Training will be conducted for the agents before they co-market the projects.

The agents will also earn the same commission, irrespective of which agency the project was secured by, unlike co-broke agents who usually receive less.

On the company level, however, the party which secured the project, termed the "managing member", will get a larger commission than the rest, termed "supporting members".

The managing member will also have to request consent from the developer to allow the supporting members to co-market the development. In the first month of the launch, half of the showflat duties must be allocated to other supporting members, subject to the developer's approval.

Anne Tong, chief executive officer of HSR International, said that banded together, the four firms will be better able to address the "shrinking pool of buyers" in the market.

"In the past, developers were quite comfortable to do exclusives with one agency, or joint marketing with two agencies, but with the market becoming so challenging, it is getting more difficult to reach out to the correct buyers.

"This alliance will benefit developers because each agency has strengths in different market segments. Developers using PAG for their project launches will have access to a wider network of potential home buyers - a crucial factor to the success of project launches in today's market."

To be sure, this is not a merger; each agency will continue to exist in its own right.

OrangeTee's Mr Tan likened it to the Star Alliance, the world's largest global airline alliance: "Each entity still operates under its own brand, but the alliance helps us to tap into each other's network, combine our resources, and widen our scope of clients."

The two largest players, ERA and PropNex, are not worried, however, citing problems that often accompany alliances.

PropNex chief Mohamed Ismail believes that the trio of ERA, PropNex and Huttons will remain the favoured marketing agencies, given their track records. "Mid-sized agencies find it difficult to penetrate the market because of this existing preference," he explained.

He also foresees teething problems with regard to reporting to different key executive officers and ensuring fair distribution of work. He would know - PropNex, too, was formed from the merger of five smaller real estate firms years ago and three of the partners have since left or disposed off their stakes due to various differences.

"It is not impossible but it is not going to be easy either. (The four agencies) will have to be doubly efficient in their communications and system processes. There will always be comparisons among themselves and someone that will emerge the team leader."

Jack Chua, chief executive of ERA, said that the fact that the alliance is not a permanent fixture - that is, a merger - makes it little more than just four agencies in a joint marketing exercise, not unlike how some developers already engage multiple marketing agencies for one project to increase its odds of successful sales.

"It is just four agencies operating independently with different CEOs, only coming together when putting together a showflat to jointly market a new project," he pointed out. "If PropNex, which went through a merger, also encountered problems with culture differences, how much more an alliance?"

One developer also cited concerns with the fee structure and wondered whether four agencies proposing one marketing strategy would be like too many cooks preparing the broth.

While he admits that he does look at size when engaging an agency, he would in fact also consider a smaller outfit which has access to a specific desired group of clientele."The ability to market a project successfully, not the size, is after all the most important criteria," he added.