UGL to Spin Off Property Unit DTZ After Posting 45% Drop in Profit; Acquired DTZ (Revenue $1.1 Billion) in Dec 2011 for $120.2 Million Vs Singapore’s ERA $103 Million (Revenue $274 Million)

UGL to Spin Off Property Unit After Posting 45% Drop in Profit

UGL Ltd. (UGL), the Australian company that acquired U.K. real estate broker DTZ Holdings Plc in 2011, plans to split its operations into two listed companies by June 2015 to allow each to follow its own growth strategy.

UGL will create two companies, one focused on global property services and the other on engineering, construction and maintenance services in Australia, New Zealand and Asia, it said in a statement to the Australian stock exchange today. The company today reported underlying profit after tax in the 12 months to June 30 fell 45 percent from a year ago to A$92.1 million ($84.7 million).UGL in December 2011 bought the London-based DTZ for about 77.5 million pounds ($120.2 million), gaining access to China, where DTZ has the biggest geographic presence among international real estate advisory firms. The plan to create two separate companies follows a 3.5 percent drop in the company’s share price this year, compared with a 8.7 percent gain in the benchmark S&P/ASX 200 index.

“A demerger is the next logical step which will allow each business to pursue their own strategic priorities and opportunities for growth,” Chief Executive Officer Richard Leupen said in today’s statement. “A demerger will recognize the fundamentally different markets, geographic focus and strategic requirements of the two businesses.”

DTZ’s revenue grew 21 percent in the year to June 30 from a year earlier to A$1.9 billion while UGL’s engineering revenue fell 30 percent to A$1.8 billion due to slower investment in Australia’s resources and infrastructure sector, UGL said.

The company plans to complete the integration of DTZ globally and the property unit’s global headquarters in the U.S., and focus on reducing debt before the demerger, it said today. The board proposes that Leupen will continue to lead the company as it prepares for the demerger, Chairman Trevor Rowe said in the statement.

UGL expects underlying net income after tax of between A$120 million and A$130 million in the year ending June 30, 2014, it said.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

UGL confirms DTZ demerger

5 hours ago1

By a staff reporter, with AAP

UGL Ltd will proceed with a demerger of its engineering and property bsuinesses as soon as possible, after posting a steep fall in full-year profit.

Investors responded positively to the news. At the 1015 AEST official market open UGL shares were 3.11 per cent higher at $7.63, against a benchmark index fall of 0.07 per cent.

In the year to June 30, UGL’s net profit was $36.472 million, a 72.8 per cent decline on the previous year’s $135.392 million.

The group said net profit was weighed down by $55.6 million of costs associated to restructuring, the rebranding of DTZ, the amortisation of acquired intangibles, and there was a gain on the sale of property.

Underlying profit was $92.1 million, in line with earlier guidance.

Revenue in the same period was $3.816 million, 14.3 per cent lower than the 4.454 billion in 2012.

The group announced a fully-franked final dividend of 5 cents, to be paid on September 6 to shareholders on the register at August 23. Combined with the interim dividend of 34 cents, the group will pay a fully-franked total dividend of 39 cents in the year.

In 2012, UGL paid a partially-franked total dividend of 70 cents.

UGL chief executive Richard Leupen said the company’s engineering business had suffered due to a slowdown in capital investment in the resources and infrastructure sectors.

But, he said, the DTZ business had seen its annual revenue rise to $1.9 billion, helped by an improvement in the US property market and a continued strong performance from its Chinese and Asia Pacific markets.

Demerger next logical step: Rowe

UGL chairman Trevor Rowe said the planned demerger would enhance shareholder value over the short and long term.

The group will work towards separating its property business DTZ from its under-performing engineering business over the next 12 to 18 months.

“Over the past decade, UGL has successfully grown its property services and engineering businesses to become sizeable businesses which are leaders in their respective markets,” he said.

“As both businesses enter their next phase of growth, the operational and strategic priorities of each business, and the associated management and financial requirements are starting to diverge.

“As a result, we believe a demerger is the next logical step which will allow each business to pursue their own strategic priorities and opportunities for growth.”

 

ERA Realty sold for over $100m

Buyer is Indonesian private equity player Northstar

The Business Times – August 5, 2013
Mr Walujo: Is the son-in- law of Theodore Rachmat, a tycoon who previously ran Astra. – PHOTO: BLOOMBERG

[SINGAPORE] The Republic’s biggest real estate agency ERA Realty Network has been sold for over $100 million to Indonesian private equity firm Northstar Group, months after owner Harry Chua put it on the market.

The price is shy of the $150 million that Mr Harry Chua’s Hersing Corporation is said to have asked when it put up for sale the master franchise rights to the ERA name in Asia-Pacific.

Sources said that the final touches to the deal are still being added, but the sale will include Hersing’s Singapore franchise rights to Coldwell Banker, which is currently a dormant business here.

Both the ERA and Coldwell Banker brands are owned by US real estate brokerage Realogy Holdings Corp. In Singapore, ERA employs over 5,000 agents – making it the biggest agency by number of agents – and handles billions of dollars worth of deals annually, which account for the bulk of Hersing’s profit.

BT understands that Northstar agreed to acquire ERA on the condition that Jack Chua, who was previously running the show at ERA, returns to head the agency.

Mr Jack Chua is widely known to have helped Mr Harry Chua to grow the agency’s reach in Singapore, and is ERA’s leading dealmaker. The two are not related.

In January this year, however, a group-wide restructuring exercise saw Richard Tynes, previously Hersing’s chief investment officer, take over to lead ERA, while Mr Jack Chua started helping Hersing set up and grow the Singapore outpost of famed Hong Kong dim sum chain Tim Ho Wan – which opened at Plaza Singapura in April. Hersing owns the franchise rights to the Tim Ho Wan brand for the Asia-Pacific region.

On top of bringing Mr Jack Chua on board again, BT understands that ERA’s new owner has also offered the agency’s top management some share incentives. Said a source: “Northstar is using this to tie down the senior management and ensure that they stay, since the agency business is dependent on the individuals leading the agency.”

Northstar is co-founded by Patrick Walujo – the son-in-law of Theodore Rachmat, one of Indonesia’s richest men who previously ran auto distributor Astra International. Mr Walujo is currently a managing partner at Northstar, which is part-owned by TPG Capital, a US-based buyout firm.

Northstar manages more than US$1.2 billion in committed equity capital dedicated to South-east Asia, with a focus on Indonesia. Last November, it bought a controlling 50.05 per cent stake in Singapore-listed Nera Telecommunications from Norway-based power conversion firm Eltek ASA. Northstar then attempted but failed to buy up the entire firm in a mandatory takeover bid.

Mr Harry Chua’s move to sell the ERA and Coldwell Banker franchise rights comes after he took Hersing private in November last year, after it spent 14 years as a listed company.

The 66-year-old brought the ERA brand into Singapore in 1982 when it was still an unknown US name, and set up shop in a 2,000 sq ft office on the fifth floor of Plaza Singapura.

In 1998, he listed Hersing, which was made up mostly of the ERA business, on Sesdaq – then the secondary board of the Singapore Exchange. Two years later, Hersing was upgraded to the mainboard.

Its rights to the ERA brand cover Asia-Pacific and are perpetual renewal rights, renewable every 30 years. ERA has about 9,000 agents across the region in markets such as Japan, Taiwan, Thailand, Korea, Malaysia and China.

Most are located in Singapore, where ERA has 5,192 agents, according to data from the Council for Estate Agencies.

Hersing’s earnings have largely been driven by the ERA business in Singapore, which in 2011 was involved in over 35,000 transactions with a total property value of about $17 billion, according to Hersing’s annual report that year.

This, together with business from Coldwell Banker and real estate course provider RIA School of Real Estate, translated into profit after taxation of $13.7 million for Hersing in 2011. Together, the three real estate businesses accounted for 86 per cent of the $274.2 million in total revenue that Hersing made that year.

PE firm Northstar leads buyout of Singapore’s biggest property broker ERA

Wed, Aug 7 2013

SINGAPORE, Aug 7 (Reuters) – Northstar Group, a private equity firm owned by Indonesian investor Patrick Walujo, has led a management buyout of Singapore’s biggest property broker, ERA Real Estate, its second major deal in Singapore in less than a year and a sign of growing interest in the city’s real estate market.

Singapore, one of Asia’s major financial centres, is a popular destination for the world’s wealthy due to its minimal taxes, low crime rate and cosmopolitan environment. Private equity firms remain keen on the market despite government efforts to cool private home prices that have risen more than 60 percent since mid-2009, largely due to low interest rates.

The Northstar-led group is paying around S$130 million ($103 million) to purchase ERA from Hersing Corp, a source familiar with the deal told Reuters. Northstar did not disclose the price.

Northstar, in which U.S. buyout firm TPG Capital Management LP has a minority stake, was competing against several private equity bidders including Blackstone Group LP and Affinity Equity Partners, sources told Reuters.

Blackstone and Affinity officials were not immediately available to comment. ERA is the market leader in the real estate broking business in Singapore with more than 5,100 sales agents, a statement said.

Jack Chua, who has been with Hersing group for more than two decades, is leading the group of senior ERA executives in the buyout that are co-investing with Northstar in the ERA business.

Northstar, which manages $1.2 billion and is headquartered in Singapore, is also in the process of acquiring the Asia Pacific Master Franchise of ERA covering 18 countries in the region, it said.

Macquarie advised the seller, Hersing Corp, which controls ERA. Hersing itself was taken private last year.

Northstar, founded by former Goldman Sachs’s banker Walujo, last year bought a majority stake in Singapore-listed Nera Telecommunications Ltd and has offered to buy the entire company for around $146 million.

Passing of an ERA? Top realty firm may be sold

Sunday, May 12, 2013

Felda Chay

The Business Times

SINGAPORE – Harry Chua, a key figure in Singapore’s real estate agency industry, is looking to sell his baby – ERA Realty Network – for about $150 million.

Mr Chua’s Hersing Corporation is understood to have put the group’s master franchise rights to the ERA brand on the market. Hersing’s rights to the US brand covers Asia-Pacific and are perpetual renewal rights, renewable every 30 years.

ERA has about 9,000 agents across the Asia-Pacific in countries such as Japan, Taiwan, Thailand, Korea, Malaysia and China. Most are located in Singapore, where ERA has 5,103 agents, according to data from the Council for Estate Agencies.

The agency is currently led by Richard Tynes, who took over as chief executive officer in January this year. Running the show previously was Jack Chua, who has been with Hersing for over 20 years and is widely regarded as a key figure at ERA, and the agency’s dealmaker.

BT understands that Mr Jack Chua, who is Hersing’s CEO, is currently more focused on growing the Singapore outpost of famed Hong Kong dim sum chain Tim Ho Wan – which opened recently at Plaza Singapura. Mr Harry Chua owns the franchise rights to the Tim Ho Wan brand for the Asia-Pacific region.

“ERA gets a lot of projects due to Jack,” said a source, who declined to be named.

In response to BT’s query on the sale, Mr Tynes said: “Harry Chua has received interest from external parties regarding a potential transaction with ERA and is in the process of evaluating it.

“Harry Chua receives interest in ERA from time to time due to the long term success and future potential of the business and brand.”

Talk that the ERA brand may change hands has been in the market for more than a month. Said the managing director of a real estate agency here, who declined to be named: “There are people who are interested, but the issue is the price.”

The move to sell the ERA franchise rights comes after Hersing was delisted from the Singapore Exchange Mainboard in November last year after more than 14 years as a listed company with earnings largely driven by the ERA business.

A group-wide restructuring exercise led to the individual units all appointing their own CEOs. Previously, all units came under the direct purview of Mr Jack Chua, who has been Hersing’s CEO from 2011. Prior to that, the group was helmed by Mr Harry Chua, who is now Hersing’s executive chairman.

Mr Harry Chua, who is 66 years old this year, is an established figure in the real estate scene and is credited for having sold 12 condominiums on one record- breaking afternoon in 1979.

He brought the ERA brand into Singapore in 1982, when it was still an unknown US name, and set up shop in a 2,000-sq-ft office on the fifth floor of Plaza Singapura.

Under his leadership, ERA grew from selling $25 million worth of properties in its first year, into an agency that made $1.1 billion in property sales in 1993.

It was also under Mr Harry Chua that ERA launched new products for the resale market such as a Seller Security Plan, which promised: “If we don’t sell your house, ERA will buy it”. Other marketing programmes it initiated includes one that assured buyers of Housing and Development Board properties the return of their deposit if a seller is later found to be a bankrupt.

In 1998, Mr Harry Chua listed Hersing – which at that time was made up mostly of the ERA business, and which therefore made ERA the first property agency in Singapore to be listed.

By 2011, the year before Hersing was delisted, ERA was involved in over 35,000 transactions with a total property value of about $17 billion, according to Hersing’s annual report that year.

ERA is a large contributor to Hersing’s bottomline. In 2011, the real estate services business accounted for 86 per cent of the $274.2 million in total revenue that Hersing made.

Profit after taxation from the real estate business was $13.7 million, although Hersing’s profit after tax that year was $12.8 million due to losses incurred by its self storage, design and furnishing services segment.

Hersing’s real estate services business includes ERA, real estate course provider RIA School of Real Estate, and Coldwell Banker – which Hersing holds master franchise rights to in Singapore.

Hersing also runs self storage business Storhub, and design and furniture companies such as Casa Kidi and HC Design. It also manages Western Union Money Transfer Singapore.

In April, it opened the Singapore branch of Tim Ho Wan, and has plans for more outlets in Singapore and in the region.