We have been working with real estate agents from Malaysia and Japan covering assets in Malaysia, Japan, South Korea and the United States. From time to time, we too have requests for other assets besides these 4 countries.
It all began when people started to believe that when we handle mergers and acquisitions, properties get involved – the lands where the warehouses sit on, the numerous apartments that are bought to house workers from overseas and lands that are required to build new factories.
Through our involvement with 3 of the Top 6 Global Accounting Firms, real estate is one of the areas that overlap which very few people knew about.
Fortunately, I have new partners that handle real estate whilst I continue to delve in strategic management. Now, real estate may be a straightforward transaction but for better rewards, there is a not-so-straightforward method.
I will first explain the 2 methods:
1. Real estate method;
2. Mergers and acquisition methods.
Next, I will do a comparison between the two methods.
Finally, I will give a case study on structuring and closing the deals.
1st Method: Real Estate (RE)
The regulatory act that governs real estate and real estate licensing in Malaysia is the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 (Act 242).
The commission is often the total of 2% to 4% depending on whether the deal is an exclusive deal or a non-exclusive deal. It may also involve referrals and co-broke agreements.
For the buyer agent and seller agent, they will involve their agencies. There will also be a calculation of referral fees. Depending on the states and countries, there are different ways for agents to work together to ensure that the deal is completed and satisfies both the buyer and the seller.
Nevertheless, I will leave it to Ms. Christine “Vulcan” Ang and Ms. Jang Su Ji to explain this method in further detail. NOTE: We will only accept direct deals from Buyers and Sellers or opposing side agents. 2nd Method: Mergers and Acquisitions (M&A)
If the acquisition is structured as an M&A transaction (i.e., purchasing the shares of the company that owns the physical asset, rather than just the physical asset), it can be classified as an M&A deal. In this case, commissions are typically negotiated based on investment banking or corporate advisory fees that are chargeable based on the deal size.
The commission varies depending on whether the deal is an exclusive deal or a non-exclusive deal and depending on what the Seller or Buyer agreed to give in the mandate. Both the Buyer and Seller can provide commission as well. It may also involve referrals and co-broke agreements.
Comparatives
To appreciate the two methods in depth, you will need to consult professionals. What is being explained here is simplified and demystified. It takes time to learn and the literature covering the subject matter are two separate courses.
Case-study
The durian farm information had been changed as we do not share all of our methods to close a deal.
A 300-acre durian farm owns by 3 brothers and a sister. Every year, these durians are exported to China. The eldest brother sought our advice as a management consultant to sell off the farm. At the same time, the sister had contact a real estate negotiator (REN) to put the farm on listing.
M&A:
1. Seller consultant: Upon agreement of disposal, a Mandate is to be provided. It is best that the durian farm is under Durian Tua Sdn. Bhd. (a private limited company) owned by the siblings. The Mandate signed by the eldest brother provided us after paying the onboarding fee, with 5% success fees plus a profit-sharing which brings the total to 10% upon success of sales.
2. The consultants will study the requirements (some are by way of tender bidding for the highest price), use their networks and anyone who introduces the buyers (in this case), will get a generous cut, better than 0.3% to 1.5% that is provided in real estate.
3. When buyers are identified, they are given teasers, information memorandum or investment deck (depending on which stages they are at) which contains business information. Some buyers, may offer to buy only 50-acres of the 300-acres.
4. Some buyers may insist certain conditions to be met. License to export, key customers, contracts with supermarkets, staff costs etc. Hence valuations are being conducted and due-diligence where the lawyers and accountants will be involved.
5. Why the deal may take such a long time, postponed or cancelled?
a. Do not meet the conditions set by sellers or buyers;
b. One of the brothers changed his mind and wants his son to take over the business. He made an offer to buy part of the business;
c. There are no buyers at that time.
For us, whether it is done in M&A method or RE method, we can switch to either one as we have specialists for both. We will only take genuine cases where clients are willing to pay for administrative costs, deposits when demanded and not too many involvements.
If anything involves under-the-table money or some form of bribery, we will automatically excuse ourselves from the case.
We can reach 115 countries through our networks to do business for you.
Please remember these few things:
1. Willing buyer, willing seller.
2. Caveat emptor.
Thank you.
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