Commercialview.com.au sold by estate agents to Domain
Nine Entertainment's digital and print real estate media business Domain Holdings is set acquire the Commercialview.com.au website.
For starters Domain will spend $2 million in cash to secure the commercial property digital listings platform, which had most of its footprint in Melbourne and Sydney.
CommercialVIEW.com.au is a stand-alone commercial real estate advertising portal that is industry owned, directed by Ben Cooper, Stephen Gorman, Malcolm Gunning and its CEO Daniel Bignold. Its issued capital is given as $3.8 million, with nine million ordinary shares on issue and 310,000 redeemable preference shares.
During the past year the board exercised its power to change the option terms with the exercise price of the options reduced from $0.50 to $0.00.
It was established in 2012 under the stewardship of Petra Sprekos and Enzo Raimondo of the REIV.
In 2016 Bignold made a rare public comment on the state of the website.
Bignold said the dominant players in the market had been able to press prices higher, putting pressure on commercial property agents.
"We have a price point that’s very fair and reasonable, and is less than our competitors," he noted.
Domain Holdings Australia Limited announced its commercial real estate business, Commercial Real Estate entered into a three stage agreement with shareholders of Commercialview.com.au Limited to acquire 100% of the issued share capital in CommercialView.
The acquisition will occur through a subsidiary of Domain, Commercial Real Estate Media Pty Limited (“CREM”), which is currently approximately 70% owned by Domain and 30% owned by members of the commercial real estate industry.
The consideration for the proposed transaction is anywhere between $4.2 million and $17.2 million, contingent on targets relating to the future financial performance of the CREM and CommercialView businesses.
The on-target consideration is $10.2 million, which is equivalent to four times the projected increase in EBITDA from the transaction for calendar year 2020, including synergies.
The maximum consideration for the acquisition is $17.2 million of which a maximum of $2 million is payable in cash. The remainder is payable in newly issued shares in CREM.
Domain Group CEO Jason Pellegrino said there had been unanimous support for the transaction from CommercialView shareholders.
The commercial property website recently reported another loss in its annual results which gave its revenues as $1.6 million.
It was segmented into $440,000 subscription revenue, $150,000 banner advertising and over $1 million in depth revenue.
The 2018 financial year loss of the company after providing for income tax amounted to $8,500 compared to its $428,000 loss in the prior year.
Its directors, who noted it was a high demand/low supply commercial property market, slashed marketing expenses from $386,000 to $255,000.
"For a portal, this is a difficult market to extract revenue as not only stock levels are low, but when stock is listed it generally move fast and doesn’t require large ongoing advertising budgets.
"Total new listings that hit the CVIEW portal in FY18 compared to FY17 were down 21 percent and listings for sale were down 29 percent yoy.
"This creates a large void for listing upgrade opportunities particularly investment stock which generally attract a larger advertising budget."
The revenue focus for the year was seeking upgrade opportunities for remaining sales stock and also to leverage the larger proportion of leasing stock in the market.
The business has had a "clear strategy" of tightening up on expenses without negatively impacting the operations, which resulted in a 22 percent reduction in expenses and $150,000 positive full year EBITDA and an $88,000 increase in cash balances for the year. Its assets included $474,000 in cash and $193,000 in trade receivables.
Its deferred tax assets sit at $700,000 plus.
Completion of the proposed transaction is targeted to occur on 21 December 2018.
The consideration is payable in three tranches, partially contingent on targets relating to the future financial performance of the CREM and CommercialView businesses, as follows:
a payment of $4.2 million to be paid at completion as a combination of cash and CREM shares, amounting to approximately a 3.7% equity interest in CREM;
a second payment payable in early 2020, in the range of $0 to $5 million to be paid as a combination of cash and CREM shares; and
a third payment in early 2021, in the range of $0 to approximately $8 million payable in CREM shares.