As fewer Aussies look to buy property and more focused on coastal life, real estate agents are re-strategising to make the most of the opportunities. Real estate agency McGrath Limited (ASX: MEA) announced that it has acquired a 30% stake in its Central Coast franchisee, McGrath Central Coast, from principals Jaimie Woodcock and Mat Steinwede.
Digging into the finances of the deal, the stake acquisition is valued at $7 million and will be paid in cash (67%) and shares in McGrath (33%). The total consideration will be paid 60% at completion, 20% on the first anniversary and 20% on the second anniversary. The Company will issue 3,373,351 completion shares to Woodcock and Steinwede entities at an issue price of $0.41 per share. The parties have agreed that the New Shares will be subject to voluntary escrow for a two year period till 30 September 2024.
Managing Director & Chief Executive Officer, John McGrath commented, “This acquisition is in line with our strategy of investing in quality businesses and partners. I have known Jaimie and Matt for over 20 years and am pleased to say they are amongst the finest real estate professionals I have come across in my 40 years in real estate.”
The NSW Central Coast region had an estimated gross sales value of more than $9 billion in FY22. So it’s no wonder the Company is looking to work with McGrath Central Coast. In fact, it was the Company’s first franchise partner. Now, McGrath aims to expand the Central Coast business into the Lake Macquarie and Hunter regions. Woodcock and Steinwede will continue leading the business.
The payments made at the first and second year anniversary mark will be adjusted in proportion with the movements in EBITDA for FY23 and FY24 respectively, instead of relying on past performance.
In 2005, the Terrigal office was the Group’s first franchise office. Since then, the business has grown to six offices with approximately 1,300 properties under the management of Jaimie Woodcock and Mat Steinwede. Several of the key agents and management team are also equity owners of the business and will continue in this capacity post transaction.
McGrath’s Central Coast business comes with a host of benefits, especially its talent. The McGrath Central Coast business has won numerous accolades throughout its history, including top honours at the McGrath Awards for Office of the Year. What’s more is that Steinwede is among Australia’s leading residential sales agents and four-time winner of McGrath Agent of the Year, as well as ranking in the Real Estate Business Top 100 Agents in Australia over the last six consecutive years.
In FY22, McGrath posted a profit of nearly $12 million with underlying EBITDA increasing by 7.9% on FY21 to $19.1 million. Still, the Company is aware that the real estate market is settling back down after its big boom during Covid-19. To address the after-effects of the same, the Company is implementing a range of initiatives, such as acquisitions, to make sure they remain relevant.
Alinda is a Business Reporter for The Sentiment
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