$30m expected from REA broking venture

Details have emerged around predicted revenues, earnings and commissions behind the REA Group, NAB and Smartline arrangement

$30m expected from REA broking venture



The partnership between REA Group and NAB alongside REA’s acquisition of Smartline is expected to bring in between $26m and $30m in the 2018 financial year.

In REA Group’s financial results investor briefing on Friday (11 August), chief financial officer Owen Wilson detailed the various business streams stemming from the new arrangements including upfront and trail commissions from the firm’s associated mortgage brokers.

“The first is our white label product in partnership with NAB. This delivers a revenue stream of upfront commissions on all loans written plus a yearly contribution from NAB to fund the development and marketing of our experience.

“Our partnership will also be extended into the development of an REA branded mortgage broking solution which will deliver upfront and trail commissions on all loans written. This solution is being developed to enable speed to market when our offering is launched later this year.”

The acquisition of Smartline will also deliver upfront and trail commission to REA Group, he said. REA’s complete mortgage broking offering will be launched at the end of 2017.

As well as $30m in revenue, projected figures put earnings before interest, taxes, and amortisation (EBITA) at between $7m and $11m in FY18.

The bulk of these revenue and EBITA figures will initially come from the Smartline partnership, Wilson said.

“The two businesses that we have with NAB are effectively start-ups. We’re obviously investing very heavily in those and we’re very confident in the long term volumes that are going to come through, but in the short-term it’s not a significant proper contribution.”

The move was a commercial opportunity for REA Group with more than 50% of mortgages obtained through brokers and $2.2bn of broker fees in the market, CEO Tracey Fellows said.

“We made strategic investment beyond our relationship that we had with NAB. We extended our strategic partnership to also include the Realestate.com.au brokers enabling us to have an immediate REA broking solution at time of launch of our product.

“We acquired a majority stake in Smartline to add scale and capability to longer terms with over 300 brokers nationally and a successful 20 year business.”

This dual strategy would allow REA to capture a greater share of the mortgage market, Fellows said.

We’re confident this dual strategy allows us to capture a greater share of the mortgage market and we’re very excited to be launching later at the end of this calendar year.”

Wilson said that REA’s competitive advantage here was how easy the model made connecting a property buyer with a broker.

“You talk to any [broker] and the hardest part of their business model is getting a lead. We get access to people in the very commencement of their property seeking journey and so as they start to think about how much they can afford and who to borrow from, we’re going to be front and centre on that.”

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