Domain split: finally a peek into the agent ownership model

Investors have finally got a closer look at Domain’s controversial real estate agent commission scheme.

For the first time investors have been given a closer look inside the controversial real estate agent commission scheme of Fairfax Media’s real estate arm Domain.

A host of details about the so-called Agent Ownership Model, which gives real estate agents a share of revenue based on their advertising booking volumes, emerged from an ASX filing.

The structure was a key obstacle to a potential multi-billion-dollar bid for Fairfax from private equity bidders TPG Capital and Hellman & Friedman.

Both firms walked away from tabling a formal offer for the company in June.

A 215-page scheme booklet for the separation of Domain from Fairfax reveals there are some 1600 participating real estate agencies operating under the AOM, which is separated into three businesses: Residential Digital, Residential Print and Commercial.

Of these, there are 1370 participating agents in Residential Digital, 86 in Residential Print and 240 in Commercial.

The agents’ proportional share of pro forma historical earnings before interest, tax, depreciation and amortisation for 2017 amounted to $10 million, including $2m attributable to print products, according to the filing.

“Allocation of performance shares in the relevant AOM entity is determined based on a participating agency’s spend on relevant products during the allocation period,” the booklet states.

“The agent proportional share will vary in future years, depending on a range of factors including the relative earnings of Domain and each AOM entity.”

As part of the separation, Domain has proposed to acquire the outstanding 50 per cent of issued shares in Review Property for $36m in Domain shares.

The business sits under the Residential Digital AOM business in Victoria.

Darren Davidson