Brookfield Real Estate Services Inc. reports third quarter 2012
results and monthly dividend
TORONTO, Nov. 9, 2012 /CNW/ - Brookfield Real Estate
Services Inc. (the Company) (TSX: BRE), a leading provider of
services to residential real estate brokers and their REALTORS®¹,
today announced that cash flow from operations ("CFFO") for the
three and nine months ended September 30,
2012 was $7.1 million or
$0.55 per restricted voting share
("Share") and $20.0 million or
$1.56 per Share, respectively, as
compared to $7.3 million or
$0.57 per Share and $19.9 million or $1.55 per Share, respectively, for the same
period in 2011.
CFFO for the rolling 12 month period ended
September 30, 2012 was $1.98 per Share as compared to $1.97 for the 12 months ended December 31, 2011. Royalties for the three and
nine months ended September 30, 2012
were $10.2 million and $28.4 million, respectively, compared to
$10.3 million and $28.3 million, respectively for the same period
in 2011. Net loss and net earnings for the three and nine months
ended September 30, 2012 was
$2.5 million and $2.1 million, or $0.26 loss and $0.22 earnings per Share, respectively, as
compared to net income of $8.1
million and $11.2 million or
$0.85 and $1.18 per Share, respectively, for the same
period in 2011.
OVERVIEW OF THIRD QUARTER OPERATING
RESULTS
During the Quarter the Company generated CFFO of $7.1 million as compared to $7.3 million for the same period in 2011 due
primarily to a $0.3 million bad debt
provision associated with the writedown of the remaining receivable
balance of a distressed franchisee. Management continues to work
with this franchisee and will record the associated royalties and
receivable recoveries as received.
On a rolling twelve-month basis, the Canadian
market transactional dollar volume of $168.0
billion increased by 3% from September 30, 2011, driven by a 1% and 2%
increase in selling price and home sale activity, respectively. For
the three months ended September 30,
2012, the Canadian market transactional dollar volume was
down 7% over the same period in 2011, driven solely by a decrease
in home sale activity.
"Early in the year, we had forecast a cyclical slowing in
transaction volumes, a natural market reaction after a period of
strong home price appreciation, which saw affordability eroded,"
said Phil Soper, President and Chief
Executive Officer. "Changes to mortgage regulations, which took
effect on July 9th,
accelerated the correction."
On a rolling twelve-month basis, the GTA Market
increased by 7% from September 30,
2011, driven solely by an increase in selling price. For the
three months ended September 30,
2012, the GTA Market experienced a 10% decrease on a 5%
increase in selling price and 15% decrease in home sale activity,
respectively over the same period in 2011.
The Company's revenue is primarily fixed in
nature, based on the number of REALTORS® in the network. This
structure provides revenue protection from the impact of revenue
declines when the market cools, but also reduces the degree to
which the Company participates in periods of rapid market
expansion.
The Company Network
As at September 30, 2012 the Company
Network was comprised of 15,238 REALTORS®, operating under 412
franchise agreements providing services from 662 locations, with an
approximate 22% share of the Market based on 2011 transactional
dollar volume.
Outlook
"Canadian consumers were bombarded with upsetting economic news
from around the globe during the period, particularly in the early
weeks of the third quarter. While this has been a drag on the
country's housing market and contributed to a slowing in home sale
transactions, consumer confidence appeared to rebound in September,
which should support activity in the important fall market," said
Phil Soper, President and Chief
Executive Officer, Brookfield Real Estate Services, Inc.
"Policy makers in Canada and
the United States have stated that
the current period of very low interest rates will continue through
at least 2013. This is supportive of housing market activity hence
downward pressure on home prices will likely be minimal," said
Soper. "And for the first time in six years, sustained
positive news from the American housing market should support
a more positive outlook on overall economic prosperity."
Monthly Cash Dividend
The Company declared a cash dividend of $0.092 per share for the month of November 2012, payable on December 31, 2012, to shareholders of record on
November 30, 2012.
CFFO
This news release and accompanying financial statements make
reference to cash flow from operations ("CFFO") on a total and per
restricted voting share basis. CFFO is defined as net income prior
to fair value changes, amortization, interest on exchangeable
units, income taxes, items related to other income and interests of
exchangeable unitholders. CFFO is used by the Company to measure
the amount of cash generated from operations which is available to
the Company's shareholders on a diluted basis where such dilution
represents the total number of shares of the Company that would be
outstanding if exchangeable unitholders converted Class B LP units
into shares of the Company. The Company uses CFFO to assess its
operating results, the value of its business and believes that many
of its shareholders and analysts also find this measure of value to
them. CFFO does not have any standard meaning pre- scribed by IFRS
and therefore may not be comparable to similar measures presented
by other companies.
Management Services Agreement
The Company is managed pursuant to a Management Services Agreement
(the "MSA") between the Company and Brookfield Real Estate Services
Manager Limited (the "Manager"), a subsidiary of Brookfield Asset Management Inc. The MSA
has been in effect since 2003 and was originally designed for an
income trust structure. The Company and the Manager have agreed to
extend the termination date of the MSA to December 31, 2013 and the date for delivery of
such notice to on or before June 30,
2013.
The Board of Directors of the Company have convened a Special
Committee to evaluate various alternatives associated with the
renewal of the MSA and have engaged an external advisor.
Forward-Looking Statements
This news release contains forward-looking information and other
"forward-looking statements". The words such as "should", "will",
"continue", "plan", "believe", "expect", "anticipate", "intend",
"estimate", "approximate", "expected" and other expressions that
are predictions of or indicate future events and trends and that do
not relate to historical matters identify forward-looking
statements. Reliance should not be placed on forward-looking
statements because they involve known and unknown risks,
uncertainties and other factors that may cause the actual results,
performance or achievements of the Corporation to differ materially
from anticipated future results, performance or achievement
expressed or implied by such forward-looking statements. Factors
that could cause actual results to differ materially from those set
forward in the forward looking statements include a change in
general economic conditions, interest rates, consumer confidence,
the level of residential real estate resale transactions, the
average rate of commissions charged, competition from other
traditional real estate brokers or from discount and/or
Internet-based real estate alternatives, the availability of
acquisition opportunities and/or the closing of existing real
estate brokerage offices, other developments in the residential
real estate brokerage industry or the Corporation that reduce the
number of and/or royalty revenue from the Company's network of
15,238 REALTORS®, our ability to maintain brand equity through the
use of trademarks, the availability of equity and debt financing, a
change in tax provisions, and other risks detailed in the Company's
annual information form, which is filed with securities commissions
and posted on SEDAR at www.sedar.com. The Corporation undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
Conference Call
Brookfield Real Estate Services Inc. will host a conference call on
Friday, November 9, 2012 at
10 a.m. ET to discuss its third
quarter financial results.
To access the call by telephone, please dial (888) 231-8191 or
(647) 427-7450. Please connect approximately ten minutes prior to
the beginning of the call to ensure participation. A recording of
the conference call will be available on the Company's website by
November 12, 2012 at
http://www.brookfieldresinc.com/content/investor_centre-25063.html.
Supplemental Information
The Company's Interim Condensed Consolidated Financial Statements,
Supplemental Information and IFRS overview for the three and nine
months ended September 30, 2012
containing further information on the company's strategy,
operations and financial results can be found on our website at
www.brookfieldresinc.com. The Company's Management Discussion and
Analysis, Financial Statements and associated regulatory filings
will follow within prescribed timelines. Shareholders are
encouraged to read these documents.
Brookfield Real Estate Services Inc.
Profile
The Company is a leading provider of services to residential real
estate brokers and their REALTORS®¹. The Company generates cash
flow from franchise royalties and service fees derived from a
national network of real estate brokers and agents in Canada operating under the Royal LePage, Via
Capitale Real Estate Network and Johnston & Daniel brand names.
At September 30, 2012, the Company
network consisted of 15,238 REALTORS®. The Company network has an
approximate 22% share of the Canadian residential resale real
estate market based on transactional dollar volume. The Company
generates both fixed and variable fee components. Variable fees are
primarily driven by the total transactional dollar volume from the
sales commissions of REALTORS®, while fixed fees are based on the
number of agents and sales representatives in the network.
Approximately 68% of the Company's revenue is based on fees that
are fixed in nature; this provides revenue stability and helps
insulate the Company's cash flows from market fluctuations. The
Company is listed on the TSX and trades under the symbol "BRE". For
further information about the Company, please visit
www.brookfieldresinc.com.
1 REALTOR® is a trademark
identifying real estate licensees in Canada who are members of the Canadian
Real Estate Association.
SOURCE Brookfield Real Estate Services Inc.