TORONTO, May 7, 2013 /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 months ended March 31, 2013 was
$5.6 million or $0.436 per restricted voting share ("Share"),
compared to $5.6 million or
$0.434 per Share for the same period
in 2012.
Royalties for the three months ended March 31, 2013 were $8.1
million, down slightly from $8.2
million for the same period in 2012. The net loss for the
three months ended March 31, 2013 was
$0.5 million, or $0.06 loss per Share, as compared to net loss of
$3.2 million or $0.33 loss per Share, for the same period in
2012.
OVERVIEW OF FIRST QUARTER OPERATING RESULTS
During the Quarter the Company generated CFFO of $5.6 million, which was up slightly from the same
period of 2012. The tightening of mortgage-lending rules introduced
in July 2012, contributed to a pull
of market activity into the first half of 2012, resulting in an
abnormally active comparative period. Royalties were down slightly
this quarter as the industry returns to more normalized
transactional patterns and cycle over the last year's period of
heightened activity. Offsetting this decrease was a $0.2 million reduction in administration costs
due primarily to a lower quarter-over-quarter bad debt provision
resulting from the success of increased collection efforts as well
as a reduction in professional fees as a result of the completion
of activities in 2012 related IFRS requirements and the conversion
of the Company from a Fund to a corporation.
For the three months ended March 31,
2013, the Canadian market transactional dollar volume of
$34.8 billion decreased by 12.2% from
the same period in 2012, driven solely by a decrease in units sold.
The average sales price of a home remained largely unchanged due
primarily to a balanced market supported by reduced listings and
low interest rates. For the three months ended March 31, 2013, the Toronto market transactional dollar volume was
down 10.5% over the same period in 2012, also driven primarily by a
decrease in home sale activity.
"The first quarter of 2013 saw an unusual grouping of economic
factors which brought stability to the Canadian housing market:
consistently low interest rates, an expanding economy, with
essentially flat home prices," said Phil
Soper, President and Chief Executive Officer, Brookfield
Real Estate Services Inc. "Together, these factors should mitigate
the length and severity of the current cyclical correction."
"We saw a year-over-year decline in sales volumes in the
quarter, as the lingering impact of last summer's introduction of
more restrictive mortgage rules affected entry-level buyers, and
some sellers delayed listing their homes on speculation of a real
estate price correction," continued Soper. "Buyers looking to make
opportunistic purchases in a soft market, however, were largely
disappointed as home prices held firm across almost all
markets."
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 March 31, 2013 the Company
Network was comprised of 15,558 REALTORS®, operating under 440
franchise agreements providing services from 679 locations, with an
approximate 24% share of the Market based on 2012 transactional
dollar volume.
Outlook
"As we previously forecasted, the Canadian residential real estate
market is in the midst of a cyclical slowdown which has seen lower
unit sales volumes and price appreciation reduced. We believe
we are well through the correction, which began in the third
quarter of 2012," said Soper. "In the first quarter of 2013 we saw
fewer homes trade hands, but starting in the second half of 2013,
Management expects volumes to adjust to normal levels."
Monthly Cash Dividend
On May 6th the Company declared a
dividend of $0.092 per share for the
month of May 2013, payable on
June 28th, 2013 to shareholders of
record on May 31st, 2013.
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 prescribed 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 notice to terminate to on or before June 30, 2013. If such notice is not received,
the MSA will automatically renew for a ten year period. 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
15,558 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
Tuesday, May 7, 2013 at 2 p.m. ET to discuss its financial results for
the first quarter of 2013.
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
May 8, 2013 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 months
ended March 31, 2013 contain further
information on the company's strategy, operations and financial
results and 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 March 31, 2013, the Company
network consisted of 15,558 REALTORS®. The Company network has an
approximate 24% share of the Canadian residential resale real
estate market based on 2012 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 73% 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.