TORONTO, Nov. 11, 2016 /CNW/ - Brookfield Real Estate
Services Inc. (TSX: BRE), a leading provider of services to
residential real estate brokers and their
REALTORS®1 (the "Company"), today announced
its third quarter financial results (including its cash flow from
operations ("CFFO")), and the approval of a monthly dividend to
holders of the Company's restricted voting shares.
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1
REALTORS® is a trademark identifying real estate licensees in
Canada who are members of the Canadian Real Estate
Association.
|
HIGHLIGHTS
- CFFO on a rolling twelve-month basis increased by 12% to
$2.42 per Share compared
to 2015.
- The Company's network of REALTORS® (the "Network") grew to
17,538, up from 17,405 as at June 30, 2016.
- Canadian housing market annualized transactional dollar volume
and national average house price continued to increase driven by
strong markets in the greater Toronto and greater Vancouver areas.
- The Board of Directors of the Company approved a dividend
payable to shareholders on December 30,
2016 of $0.1083 per restricted voting share,
representing an annualized rate of $1.30 per voting share.
THIRD QUARTER OPERATING RESULTS
CFFO for the third quarter of 2016 improved to $9.3 million or $0.73 per Share on a diluted basis ("Share"), an
increase of 9% as compared to $8.5
million or $0.66 per Share for
the same period in 2015. For the rolling twelve-month period ended
September 30, 2016, CFFO was
$2.42 per Share as compared to
$2.16 per Share for the rolling
twelve-month period ended September 30, 2015.
Royalties for the three months ended September 30, 2016 were $12.6 million, compared to $11.6 million for the same period in 2015. For
the nine months ended September 30,
2016, royalties were $32.8 million, compared to
$30.3 million for the same period in
2015.
The increased royalties and improvement in CFFO were driven
primarily by an increase in the number of REALTORS® in the
Network and supported by strong real estate markets, particularly
in Ontario and British Columbia.
"Cash flow from operations drives our dividend, and again this
year we are outperforming previous years' results," said
Phil Soper, President and Chief
Executive Officer, Brookfield Real Estate Services Inc.
"Contributing to this strong performance is an increase in
royalties underpinned by the continued growth of our
REALTOR® Network through both acquisition and recruiting and
retention."
The Company experienced a net loss of $1.0 million, or $0.11 per Share, for the three months ended
September 30, 2016, compared to
$7.8 million, or $0.31 per Share, for the same period in 2015. For
the nine months ended September 30,
2016, net earnings were $1.1
million, or $0.11 per Share,
compared to $4.3 million, or
$0.46 per Share, for the same period
in 2015.
The net loss for the quarter results from the change in the fair
value of exchangeable units issued by the Company. The
liability associated with the exchangeable units is determined with
reference to the share price of the Company's restricted voting
shares as at each reporting date. During the third quarter of
2016, the share price of the Company's restricted voting shares
increased from $14.98 at June 30, 2016 to $16.60 at September 30,
2016, resulting in an unrealized loss of $5.4 million. During the third quarter of
2015, the share price of the restricted voting shares decreased
from $15.03 to $13.45 resulting in an unrealized gain of
$5.3 million. For the nine
months ended September 2016, the
Company recognized an unrealized loss on the value of exchangeable
units of $6.5 million versus a loss
of $1.5 million for the same period
in 2015.
THE COMPANY NETWORK
As at September 30, 2016, the Network
was comprised of 17,538 REALTORS®, operating under 302 franchise
agreements providing services from 668 locations, with
approximately a one fifth share of the Canadian residential
real estate market ("Canadian Market") based on 2015 transactional
dollar volume.
REAL ESTATE MARKETS
According to the Canadian Real Estate Association
("CREA")2, for the rolling twelve-month
period ended September 30, 2016, the
Canadian Market, as defined by total transactional dollar volume,
closed up 20%, at $261.2 billion,
compared to the rolling twelve-month period ended September 30, 2015, driven by an increase of 12%
in average selling price and a 8% increase in units sold. For the
three months ended September 30,
2016, the Canadian Market was up 12%, at $65.6 billion,
compared to the same period in 2015, driven by an 8% increase in
average selling price and a 3% increase in units sold.
The most marked annual increases were found in the Greater Toronto Area ("GTA") and in
Greater Vancouver, according to
the Toronto Real Estate Board
("TREB")3 and CREA. On a rolling
twelve-month basis, the housing market in the GTA experienced a
year-over-year transactional dollar volume increase of 27% driven
by a 15% increase in average selling price, and an 11% increase in
number of units sold. Greater
Vancouver experienced a year-over-year transactional dollar
volume increase of 28% driven by a 16% increase in average selling
price, and a 10% increase in number of units sold. For the three
months ended September 30, 2016, the
GTA market experienced a 34% increase in transactional dollar
volume driven by a 18% increase in average selling price and a 13%
increase in number of units sold, compared to the same period in
2015. For the three months ended September
30, 2016, the Greater
Vancouver market decreased by 22% on a transactional dollar
volume basis, driven by a 25% decrease in number of units sold,
compared to the same period in 2015. During the quarter, the
average selling price within the Greater
Vancouver region increased by 4% compared to the same period
in 2015.
_________________________________
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2 Source:
National MLS® Report: The Canadian Real Estate Association News
Release as of October 14, 2016, and October 15, 2015
|
3 Source:
Toronto Real Estate Board Market Watch as of October 5, 2016 and
October 5, 2015.
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OUTLOOK
"Canada's residential real estate
market continued to grow in the third quarter of 2016, with home
values showing modest to strong price appreciation in almost every
Canadian city," said Soper. "Homes across Ontario experienced significant growth during
the period, with the Greater Toronto
Area leading the country in terms of robust sales activity
and demand. On the other hand, Vancouver,
Canada's most expensive market, began to show signs of
cyclical cooling. Despite recording impressive year-over-year price
appreciation, the number of homes trading hands has been slowing on
eroding affordability, which may ultimately lead to moderating
prices in the future."
"Quebec and Alberta continued to impress this quarter,"
continued Soper, "Both provinces exceeded expectations, with
Montreal already surpassing its
annual economic targets and Calgary withstanding what many believe to be
the worst of the downturn, leading to better-than-expected results
within the regions' housing markets."
"While recent government intervention within the Canadian real
estate market has been significant, it appears that Canadian
homebuyers are adjusting quickly, and fears of a hard correction
may be unwarranted," Soper claimed. "Looking ahead, we expect the
national real estate market to continue to appreciate for the
remainder of 2016, albeit at a more gradual pace, as Vancouver begins to transition to a more
balanced market."
CASH DIVIDEND
The Company declared a cash dividend of $0.1083 per restricted voting share payable on
December 30, 2016, to shareholders of
record on November 30, 2016. This
represents a targeted annual dividend of $1.30 per restricted voting share.
CONFERENCE CALL
Brookfield Real Estate Services Inc. will host a conference call on
Friday, November 11, 2016 at
9:30 a.m. ET to discuss its third
quarter 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 in the Investor Centre
section of the Company's website by Monday,
November 21, 2016.
CFFO
This news release and accompanying financial statements make
reference to CFFO on a total and per Share basis. CFFO is defined
as operating income prior to deducting impairment and amortization
of intangible assets. 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 and the financial position of its business and
believes that many of its shareholders and analysts also find this
measure useful. CFFO does not have any standard meaning prescribed
by IFRS and therefore may not be comparable to similar measures
presented by other companies.
FORWARD LOOKING STATEMENTS
This news release contains forward-looking information and other
"forward-looking statements". Words such as "continue", "outlook",
"lead", "leading", "signs", "appears", "ahead", "expect", "begins",
"began", "been", "may", "believe", "will", and other expressions
that are predictions of or could 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 Company 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 indicated in the forward looking statements
include: changes in the Company's strategy with respect to
dividends, changes in the supply of houses for sale in Canada or in any particular region within
Canada, changes in the demand for
houses in Canada or any particular
region within Canada, changes in
government policy, laws or regulations which could reasonably
affect the housing markets in Canada, Consumer response to any changes in
the housing markets in Canada or
any changes in government policy, laws or regulations,
changes in general economic conditions (including interest rates,
consumer confidence and other general economic factors or
indicators), changes in global and regional economic growth, the
demand for and prices of natural resources on local and
international markets, the level of residential real estate
transactions, competition from other real estate brokers or from
discount and/or Internet-based real estate alternatives, the
closing of existing real estate brokerage offices, other
developments in the residential real estate brokerage industry or
the Company that reduce the number of REALTORS® in the
Company's Network or royalty revenue from the Company's Network,
our ability to maintain brand equity through the use of trademarks,
the methods used by shareholders or analysts to evaluate the value
of the Company and its publicly traded securities, changes in tax
laws or regulations, 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 Company
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.
About Brookfield Real Estate Services Inc.
Brookfield Real Estate Services Inc. is a leading provider of
services to residential real estate brokers and a network of over
17,000 REALTORS®. We operate in Canada under the Royal LePage, Via
Capitale and Johnston & Daniel brands. Further information is
available at www.brookfieldresinc.com.
Brookfield Real Estate Services Inc. is an affiliate of
Brookfield Asset Management, a leading global alternative asset
manager with over $250 billion of
assets under management. For more information, go
to www.Brookfield.com.
Brookfield Real
Estate Services Inc.
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Interim Balance
Sheet Highlights
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As at
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September
30,
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December
31,
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(Unaudited, in
thousands of Canadian dollars)
|
|
|
|
|
|
2016
|
|
2015
|
Cash
|
|
|
|
|
$
|
4,799
|
$
|
5,645
|
Other current
assets
|
|
|
|
|
|
4,834
|
|
4,245
|
Total current
assets
|
|
|
|
|
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9,633
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|
9,890
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Non-current
assets
|
|
|
|
|
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87,530
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|
88,224
|
Total
assets
|
|
|
|
|
$
|
97,163
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$
|
98,114
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
|
|
|
$
|
1,247
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$
|
1,181
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Current portion of
purchase obligation
|
|
|
|
|
|
4,787
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|
2,824
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Interest payable on
Exchangeable Units
|
|
|
|
|
|
476
|
|
476
|
Dividends
payable
|
|
|
|
|
|
1,027
|
|
1,027
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Other current
liabilities
|
|
|
|
|
|
494
|
|
640
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Total current
liabilities
|
|
|
|
|
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8,031
|
|
6,148
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Debt
facilities
|
|
|
|
|
|
65,705
|
|
64,662
|
Other non-current
liabilities
|
|
|
|
|
|
1,735
|
|
3,890
|
Exchangeable
Units
|
|
|
|
|
|
55,240
|
|
48,784
|
Total
Liabilities
|
|
|
|
|
|
130,711
|
|
123,484
|
Shareholders'
deficit
|
|
|
|
|
|
(33,548)
|
|
(25,370)
|
Total Liabilities
and Shareholders' deficit
|
|
|
|
|
$
|
97,163
|
$
|
98,114
|
|
|
|
|
|
|
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Interim Earnings
(Loss) Highlights
|
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|
|
|
|
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Three
months
|
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Three
months
|
|
Nine
months
|
|
Nine
months
|
|
|
ended
|
|
ended
|
|
ended
|
|
ended
|
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
(Unaudited, in
thousands of Canadian dollars)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Royalties
|
$
|
12,567
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$
|
11,565
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$
|
32,833
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$
|
30,320
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Administration
Expense
|
|
(252)
|
|
(348)
|
|
(750)
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(1,034)
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Management
Fee
|
|
(2,331)
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|
(2,115)
|
|
(6,021)
|
|
(5,495)
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Interest
Expense
|
|
(662)
|
|
(640)
|
|
(1,980)
|
|
(1,809)
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Cash Flow from
Operations
|
|
9,322
|
|
8,462
|
|
24,082
|
|
21,982
|
Impairment, write-off
and amortization of intangible assets
|
|
(2,395)
|
|
(2,659)
|
|
(7,539)
|
|
(7,740)
|
Interest on
Exchangeable Units
|
|
(1,428)
|
|
(1,372)
|
|
(4,283)
|
|
(4,026)
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Gain / (loss) on fair
value of Exchangeable Units
|
|
(5,391)
|
|
5,258
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|
(6,456)
|
|
(1,497)
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Gain / (loss) on
interest rate swap
|
|
177
|
|
(257)
|
|
201
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|
(1,538)
|
Gain / (loss) on fair
value of purchase obligation
|
|
311
|
|
(481)
|
|
(1,401)
|
|
(179)
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Income tax
expense
|
|
(1,634)
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|
(1,140)
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(3,538)
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(2,677)
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Net and
comprehensive earnings / (loss)
|
$
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(1,038)
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$
|
7,811
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$
|
1,066
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$
|
4,325
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Basic earnings /
(loss) per Restricted Voting Share
|
$
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(0.11)
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$
|
0.82
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$
|
0.11
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$
|
0.46
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Diluted earnings /
(loss) per Share
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$
|
(0.11)
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$
|
0.31
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$
|
0.11
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$
|
0.46
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Cash Flow from
Operations per Share on a diluted basis
|
$
|
0.73
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$
|
0.66
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$
|
1.88
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$
|
1.72
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Cash Flow from
Operations per Share on a diluted basis -
rolling twelve-month period ended September 30,
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|
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$
|
2.42
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$
|
2.16
|
|
|
|
|
|
|
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Interim Cash Flow
Highlights
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Three
months
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Three
months
|
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Nine
months
|
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Nine
months
|
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|
ended
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ended
|
|
ended
|
|
ended
|
|
|
September
30,
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September
30,
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|
September
30,
|
|
September
30,
|
(Unaudited, in
thousands of Canadian dollars)
|
|
2016
|
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2015
|
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2016
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2015
|
Cash provided by
Operating activities:
|
$
|
7,077
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$
|
7,143
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$
|
15,416
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$
|
14,984
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Cash provided used
for Investing activities:
|
|
(7)
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|
(7,799)
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|
(8,018)
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|
(18,127)
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Cash provided /
(used) by/for Financing activities:
|
|
(6,081)
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|
2,935
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|
(8,244)
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|
5,245
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Change in cash for
the period
|
|
989
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|
2,279
|
|
(846)
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|
2,102
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Cash, beginning of
the period
|
|
3,810
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|
2,875
|
|
5,645
|
|
3,052
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Cash, end of the
period
|
$
|
4,799
|
$
|
5,154
|
$
|
4,799
|
$
|
5,154
|
|
|
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SOURCE Brookfield Real Estate Services Inc.