TORONTO, March 9, 2017 /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 2016 annual financial results and the approval of a monthly
dividend to holders of the Company's restricted voting shares.
HIGHLIGHTS
- Cash flow from operations ("CFFO") for the year reached a
record $31.0 million or $2.42 per fully diluted restricted voting share
("Share") compared to $28.9 million
or $2.26 per Share in 2015.
- The Company's network of REALTORS® (the "Network")
increased to 17,580, up from 16,794 as at December 31, 2015. The increase was driven by 459
REALTORS® acquired by way of acquisition of Franchise
Agreements, and 327 REALTORS® recruited in the
year.
- Canadian housing market transactional dollar volume and
national average house price continued to increase, driven
primarily by the ongoing strength of the Greater Toronto Area market.
- The Board of Directors of the Company approved a dividend to
shareholders of $0.1083 per
restricted voting share payable April 28,
2017 to shareholders of record March
31, 2017, representing a target annual dividend of
$1.30 per restricted voting
share.
- Subsequent to December 31, 2016,
the Company acquired 55 Franchise Agreements in January 2017 representing 568
REALTORS® and an estimated annual royalty stream of
$1.2 million.
OPERATING RESULTS
For the year ended December 31, 2016,
CFFO was $31.0 million or
$2.42 per Share, an increase of 7.3%
as compared to $28.9 million or
$2.26 per Share in 2015. For the
fourth quarter of 2016, CFFO was $6.9
million or $0.54 per share,
unchanged from 2015 as continued strength in the Ontario market was offset by a 41% quarterly
drop in transactional dollar volume in Vancouver compared to the fourth quarter of
2015.
Royalty revenues for the year ended December 31, 2016, were $42.4 million compared to $39.9 million in 2015. For the quarter, royalty
revenues amounted to $9.6 million, up
marginally from $9.5 million in
2015. The benefit of higher fixed franchise fees (due to the
increased number of REALTORS® in the Network) and higher
premium fees (due to the strong GTA markets) was partly offset by
lower variable franchise fees resulting from the weaker markets in
Vancouver in the second half of
the year.
Net earnings in 2016 were $6.4
million or $0.67 per
restricted voting share as compared to $1.3
million, or $0.14 per
restricted voting share in 2015.
The increased royalties and improvement in annual CFFO were driven
primarily by an increase in the number
of REALTORS® in the Network and strong
Canadian real estate market, particularly in the GTA.
"We are pleased to report that 2016 was another banner year for
the Company. Our annual cash flow from operations was the highest
ever generated by the Company," said Phil
Soper, President and Chief Executive Officer, Brookfield
Real Estate Services Inc. "This improvement in CFFO was driven by a
$2.6 million increase in royalty
revenue this year as compared to 2015, as a result of a strong
Canadian real estate market, a significant increase in the number
of REALTORS® in the Company from acquisition and strong
recruiting growth, and lower cash operating expenses."
THE COMPANY NETWORK
As at December 31, 2016, the Network
was comprised of 17,580 REALTORS®, operating under 297
franchise agreements (providing services from 667 locations),
with approximately one fifth share of the Canadian residential real
estate market based on 2016 transactional dollar volume.
In 2016, the Company purchased 33 Franchise Agreements
representing an annual revenue stream of approximately $1.0 million from 459 REALTORS®.
The Company experienced net recruitment growth of 327
REALTORS®, compared to net attrition of 160
REALTORS® in 2015. The improvement in net recruitment
growth is due, in part, to specific programs designed to support
Brokerages in the Network in their recruiting performance as well
as their efforts to reduce attrition.
Effective January 1, 2017, the
Company acquired an additional 55 Franchise Agreements representing
568 REALTORS®, bringing the total Network to 18,148
REALTORS® across Canada.
REAL ESTATE MARKET
According to the Canadian Real Estate Association
("CREA")2, for the year ended December 31, 2016,
the Canadian Residential Real Estate Market (the "Canadian
Market"), as defined by total transactional dollar volume,
increased 17%, to $262.9
billion, compared to 2015, driven by an increase of
11% in national average selling price and a 6% increase
in units sold. For the three month period ended December
31, 2016, the Canadian Market was up 4%, at $49.8 billion, over the same period in 2015,
driven by a 6% increase in national average selling price and
a 2% decrease in units sold.
The most notable increase was in the greater Toronto area ("GTA"), according to
the Toronto Real Estate Board ("TREB")3 and
CREA. In 2016, the housing market in the GTA experienced a
year-over-year transactional dollar volume increase of 31%
driven by a 17% increase in average selling price, and a 12%
increase in number of units sold. In the fourth quarter of 2016,
the GTA market experienced a 36% transactional dollar volume
increase based on a 19% increase in average selling price and a 14%
increase in number of units sold over the same period in
2015.
Despite a significant drop in the market in the second half of
the year, the Greater Vancouver
housing market saw healthy annual growth in 2016, according to
CREA. While second half activity was 32% below 2015 levels,
transactional dollar volume for the full twelve months increased
by 7% driven by a 13% increase in average selling price, and a
5% decrease in number of units sold year-over-year.
OUTLOOK
"There was notable disparity in home price
appreciation between Canadian regions in 2016, with rates ranging
from double-digit extremes in some cities to negative growth in
others," said Soper. "Looking ahead, we expect the house price
appreciation gap between regions to narrow in 2017 with a trend
toward historical norms as some overheated markets slow, while
activity levels in a number of cool markets begin to pick up. This
trend is anticipated to be driven primarily by a modest price
correction in the Greater
Vancouver housing market, strong but moderating price
appreciation in the GTA, and welcomed upward price trends in
Quebec, Atlantic Canada and Alberta."
"Unlike Vancouver where a price
correction is underway, there is no relief in sight for the GTA –
forward momentum and supporting fundamentals in the region remain
strong," continued Soper. "And, while we don't anticipate a strong
housing rebound for Alberta, we
are calling 2016 as the bottom for this correctional phase of the
cycle. We base our outlook not on a sharp increase in the
value of oil, but upon maintaining a $50/barrel floor, allowing the energy industry to
move into modest growth mode."
CASH DIVIDEND
The Company declared a cash dividend of
$0.1083 per restricted voting share
payable on April 28, 2017, to
shareholders of record on March 31,
2017. 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 Thursday,
March 9, 2017 at 10 a.m. ET to
discuss its annual and fourth quarter financial results for
2016.
To access the call by telephone, please dial 1-888-231-8191 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 Wednesday, March
15, 2017.
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", "ongoing", "target", "estimate",
"outlook", "ahead", "expect", "trend", "anticipate",
"forward", "calling", "believes" 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
supply or demand of houses for sale in Canada or in any particular region within
Canada, changes in the selling
price for houses in Canada or any
particular region within Canada,
changes in the Company's strategy with respect to dividends,
changes in the productivity of the Company's REALTORS®
or the commissions they charge their customers, 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. Forward-looking information
is based on various material factors or assumptions, which are
based on information currently available to management. Material
factors or assumptions that were applied in drawing conclusions or
making estimates set out in the forward-looking statements include,
but are not limited to: anticipated economic conditions,
anticipated impact of government policies, anticipated financial
performance, anticipated market conditions, business prospects, the
successful execution of the Company's business strategies and
recent regulatory developments. The factors underlying current
expectations are dynamic and subject to change. Although the
forward-looking statements contained in this MD&A are based
upon what management believes are reasonable assumptions, the
Company cannot assure readers that actual results will be
consistent with these forward-looking statements. 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. ("BRESI") is a leading provider of
services to residential real estate brokers and a network of more
than 18,000 REALTORS®1. BRESI operates 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 $250 billion of
assets under management. For more information, go
to www.brookfield.com.
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1
REALTORS® is a trademark identifying real estate
licensees in Canada who are members of the Canadian Real Estate
Association.
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2 Source:
National MLS® Report: The Canadian Real Estate
Association News Release as of January 16, 2017
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3 Source:
Toronto Real Estate Board Market Watch as of January 5,
2017.
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Brookfield Real
Estate Services Inc.
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Balance Sheet
Highlights
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As at
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|
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December
31,
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December
31,
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(Unaudited, in
thousands of Canadian dollars)
|
|
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2016
|
2015
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Cash
|
|
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$
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3,102
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$
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5,645
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Other current
assets
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4,114
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4,245
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Total current
assets
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7,216
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9,890
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Non-current
assets
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85,187
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88,224
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Total
assets
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$
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92,403
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$
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98,114
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Accounts payable and
accrued liabilities
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$
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893
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$
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1,181
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Current portion of
purchase obligation
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3,559
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2,824
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Interest payable on
Exchangeable Units
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435
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476
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Dividends
payable
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476
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1,027
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Other current
liabilities
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1,027
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640
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Total current
liabilities
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6,390
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6,148
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Debt
facilities
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63,720
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64,662
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Other non-current
liabilities
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1,114
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3,890
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Exchangeable
Units
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52,477
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48,784
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Total
Liabilities
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123,701
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123,484
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Shareholders'
deficit
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(31,298)
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(25,370)
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Total Liabilities
and Shareholders' deficit
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$
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92,403
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$
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98,114
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Earnings (Loss)
Highlights
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Three
months
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Three
months
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|
|
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ended
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ended
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Year
ended
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Year ended
|
|
December
31,
|
December
31,
|
December
31,
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December
31,
|
(Unaudited, in
thousands of Canadian dollars)
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2016
|
2015
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2016
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2015
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Royalties
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$
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9,602
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$
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9,539
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$
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42,436
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$
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39,859
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Administration
Expense
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(308)
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(252)
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(1,058)
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(1,286)
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Management
Fee
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(1,734)
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(1,734)
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(7,754)
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(7,229)
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Interest
Expense
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(627)
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(619)
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(2,606)
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(2,428)
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Cash Flow from
Operations
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6,933
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6,934
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31,018
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28,916
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Impairment, write-off
and amortization of intangible assets
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(2,155)
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(3,199)
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(9,694)
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(10,939)
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Interest on
Exchangeable Units
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(1,428)
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(1,408)
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(5,710)
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(5,434)
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Gain / (loss) on fair
value of Exchangeable Units
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2,762
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(4,027)
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(3,694)
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(5,524)
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Gain / (loss) on
interest rate swap
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621
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84
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822
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(1,454)
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Gain / (loss) on fair
value of purchase obligation
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(167)
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(454)
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(1,568)
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(633)
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Income tax
expense
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(1,239)
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(931)
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(4,777)
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(3,608)
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Net and
comprehensive earnings / (loss)
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$
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5,327
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$
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(3,001)
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$
|
6,397
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$
|
1,324
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Basic earnings /
(loss) per Restricted Voting Share
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$
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0.56
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$
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(0.32)
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$
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0.67
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$
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0.14
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Diluted earnings /
(loss) per Share
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$
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0.31
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$
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(0.32)
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$
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0.67
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$
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0.14
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Cash Flow from
Operations per Share on a diluted basis
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$
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0.54
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$
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0.54
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$
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2.42
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$
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2.26
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Cash Flow
Highlights
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Three
months
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Three
months
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ended
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ended
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Year
ended
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Year ended
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December
31,
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December
31,
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December
31,
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December
31,
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(Unaudited, in
thousands of Canadian dollars)
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2016
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2015
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2016
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2015
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Cash provided by
Operating activities:
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$
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4,728
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$
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5,426
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$
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20,148
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$
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20,433
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Cash provided used
for Investing activities:
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(1,344)
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29
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(9,366)
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(18,121)
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Cash provided /
(used) by/for Financing activities:
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(5,081)
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(4,964)
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(13,325)
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281
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Change in cash for
the period
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(1,697)
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491
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(2,543)
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2,593
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Cash, beginning of
the period
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4,799
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5,154
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5,645
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3,052
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Cash, end of the
period
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$
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3,102
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$
|
5,645
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$
|
3,102
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$
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5,645
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SOURCE Brookfield Real Estate Services Inc.