TORONTO, May 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 first quarter 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 three months ended
March 31, 2017 increased by 9% to
$7.4 million or $0.58 per fully diluted restricted voting share
("Share"), compared to $6.8 million
or $0.53 per Share in the same period
in 2016.
- The Company's network of REALTORS® (the
"Network") increased to 18,077, up from 17,580 as at December
31, 2016. The increase was driven by 568
REALTORS® acquired by way of the acquisition of
Franchise Agreements, partly offset by net attrition of 71
REALTORS® during the quarter.
- 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 June 30, 2017 to shareholders of record on
May 31, 2016, representing a target
annual dividend of $1.30 per
restricted voting share.
FIRST QUARTER OPERATING RESULTS
CFFO for the first quarter of 2017 improved to $7.4 million or $0.58 per Share, an increase of 9% as compared to
$6.8 million or $0.53 per Share for the same period in 2016. For
the rolling twelve-month period ended March
31, 2017, CFFO was $2.47 per
Share as compared to $2.31 per Share
for the rolling twelve-month period ended March 31, 2016.
Royalties for the three months ended March 31, 2017, were $10.4
million, compared to $9.4
million for the same period in 2016. For the rolling
twelve-month period ended March 31,
2017, royalties were $43.5 million, compared to
$40.8 million for the same period in
2016.
The improvement in CFFO was primarily driven by a $1.0 million increase in royalties as a result of
an increase in the number of REALTORS® in the Network partly offset
by a $0.4 million increase in
expenses, due to higher management fees and higher administration
expenses as compared to the three month period ended March 31, 2016.
During the quarter, the Company generated net earnings of
$1.3 million or $0.13 per Share, compared to net earnings of
$0.9 million or $0.10 per Share in 2016.
"Cash flow from operations continued to grow during the quarter,
underpinned by an increase in royalties and the strong accretive
growth of our REALTOR® Network," said Phil Soper, President and Chief Executive
Officer, Brookfield Real Estate Services Inc.
THE COMPANY NETWORK
As at March 31, 2017, the Network
was comprised of 18,077 REALTORS®, operating under 302
franchise agreements providing services from 675 locations, with
approximately a one fifth share of the Canadian residential
real estate market ("Canadian Market") based on 2016 transactional
dollar volume. This represents an increase of 497
REALTORS® for the quarter, comprised of 568
REALTORS® acquired under 55 franchise agreements on
January 1, 2017, partly offset by net
attrition of 71 REALTORS®. The 55 franchise agreements
acquired on January 1, 2017, are
estimated to generate royalties of $1.2
million annually.
REAL ESTATE MARKETS
According to the Canadian Real Estate Association
("CREA")2, for the three months ended March 31, 2017, the Canadian Market, as defined
by total transactional dollar volume, was up 7% at $60.9
billion, compared to the same period in 2016, driven by a 5%
increase in average selling price and a 2% increase in units sold.
For the rolling twelve-month period ended March 31, 2017, the Canadian Market, closed up
12%, at $267 billion, as compared to
the rolling twelve-month period ended March
31, 2016, driven by an increase of 8% in average selling
price and a 4% increase in units sold.
The most marked transactional dollar volume increase was found
in the Greater Toronto Area
("GTA"), according to the Toronto Real Estate Board
("TREB")3 and CREA. During the quarter, the market
experienced a transactional dollar volume increase of 45% when
compared to the same period last year, driven by a 29%
year-over-year increase in average selling price and a 12%
year-over-year increase in the number of units sold. On a rolling
twelve-month basis, the GTA market's transactional dollar volume
increased by 34%, driven by a 20% increase in average selling
price, and an 11% increase in the number of units sold.
Meanwhile, during the quarter, the Greater Vancouver area ("GVA") market
encountered the largest year-over-year loss with an approximate 37%
decrease in the number of units sold and a 12% decrease in price.
For the rolling twelve-month period ended March 31, 2017, the GVA experienced a 21%
decrease in the number of units sold and a 2% increase in price in
comparison to the same period last year, due in part to the impact
of government policies introduced in 2016 designed to moderate
significant increases in selling prices in the market.
OUTLOOK
Canada's residential real
estate market saw substantial price growth in the first quarter of
2017. While the majority of housing markets in Canada posted modest gains, price appreciation
across much of Ontario
significantly outpaced the rest of the country and propped up the
national average.
"For the first time in several years, real estate markets in
Vancouver and Toronto are headed in opposite
directions," said Soper. "During the first quarter, home
price appreciation in Greater
Vancouver was noticeably lower than the historic highs
witnessed in 2016, driven by eroding affordability and regulatory
intervention."
While the number of homes trading hands in Greater Vancouver has decreased markedly when
compared to the same time last year, sales activity has grown in
each month of the quarter, providing an indication that the market
may have bottomed out and could be starting to recover.
"As price appreciation slowed in the Lower Mainland of
British Columbia this quarter, the
Greater Toronto Area claimed the title of Canada's hottest housing market," Soper
continued. "A lack of inventory, coupled with robust demand
fueled by a strong economy, immigration, high household formation
and continued low interest rates, has resulted in significant home
price appreciation throughout the GTA. These market
characteristics have begun to spill out into areas well
outside of the municipality's borders, resulting in significant
home price appreciation in the 'Golden Horseshoe', and as far
away as Windsor and London in southwestern Ontario."
CASH DIVIDEND
The Company declared a cash dividend of $0.1083 per restricted voting share payable on
June 30, 2017, to shareholders of
record on May 31, 2016. This
represents a targeted annual dividend of $1.30 per restricted voting share.
ANNUAL GENERAL MEETING
First quarter results will be shared at the Brookfield Real
Estate Services Inc. Annual General Meeting being held today,
Tuesday, May 9, 2017 at 10:00 a.m. ET at the Estates of Sunnybrook, Vaughan Estate, Courtyard
Ballroom, located at 2075 Bayview Avenue, Toronto, Ontario.
Shareholders unable to attend in person may listen online via
webcast at:
http://event.on24.com/r.htm?e=1407730&s=1&k=7B1577A06B0F41A07A42AF2587F8EC3E.
A copy of the Annual General Meeting presentation will be
available on the Company's website by Friday, May 12, 2017 at:
http://www.brookfieldresinc.com/content/investor_centre/webcasts_and_presentations-25072.html
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", "target",
"start", "momentum", "continue", "growth", "estimate", "outlook",
"headed", "starting", "may", "would", "could", "rising", "likely",
"coming" 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 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 the Company's strategy with respect to dividends, 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, changes in the productivity of
REALTORS® in the Company's Network, changes in general
economic conditions (including interest rates, consumer confidence
and other general economic factors or indicators) in Canada or any particular region of
Canada, the ability of governments
pass legislation and regulations related to indicated policies,
changes in global and regional economic growth, changes in 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, 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
18,000 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.
1 REALTORS® is a
trademark identifying real estate licensees in Canada who are
members of the Canadian Real Estate Association.
|
2 Source: National
MLS® Report: The Canadian Real Estate Association
News Release as of April 18, 2017
|
3 Source: Toronto Real Estate Board
Market Watch as of April 5, 2017.
|
Brookfield Real
Estate Services Inc.
|
|
|
|
|
|
Interim Balance
Sheet Highlights
|
|
|
As at
|
March
31,
|
December
31,
|
(Unaudited, in
thousands of Canadian dollars)
|
2017
|
2016
|
Cash
|
$
|
3,305
|
$
|
3,102
|
Other current
assets
|
4,990
|
4,114
|
Total current
assets
|
8,295
|
7,216
|
Non-current
assets
|
91,294
|
85,187
|
Total
assets
|
$
|
99,589
|
$
|
92,403
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
827
|
$
|
893
|
Current portion of
purchase obligation
|
4,279
|
3,559
|
Interest payable on
Exchangeable Units
|
476
|
476
|
Dividends
payable
|
1,027
|
1,027
|
Other current
liabilities
|
40
|
435
|
Total current
liabilities
|
6,649
|
6,390
|
Debt
facilities
|
71,134
|
63,720
|
Other non-current
liabilities
|
1,064
|
1,114
|
Exchangeable
Units
|
53,842
|
52,477
|
Total
Liabilities
|
132,689
|
123,701
|
Shareholders'
deficit
|
(33,100)
|
(31,298)
|
Total Liabilities
and Shareholders' deficit
|
$
|
99,589
|
$
|
92,403
|
|
|
|
Interim Earnings
Highlights
|
|
|
|
|
|
For three months
ended March 31,
|
2017
|
2016
|
(Unaudited, in
thousands of Canadian dollars)
|
|
|
Royalties
|
$
|
10,409
|
$
|
9,602
|
Administration,
Management Fee and Interest Expense
|
(3,035)
|
(2,669)
|
Cash Flow from
Operations
|
7,374
|
6,933
|
Impairment, write-off
and amortization of intangible assets
|
(2,182)
|
(2,155)
|
Interest on
Exchangeable Units
|
(1,428)
|
(1,428)
|
Gain / (loss) on fair
value of Exchangeable Units
|
(1,365)
|
2,762
|
Gain on interest rate
swap
|
50
|
621
|
Loss on fair value of
purchase obligation
|
(74)
|
(167)
|
Income
taxes
|
(1,096)
|
(1,239)
|
Net and
comprehensive earnings
|
$
|
1,279
|
$
|
5,327
|
Basic earnings per
Restricted Voting Share
|
$
|
0.13
|
$
|
0.56
|
Diluted earnings
per Share
|
$
|
0.13
|
$
|
0.31
|
Cash Flow from
Operations per Share on a diluted basis
|
$
|
0.58
|
$
|
0.54
|
|
|
|
Interim Cash Flow
Highlights
|
|
|
|
|
|
For three months
ended March 31,
|
2017
|
2016
|
(Unaudited, in
thousands of Canadian dollars)
|
|
|
Cash provided by
Operating activities:
|
$
|
3,409
|
$
|
4,728
|
Cash provided used
for Investing activities:
|
(7,525)
|
(1,344)
|
Cash provided by
Financing activities:
|
4,319
|
(5,081)
|
Change in cash for
the period
|
203
|
(1,697)
|
Cash, beginning of
the period
|
3,102
|
4,799
|
Cash, end of the
period
|
$
|
3,305
|
$
|
3,102
|
SOURCE Brookfield Real Estate Services Inc.