TORONTO, March 7, 2018 /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
2017 annual financial results and the approval of a monthly
dividend to holders of the Company's restricted voting shares.
HIGHLIGHTS
- The Company generated net earnings of $12.4 million, or $1.31 per restricted voting share ("Share"), as
compared to $6.4 million, or
$0.67 per Share in 2016.
- The Company generated exceptional cash flow from operations
("CFFO") of $32.7 million or
$2.55 per Share, an increase of 5.5%
as compared to $31.0 million or
$2.42 per Share in 2016.
- The Company's network of REALTORS® (the
"Network") increased to 18,135, up 3% from 17,580 as at
December 31, 2016.
- The Board of Directors of the Company approved a dividend to
shareholders of $0.1125 per
restricted voting share payable April 30, 2018 to
shareholders of record March 30,
2018, representing a target annual dividend of $1.35 per restricted voting share.
OPERATING RESULTS
For the year ended December 31, 2017, CFFO was $32.7 million or $2.55 per Share, an increase of 5.5% as compared
to $31.0 million or $2.42 per Share in 2016. The improvement in CFFO
was driven by an increase in royalties as a result of an increase
in the number of REALTORS® in the Company Network
and lower cash operating expenses due to lower bad debt and other
administration expenses as compared to 2016. For the fourth quarter
of 2017, CFFO was $7.0 million or
$0.55 per Share compared to
$6.9 million or $0.54 per Share in the fourth quarter of
2016.
Royalty revenues for the year ended December 31, 2017, were $44.2 million compared to $42.4 million in 2016. The strong Canadian
residential real estate market in the first six months of the year,
combined with a 3% increase in the number of REALTORS®
in the Company Network, contributed to the year-over-year
increase. For the fourth quarter, royalty revenues amounted
to $9.5 million, down marginally from
$9.6 million in 2016 as a result of
weaker real estate markets in the last half of 2017, particularly
in southern Ontario.
Net earnings in 2017 were $12.4
million or $1.31 per Share as
compared to $6.4 million, or
$0.67 per Share in 2016.
"We are pleased with the strong financial and operational
results the Company delivered in 2017. Our annual cash flow from
operations was exceptional," said Phil
Soper, President and Chief Executive Officer, Brookfield
Real Estate Services Inc. "Our sustained financial success is a
result of our growing Company Network of REALTORS®.
Nationwide, our brands continue to attract engaged and motivated
entrepreneurs as they look for the best operating model in the
real estate brokerage industry."
THE COMPANY NETWORK
As at December 31, 2017, the Network was comprised of
18,135 REALTORS®, operating under 293 franchise
agreements (providing services from 658 locations), with an
approximate 20% share of the Canadian residential real estate
market based on 2017 transactional dollar volume. The Company
Network grew by 555 REALTORS®, largely due to the
purchase of 55 Franchise Agreements representing an annual revenue
stream of approximately $1.2
million.
REAL ESTATE MARKET
From CREA2: According to
the Canadian Real Estate Association ("CREA"), in 2018, national
sales are forecast to number 486,600 units, a decline of 5.3% or
27,000 fewer transactions versus 2017. This is a downward revision
of about 8,500 sales from CREA's previous forecast.
The overwhelming majority of the forecast decline in sales next
year reflects an expected decline in Ontario sales, with activity anticipated to
remain well below the record-levels logged in early 2017. Indeed,
new mortgage rules are expected to lower 2018 sales in all
provinces except Quebec and
Newfoundland and Labrador.
The national average price is forecast to edge down by 1.4% to
$503,100 in 2018, in large part due
to a record number of higher-priced home sales in and around
Toronto in early 2017 that is not
expected to be repeated in 2018.
New mortgage rules and further interest rate increases are
expected to further hold sales in check in Greater Vancouver and Greater Toronto Area (GTA). As a result, the
average price is forecast to hold steady in British Columbia in 2018, while declining by
2.2% in Ontario.
In an extension of current trends, average prices in 2018 are
forecast to rise in Quebec,
New Brunswick and Nova Scotia. However, price gains in 2018 will
be restrained in all markets by tougher mortgage qualification
criteria for low-ratio mortgages that will weigh on higher-end home
sales activity.
Also in line with 2017 trends, average prices in Alberta, Saskatchewan and Newfoundland and Labrador are forecast to either hold steady or
edge back slightly in 2018.
OUTLOOK
The Greater
Vancouver market, which experienced a significant housing
correction starting in August 2016,
began to show improvement in the second quarter as sales activity
in the region improved 57% compared to the first quarter. Despite
double digit, year-over-year growth in the second half of the year,
low unit sales and price decreases in the first half of the year
resulted in the market closing down 9% compared to 2016.
Growing affordability constraints, waning consumer confidence
and buyer hesitation in advance of new mortgage refinancing rules
resulted in a decline in sales activity in the GTA market in the
second half of the year offsetting significant growth in the first
two quarters. The market closed down 19% year-over-year despite an
increase of 13% in average house prices. As the GTA represents
approximately 30% of the national market, the decline in unit sales
depressed the overall performance of the Canadian residential
market. Ontario's strong economy,
low unemployment rate, low housing supply and population growth may
contribute to improving sales activity in 2018.
On January 1, 2018, the Office of
the Superintendent of Financial Institutions implemented new
regulations for mortgage refinancing that may contribute to slower
housing activity as potential buyers and sellers take a 'wait and
see' approach. Moreover, some potential move-up buyers may delay
listing their homes as they may not be able to access sufficient
financing for their desired next purchase. Further diminished
affordability may contribute to increased demand for entry-level
properties.
Low inventory levels may continue to define market
characteristics of many large urban centres including Toronto, Vancouver, Ottawa and Montreal in 2018. Further adding to pent up
housing demand, British Columbia
and Ontario both experienced an
increase in interprovincial migration in 2017, putting further
pressure on the Vancouver and
Toronto markets. Demand from
immigration, alongside demand from millennials, the largest
generation in Canada who are
increasingly approaching home buying age, may continue to outpace
supply, putting upward pressure on home prices.
"Having extensive brokerage operations from coast to coast
greatly reduces the impact that a regional market correction can
have on overall company results," Mr. Soper commented.
"Canada is a market of markets and
cyclical downturns are often provincial in nature. Overall company
growth was sustained through a soft Quebec market in the early part of the decade,
Alberta in 2015, B.C. in 2016 and
Ontario in 2017."
CASH DIVIDEND
The Company declared a cash dividend of
$0.1125 per restricted voting share
payable on April 30, 2018, to
shareholders of record on March 30,
2018. This represents a targeted annual dividend of
$1.35 per restricted voting
share.
CONFERENCE CALL
Brookfield Real Estate Services Inc.
will host a conference call on Wednesday, March
7, 2017 at 10 a.m. ET to
discuss its annual and fourth quarter financial results for
2017.
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
13, 2018.
CFFO
This news release and accompanying financial
statements make reference to cash flow from operations or "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 pay
income taxes and payments 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 "adding", "anticipated", "began", "believes",
"continue", "expected", "extension", "forecast", "further",
"growing", "increasingly", "may", "outlook", "potential",
"putting", "target", "trends", "waning" 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.
Brookfield Real
Estate Services Inc.
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Balance Sheet
Highlights
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As at
|
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|
December
31,
|
December
31,
|
(in thousands of
Canadian dollars)
|
|
|
2017
|
2016
|
Cash
|
|
|
$
|
3,458
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$
|
3,102
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Other current
assets
|
|
|
4,645
|
4,114
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Total current
assets
|
|
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8,103
|
7,216
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Non-current
assets
|
|
|
85,420
|
85,187
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Total
assets
|
|
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$
|
93,523
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$
|
92,403
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|
|
|
|
|
|
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Accounts payable and
accrued liabilities
|
|
|
$
|
803
|
$
|
893
|
Purchase
obligation
|
|
|
1,497
|
3,559
|
Interest payable on
Exchangeable Units
|
|
|
484
|
476
|
Dividends payable to
shareholders
|
|
|
1,067
|
1,027
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Other current
liabilities
|
|
|
400
|
435
|
Total current
liabilities
|
|
|
4,251
|
6,390
|
Debt
facilities
|
|
|
65,677
|
63,720
|
Other non-current
liabilities
|
|
|
-
|
1,114
|
Exchangeable
Units
|
|
|
54,973
|
52,477
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Total
Liabilities
|
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124,901
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123,701
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Shareholders'
deficit
|
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(31,378)
|
(31,298)
|
Total Liabilities
and Shareholders' deficit
|
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|
$
|
93,523
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$
|
92,403
|
|
|
|
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Earnings
Highlights
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|
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|
Three
months
|
Three
months
|
|
|
|
ended
|
ended
|
Year
ended
|
Year ended
|
|
December
31,
|
December
31,
|
December
31,
|
December
31,
|
(in thousands of
Canadian dollars, except per Share amounts)
|
2017
|
2016
|
2017
|
2016
|
Royalties
|
$
|
9,466
|
$
|
9,602
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$
|
44,238
|
$
|
42,436
|
Administration
Expense
|
(110)
|
(308)
|
(816)
|
(1,058)
|
Management
Fee
|
(1,750)
|
(1,734)
|
(8,178)
|
(7,754)
|
Interest
Expense
|
(609)
|
(627)
|
(2,532)
|
(2,606)
|
Cash Flow from
Operations
|
6,997
|
6,933
|
32,712
|
31,018
|
Impairment, write-off
and amortization of intangible assets
|
(2,020)
|
(2,155)
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(7,593)
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(9,694)
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Interest on
Exchangeable Units
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(1,451)
|
(1,428)
|
(5,750)
|
(5,710)
|
Gain / (loss) on fair
value of Exchangeable Units
|
266
|
2,762
|
(2,496)
|
(3,694)
|
Gain on interest rate
swap
|
142
|
621
|
1,159
|
822
|
Gain / (loss) on fair
value of purchase obligation
|
113
|
(167)
|
147
|
(1,568)
|
Income tax
expense
|
(1,169)
|
(1,239)
|
(5,735)
|
(4,777)
|
Net and
comprehensive earnings
|
$
|
2,878
|
$
|
5,327
|
$
|
12,444
|
$
|
6,397
|
Basic earnings per
Restricted Voting Share
|
$
|
0.30
|
$
|
0.56
|
$
|
1.31
|
$
|
0.67
|
Diluted earnings
per Share
|
$
|
0.30
|
$
|
0.31
|
$
|
1.31
|
$
|
0.67
|
Cash Flow from
Operations per Share on a diluted basis
|
$
|
0.55
|
$
|
0.54
|
$
|
2.55
|
$
|
2.42
|
|
|
|
|
|
|
|
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Cash Flow
Highlights
|
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|
Three
months
|
Three
months
|
|
|
|
ended
|
ended
|
Year
ended
|
Year ended
|
|
December
31,
|
December
31,
|
December
31,
|
December
31,
|
(in thousands of
Canadian dollars)
|
2017
|
2016
|
2017
|
2016
|
Cash provided by
Operating activities:
|
$
|
4,415
|
$
|
4,728
|
$
|
21,060
|
$
|
20,148
|
Cash provided by /
(used) for Investing activities:
|
60
|
(1,344)
|
(10,119)
|
(9,366)
|
Cash provided used
for Financing activities:
|
(3,661)
|
(5,081)
|
(10,585)
|
(13,325)
|
Change in cash for
the period
|
814
|
(1,697)
|
356
|
(2,543)
|
Cash, beginning of
the period
|
2,644
|
4,799
|
3,102
|
5,645
|
Cash, end of the
period
|
$
|
3,458
|
$
|
3,102
|
$
|
3,458
|
$
|
3,102
|
_____________________________
1 REALTORS® is a trademark identifying
real estate licensees in Canada
who are members of the Canadian Real Estate Association
2 Source: CREA Updates National Resale Market Housing
Forecast, published December 14,
2017
SOURCE Brookfield Real Estate Services Inc.