TORONTO, March 6, 2019 /CNW/ - Brookfield Real Estate
Services Inc. (dba Bridgemarq Real Estate Services) ("Bridgemarq"
or the "Company") (TSX: BRE), a leading provider of services to
residential real estate brokers and their REALTORS®1,
today announced its 2018 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 $17.4 million, or $1.30 per restricted voting share on a diluted
basis ("Share"), as compared to $12.4
million, or $1.31 per Share in
2017.
- The Company generated cash flow from operations ("CFFO") of
$30.5 million or $2.38 per Share, compared to $32.7 million or $2.55 per Share in 2017.
- The Company's network of REALTORS® (the "Network") increased to
19,220 on January 3, 2019, up 6.0%
from 18,135 at December 31,
2017.
- The Board of Directors of the Company approved a dividend to
shareholders of $0.1125 per
restricted voting share payable April 30,
2019 to shareholders of record March
29, 2019, representing a target annual dividend of
$1.35 per restricted voting share,
consistent with 2018.
OPERATING RESULTS
Royalty revenues for the year ended December 31, 2018, were $42.0 million compared to $44.2 million in 2017. The decrease in royalty
revenues was primarily as a result of a decrease in the premium
franchise fees due to the expiry of those agreements during the
year. For the fourth quarter, royalty revenues amounted to
$8.9 million, down from $9.5 million in 2017 due to lower premium fees
partly offset by increases in variable and fixed fees.
Net earnings in 2018 were $17.4
million or $1.30 per Share as
compared to $12.4 million, or
$1.31 per Share in 2017. The higher
net earnings were due in part to a gain of $6.5 million on the determination of the fair
value of the Exchangeable Units issued by the Company. Diluted
earnings per share were unchanged despite the higher earnings as a
result of the dilutive impact of that gain.
For the year ended December 31,
2018, CFFO was $30.5 million
or $2.38 per Share as compared to
$2.55 per Share in 2017. The decrease
in CFFO was mainly driven by the decrease in premium fees and
higher administrative expenses due to one-time costs associated
with the review and negotiation of amendments to the Management
Services Agreement. For the fourth quarter of 2018, CFFO was
$6.2 million or $0.48 per Share compared to $7.0 million or $0.55 per Share in the fourth quarter of 2017,
reflective of the lower royalty revenues year-over-year.
"Bridgemarq's ability to grow the number of REALTORS® in our
network through all market cycles shows the strength of
the company's underlying business model. Our structure is well
suited for an income focused investment that offers strong, stable
dividends," said Phil Soper,
President and Chief Executive Officer, Bridgemarq Real Estate
Services. "While we remain focused on driving core network growth,
the newly amended management services agreement opens the door
to developing new, diversified revenue streams."
THE COMPANY NETWORK
As at December 31, 2018, the
Network was comprised of 18,725 REALTORS®, operating under 291
franchise agreements (providing services from 673 locations), with
an approximate 20% share of the Canadian residential real estate
market based on 2018 transactional dollar volume. On January 3, 2019, the Company was assigned
franchise agreements comprised of 495 REALTORS® operating under the
Royal LePage and Via Capitale Brands, for nominal consideration.
The estimated annual royalty stream related to these Franchise
Agreements is $0.9 million.
REAL ESTATE MARKET OUTLOOK
In addition to regular cyclical activity in local housing market
activity, a number of regulatory policy changes were put in place
that have had a dampening effect on demand for real estate across
Canada. While many cities with
affordable real estate and healthy economies, such as the
Greater Montreal Area or
Ottawa, continued to see price
appreciation and healthy sales in 2018, Greater Vancouver and the Greater Toronto Area saw a significant
year-over-year decline in unit sales, decreasing 32%2
and 16%3 for the full year, respectively.
Despite the decline in sales in Greater Vancouver, listings were down
2%4 in 2018 compared to the previous year. The MLS® HPI
composite benchmark price for all residential homes in the region
saw a modest decrease of 3% in December
2018 compared to December
20175. In addition to the mortgage stress test,
new tax policies within British
Columbia's 2018 provincial budget were a significant factor
affecting sales and home values.
While sales activity in the Greater
Toronto Area was down year-over-year, the MLS® HPI composite
benchmark price for all homes in the region saw a 3% increase in
December 2018 compared to
December 20176.
The Canadian economy is performing well overall, with pockets of
uncertainty. Canada's unemployment
rate hit a 40-year low in November
2018. In January, 2019, the Bank of Canada continued to maintain its current
target for the overnight rate, which is supportive of real estate
markets. However, persistently weak oil prices driven by domestic
market access bottlenecks and global supply gluts have hit
Western Canada hard, and trade
tensions between China and the
U.S. in particular are impacting consumer confidence across the
continent.
CASH DIVIDEND
The Company declared a cash dividend of $0.1125 per restricted voting share payable on
April 30, 2019, to shareholders of
record on March 29, 2019. 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 6, 2019 at
10 a.m. ET to discuss its annual and
fourth quarter financial results for 2018.
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, 2019.
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 "ability", "believes",
"continued", "driven", "have", "grow", "through", "impacting",
"offers", "outlook", "performing", "persistently", "remain",
"target" 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 Bridgemarq Real Estate Services
Bridgemarq is a leading provider of services to residential real
estate brokers and a network of over 18,000 REALTORS®1. We operate
in Canada under the Royal LePage,
Via Capitale and Johnston & Daniel brands. Bridgemarq Real
Estate Services is the registered trade name of Brookfield Real
Estate Services Inc. For more information, go
to bridgemarq.com.
Bridgemarq is an affiliate of Brookfield Business Partners, a
business services and industrials company focused on owning and
operating high-quality businesses that benefit from barriers to
entry and/or low production costs. Brookfield Business Partners is
listed on the New York and
Toronto stock exchanges. Further
information is available at bbu.brookfield.com.
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: December
2018, REBGV, Monthly Market Report
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3 Source: January 4,
2019, TREB releases monthly market figures as reporter by GTA
REALTORS®
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4 Source: December
2018, REBGV, Monthly Market Report
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5 Source: December
2018, REBGV, Monthly Market Report
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6 Source: January 4,
2019 Toronto Real Estate Board MLS® Home Price Index – December
2018
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Bridgemarq Real
Estate Services
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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)
|
|
|
2018
|
2017
|
Cash
|
|
|
$
|
4,339
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$
|
3,458
|
Other current
assets
|
|
|
4,954
|
4,645
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Total current
assets
|
|
|
9,293
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8,103
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Non-current
assets
|
|
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86,366
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85,420
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Total
assets
|
|
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$
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95,659
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$
|
93,523
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|
|
|
|
|
|
|
|
|
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Accounts payable and
accrued liabilities
|
|
|
$
|
1,003
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$
|
803
|
Purchase
obligation
|
|
|
-
|
1,497
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Interest payable on
Exchangeable Units
|
|
|
484
|
484
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Dividends payable to
shareholders
|
|
|
1,067
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1,067
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Other current
liabilities
|
|
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-
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400
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Total current
liabilities
|
|
|
2,554
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4,251
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Debt
facilities
|
|
|
71,297
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65,677
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Exchangeable
Units
|
|
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48,484
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54,973
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Total
Liabilities
|
|
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122,335
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124,901
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Shareholders'
deficit
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(26,676)
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(31,378)
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Total Liabilities
and Shareholders' deficit
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$
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95,659
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$
|
93,523
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|
|
|
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Earnings
Highlights
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|
|
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Three
months
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Three
months
|
|
|
|
ended
|
ended
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Year
ended
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Year ended
|
|
December
31,
|
December
31,
|
December
31,
|
December
31,
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(in thousands of
Canadian dollars, except per Share amounts )
|
2018
|
2017
|
2018
|
2017
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Royalties
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$
|
8,945
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$
|
9,466
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$
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42,027
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$
|
44,238
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Administration
Expense
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(543)
|
(110)
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(1,259)
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(816)
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Management
Fee
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(1,547)
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(1,750)
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(7,616)
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(8,178)
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Interest
Expense
|
(666)
|
(609)
|
(2,686)
|
(2,532)
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Cash Flow from
Operations
|
6,189
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6,997
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30,466
|
32,712
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Impairment, write-off
and amortization of intangible assets
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(2,116)
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(2,020)
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(8,401)
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(7,593)
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Interest on
Exchangeable Units
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(1,452)
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(1,451)
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(5,806)
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(5,750)
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Gain / (loss) on fair
value of Exchangeable Units
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7,254
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266
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6,489
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(2,496)
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Gain / (loss) on
interest rate swap
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(97)
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142
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74
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1,159
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Gain / (loss) on fair
value of purchase obligation
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77
|
113
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(465)
|
147
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Income tax
expense
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(980)
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(1,169)
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(4,966)
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(5,735)
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Net and
comprehensive earnings
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$
|
8,875
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$
|
2,878
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$
|
17,391
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$
|
12,444
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Basic earnings per
Restricted Voting Share
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$
|
0.94
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$
|
0.30
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$
|
1.83
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$
|
1.31
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Diluted earnings
per Share
|
$
|
0.24
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$
|
0.30
|
$
|
1.30
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$
|
1.31
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Cash Flow from
Operations per Share on a diluted basis
|
$
|
0.48
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$
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0.55
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$
|
2.38
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$
|
2.55
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|
|
|
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Cash Flow
Highlights
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Three
months
|
Three
months
|
|
|
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ended
|
ended
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Year
ended
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Year ended
|
|
December
31,
|
December
31,
|
December
31,
|
December
31,
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(in thousands of
Canadian dollars)
|
2018
|
2017
|
2018
|
2017
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Cash provided by
Operating activities:
|
$
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2,964
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$
|
4,415
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$
|
18,971
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$
|
21,060
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Cash provided by /
(used) for Investing activities:
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(2,052)
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60
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(10,849)
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(10,119)
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Cash provided used
for Financing activities:
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(840)
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(3,661)
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(7,241)
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(10,585)
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Change in cash for
the period
|
72
|
814
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881
|
356
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Cash, beginning of
the period
|
4,267
|
2,644
|
3,458
|
3,102
|
Cash, end of the
period
|
$
|
4,339
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$
|
3,458
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$
|
4,339
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$
|
3,458
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SOURCE Brookfield Real Estate Services Inc.