Brookfield Real Estate Services Inc. reports third quarter 2012 results and
TORONTO, Nov. 9, 2012 /CNW/ - Brookfield Real Estate Services Inc. (the
Company) (TSX: BRE), a leading provider of services to residential real estate
brokers and their REALTORS®¹, today announced that cash flow from operations
("CFFO") for the three and nine months ended September 30, 2012 was $7.1
million or $0.55 per restricted voting share ("Share") and $20.0 million or
$1.56 per Share, respectively, as compared to $7.3 million or $0.57 per Share
and $19.9 million or $1.55 per Share, respectively, for the same period in
CFFO for the rolling 12 month period ended September 30, 2012 was $1.98 per
Share as compared to $1.97 for the 12 months ended December 31, 2011.
Royalties for the three and nine months ended September 30, 2012 were $10.2
million and $28.4 million, respectively, compared to $10.3 million and $28.3
million, respectively for the same period in 2011. Net loss and net earnings
for the three and nine months ended September 30, 2012 was $2.5 million and
$2.1 million, or $0.26 loss and $0.22 earnings per Share, respectively, as
compared to net income of $8.1 million and $11.2 million or $0.85 and $1.18
per Share, respectively, for the same period in 2011.
OVERVIEW OF THIRD QUARTER OPERATING RESULTS
During the Quarter the Company generated CFFO of $7.1 million as compared to
$7.3 million for the same period in 2011 due primarily to a $0.3 million bad
debt provision associated with the writedown of the remaining receivable
balance of a distressed franchisee. Management continues to work with this
franchisee and will record the associated royalties and receivable recoveries
On a rolling twelve-month basis, the Canadian market transactional dollar
volume of $168.0 billion increased by 3% from September 30, 2011, driven by a
1% and 2% increase in selling price and home sale activity, respectively. For
the three months ended September 30, 2012, the Canadian market transactional
dollar volume was down 7% over the same period in 2011, driven solely by a
decrease in home sale activity.
"Early in the year, we had forecast a cyclical slowing in transaction volumes,
a natural market reaction after a period of strong home price appreciation,
which saw affordability eroded," said Phil Soper, President and Chief
Executive Officer. "Changes to mortgage regulations, which took effect on July
9(th), accelerated the correction."
On a rolling twelve-month basis, the GTA Market increased by 7% from September
30, 2011, driven solely by an increase in selling price. For the three months
ended September 30, 2012, the GTA Market experienced a 10% decrease on a 5%
increase in selling price and 15% decrease in home sale activity, respectively
over the same period in 2011.
The Company's revenue is primarily fixed in nature, based on the number of
REALTORS® in the network. This structure provides revenue protection from the
impact of revenue declines when the market cools, but also reduces the degree
to which the Company participates in periods of rapid market expansion.
The Company Network
As at September 30, 2012 the Company Network was comprised of 15,238
REALTORS®, operating under 412 franchise agreements providing services from
662 locations, with an approximate 22% share of the Market based on 2011
transactional dollar volume.
"Canadian consumers were bombarded with upsetting economic news from around
the globe during the period, particularly in the early weeks of the third
quarter. While this has been a drag on the country's housing market and
contributed to a slowing in home sale transactions, consumer confidence
appeared to rebound in September, which should support activity in the
important fall market," said Phil Soper, President and Chief Executive
Officer, Brookfield Real Estate Services, Inc.
"Policy makers in Canada and the United States have stated that the current
period of very low interest rates will continue through at least 2013. This is
supportive of housing market activity hence downward pressure on home prices
will likely be minimal," said Soper. "And for the first time in six years,
sustained positive news from the American housing market should support a
more positive outlook on overall economic prosperity."
Monthly Cash Dividend
The Company declared a cash dividend of $0.092 per share for the month of
November 2012, payable on December 31, 2012, to shareholders of record on
November 30, 2012.
This news release and accompanying financial statements make reference to cash
flow from operations ("CFFO") on a total and per restricted voting share
basis. CFFO is defined as net income prior to fair value changes,
amortization, interest on exchangeable units, income taxes, items related to
other income and interests of exchangeable unitholders. 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, the value of
its business and believes that many of its shareholders and analysts also find
this measure of value to them. CFFO does not have any standard meaning pre-
scribed by IFRS and therefore may not be comparable to similar measures
presented by other companies.
Management Services Agreement
The Company is managed pursuant to a Management Services Agreement (the "MSA")
between the Company and Brookfield Real Estate Services Manager Limited (the
"Manager"), a subsidiary of Brookfield Asset Management Inc. The MSA has
been in effect since 2003 and was originally designed for an income trust
structure. The Company and the Manager have agreed to extend the termination
date of the MSA to December 31, 2013 and the date for delivery of such notice
to on or before June 30, 2013.
The Board of Directors of the Company have convened a Special Committee to
evaluate various alternatives associated with the renewal of the MSA and have
engaged an external advisor.
This news release contains forward-looking information and other
"forward-looking statements". The words such as "should", "will", "continue",
"plan", "believe", "expect", "anticipate", "intend", "estimate",
"approximate", "expected" and other expressions that are predictions of or
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 Corporation 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 set forward in the forward looking statements include a
change in general economic conditions, interest rates, consumer confidence,
the level of residential real estate resale transactions, the average rate of
commissions charged, competition from other traditional real estate brokers or
from discount and/or Internet-based real estate alternatives, the availability
of acquisition opportunities and/or the closing of existing real estate
brokerage offices, other developments in the residential real estate brokerage
industry or the Corporation that reduce the number of and/or royalty revenue
from the Company's network of 15,238 REALTORS®, our ability to maintain brand
equity through the use of trademarks, the availability of equity and debt
financing, a change in tax provisions, 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 Corporation 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
Brookfield Real Estate Services Inc. will host a conference call on Friday,
November 9, 2012 at 10 a.m. ET to discuss its third quarter financial 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 on
the Company's website by November 12, 2012 at
The Company's Interim Condensed Consolidated Financial Statements,
Supplemental Information and IFRS overview for the three and nine months ended
September 30, 2012 containing further information on the company's strategy,
operations and financial results can be found on our website at
www.brookfieldresinc.com. The Company's Management Discussion and Analysis,
Financial Statements and associated regulatory filings will follow within
prescribed timelines. Shareholders are encouraged to read these documents.
Brookfield Real Estate Services Inc. Profile
The Company is a leading provider of services to residential real estate
brokers and their REALTORS®¹. The Company generates cash flow from franchise
royalties and service fees derived from a national network of real estate
brokers and agents in Canada operating under the Royal LePage, Via Capitale
Real Estate Network and Johnston & Daniel brand names. At September 30, 2012,
the Company network consisted of 15,238 REALTORS®. The Company network has an
approximate 22% share of the Canadian residential resale real estate market
based on transactional dollar volume. The Company generates both fixed and
variable fee components. Variable fees are primarily driven by the total
transactional dollar volume from the sales commissions of REALTORS®, while
fixed fees are based on the number of agents and sales representatives in the
network. Approximately 68% of the Company's revenue is based on fees that are
fixed in nature; this provides revenue stability and helps insulate the
Company's cash flows from market fluctuations. The Company is listed on the
TSX and trades under the symbol "BRE". For further information about the
Company, please visit www.brookfieldresinc.com.
(1)(REALTOR® is a trademark identifying real estate licensees
inCanadawho are members of the Canadian Real Estate Association.)
Contact Tammy Gilmer Director, Public Relations & National Communications
Brookfield Real Estate Services Inc. firstname.lastname@example.org Tel:
SOURCE: Brookfield Real Estate Services Inc.
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