Brookfield Real Estate Services Inc. Reports First Quarter 2013 Results and
TORONTO, May 7, 2013 /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 months ended March 31, 2013 was $5.6 million or $0.436
per restricted voting share ("Share"), compared to $5.6 million or $0.434 per
Share for the same period in 2012.
Royalties for the three months ended March 31, 2013 were $8.1 million, down
slightly from $8.2 million for the same period in 2012. The net loss for the
three months ended March 31, 2013 was $0.5 million, or $0.06 loss per Share,
as compared to net loss of $3.2 million or $0.33 loss per Share, for the same
period in 2012.
OVERVIEW OF FIRST QUARTER OPERATING RESULTS
During the Quarter the Company generated CFFO of $5.6 million, which was up
slightly from the same period of 2012. The tightening of mortgage-lending
rules introduced in July 2012, contributed to a pull of market activity into
the first half of 2012, resulting in an abnormally active comparative period.
Royalties were down slightly this quarter as the industry returns to more
normalized transactional patterns and cycle over the last year's period of
heightened activity. Offsetting this decrease was a $0.2 million reduction in
administration costs due primarily to a lower quarter-over-quarter bad debt
provision resulting from the success of increased collection efforts as well
as a reduction in professional fees as a result of the completion of
activities in 2012 related IFRS requirements and the conversion of the Company
from a Fund to a corporation.
For the three months ended March 31, 2013, the Canadian market transactional
dollar volume of $34.8 billion decreased by 12.2% from the same period in
2012, driven solely by a decrease in units sold. The average sales price of a
home remained largely unchanged due primarily to a balanced market supported
by reduced listings and low interest rates. For the three months ended March
31, 2013, the Toronto market transactional dollar volume was down 10.5% over
the same period in 2012, also driven primarily by a decrease in home sale
"The first quarter of 2013 saw an unusual grouping of economic factors which
brought stability to the Canadian housing market: consistently low interest
rates, an expanding economy, with essentially flat home prices," said Phil
Soper, President and Chief Executive Officer, Brookfield Real Estate Services
Inc. "Together, these factors should mitigate the length and severity of the
current cyclical correction."
"We saw a year-over-year decline in sales volumes in the quarter, as the
lingering impact of last summer's introduction of more restrictive mortgage
rules affected entry-level buyers, and some sellers delayed listing their
homes on speculation of a real estate price correction," continued Soper.
"Buyers looking to make opportunistic purchases in a soft market, however,
were largely disappointed as home prices held firm across almost all markets."
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 March 31, 2013 the Company Network was comprised of 15,558 REALTORS®,
operating under 440 franchise agreements providing services from 679
locations, with an approximate 24% share of the Market based on 2012
transactional dollar volume.
"As we previously forecasted, the Canadian residential real estate market is
in the midst of a cyclical slowdown which has seen lower unit sales volumes
and price appreciation reduced. We believe we are well through the
correction, which began in the third quarter of 2012," said Soper. "In the
first quarter of 2013 we saw fewer homes trade hands, but starting in the
second half of 2013, Management expects volumes to adjust to normal levels."
Monthly Cash Dividend
On May 6th the Company declared a dividend of $0.092 per share for the month
of May 2013, payable on June 28th, 2013 to shareholders of record on May 31st,
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
prescribed 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 notice to
terminate to on or before June 30, 2013. If such notice is not received, the
MSA will automatically renew for a ten year period. 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 15,558 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 Tuesday,
May 7, 2013 at 2 p.m. ET to discuss its financial results for the first
quarter of 2013.
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 May 8, 2013 at
The Company's Interim Condensed Consolidated Financial Statements,
Supplemental Information and IFRS overview for the three months ended March
31, 2013 contain further information on the company's strategy, operations and
financial results and 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 March 31, 2013, the
Company network consisted of 15,558 REALTORS®. The Company network has an
approximate 24% share of the Canadian residential resale real estate market
based on 2012 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 73% 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.)
Tammy Gilmer Director, Public Relations & National Communications Brookfield
Real Estate Services Inc. email@example.com Tel: 416.510.5783
SOURCE: Brookfield Real Estate Services Inc.
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