TORONTO, Aug. 2, 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 six months ended June 30, 2012 was $7.4
million or $0.57 per
Restricted Voting Share ("Share") and $12.9
million or $1.01 per Share,
respectively, as compared to $6.8
million or $0.53 per Share and
$12.5 million or $0.98 per Share, respectively, for the same
period in 2011.
CFFO for the rolling 12 month period ended
June 30, 2012 was $2.00 per Share as compared to $1.97 for the 12 months ended December 31, 2011. Royalties for the three and
six months ended June 30, 2012 were
$10.0 million and $18.2 million, respectively, compared to
$9.8 million and $18.1 million, respectively for the same period
in 2011. Net earnings for the three and six months ended
June 30, 2012 was $7.9 million and $4.7
million, or $0.83 and
$0.49 earnings per Share,
respectively, as compared to net income of $4.9 million and $3.1
million or $0.52 and
$0.33 per Share, respectively, for
the same period in 2011.
OVERVIEW OF SECOND QUARTER OPERATING
RESULTS
During the Quarter, the Company generated CFFO of $7.4 million as compared to $6.8 million for the same period in 2011 as a
result of increased market activity, a $0.2
million recovery of previously written off receivables and
reduced reporting costs, partially offset by a $0.2 million decrease in other revenue and
services fees. Other revenue and services decreased by $0.2 million quarter over quarter, as the Company
discontinued an agent website program that was no longer
relevant.
On a rolling twelve-month basis, the Canadian
market transactional dollar volume of $170.8
billion increased by 10% from June
30, 2011, driven by a 3% and 7% increase in selling price
and home sale activity, respectively. For the three months ended
June 30, 2012, the Canadian market
transactional dollar volume was up 5% over the same period in 2011,
solely driven by increase in home sale activity.
On a rolling twelve-month basis, the GTA Market
experienced a quarter-over-same-quarter increase of 18% driven by a
8% increase in selling price and 10% increase in home sale
activity. For the three months ended June
30, 2012, the GTA Market experienced an 12% increase on a 7%
and 4% increase in selling price and home sale activity,
respectively over the same period in 2011. The higher than
anticipated rise in home prices is largely driven by the consistent
shortage of listings in the single-detached homes market, resulting
in competition among home buyers, and low interest rates, which
continues to draw home buyers into the Market.
The Company's revenue is primarily fixed in
nature, based on the number of REALTORS® in the network,
which decreased 1%, period over period. 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.
"While tumultuous economic conditions beyond our borders have
been a drag on Canadian consumer confidence, the relatively
favourable domestic outlook and stimulative effect of pervasively
low interest rates have continued to support real estate activity
at healthy levels." said Phil Soper,
President and Chief Executive Officer, Brookfield Real Estate
Services, Inc.
It has been an encouraging year from a growth perspective.
Our franchising prospects are building at a good pace as skilled
brokerage operators from across the country look favourably upon
the company's offerings and agree to join the network. As
well, early conversions to our Royal LePage brand from the
Brookfield's acquisition of
Prudential Real Estate will positively impact the Company's future
results.
The Company Network
As at June 30,
2012 the Company Network was comprised of 15,249
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.
Outlook
"The industry has enjoyed three years of strong house price
appreciation in almost all regions of the country, but home prices
cannot grow faster than salaries and the underlying economy
indefinitely," added Soper. "Some regions have reached or
perhaps even exceed the current upper level of price
resistance. We expect prices and unit sales to level off in
many major markets, bringing the full year 2012 into line with our
original growth forecast."
Monthly Cash Dividend
The Company declared a cash dividend of
$0.092 per share for the month of
August 2012, payable on September 28, 2012, to shareholders of record on
August 31, 2012.
CFFO
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 between the Company and Brookfield Real Estate Services
Manager Limited (the "Manager"), a subsidiary of Brookfield Asset
Management. The Management Services Agreement would
automatically renew for a ten year renewal term on August 7, 2013, unless the Company or the Manager
gives notice of its intention not to renew the Management Services
Agreement not later than August 6,
2012. The Company and the Manager have agreed to delay
the date for delivery of such notice to on or before December 31, 2012. The Management Services
Agreement has been in effect since 2003 and was originally
designed for an Income Trust structure. The Company intends
to ensure that any future ongoing management arrangements are in
the best interests of the Company and its shareholders.
Forward-Looking Statements
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 Corporation's network of
15,295 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 Fund'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 law.
Conference Call
Brookfield Real Estate Services Inc. will host a
conference call on Friday, August 3,
2012 at 10 a.m. ET to discuss
its second 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 August 7, 2012 at
http://www.brookfieldresinc.com/content/investor_centre-25063.html.
Supplemental Information
The Company's Interim Condensed Consolidated
Financial Statements, Supplemental Information and IFRS overview
for the three and six months ended June 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 June
30, 2012, the Company network consisted of 15,249
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 in Canada who are members of the Canadian
Real Estate Association.
SOURCE Brookfield Real Estate Services Inc.
