TORONTO, May 1, 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 months ended March 31, 2012 was $5.6 million as compared to $5.7 million for the same period in 2011.
CFFO for the rolling 12 month period ended March 31, 2012 is $1.96 per restricted voting share ("RVS") as compared to $1.97 for the rolling 12 month period ended March 31, 2011. Royalties were $8.2 million for the quarter, the same level as the first quarter of 2011. The net loss for the three months ended March 31, 2012 was $3.2 million or $0.34 per RVS, as compared to a loss of $1.8 million for the same period in 2011.
OVERVIEW OF FIRST QUARTER OPERATING RESULTS
During the quarter, the Company generated cash flow from operations ("CFFO") of $5.6 million as compared to $5.7 million for the same period in 2011. The Company had an increase in variable franchise fees due to increased market activity, offset by a decrease in fixed royalty fees as a result of net attrition experienced in the underlying agent network during 2011 and the decrease in other revenue and services. Other revenue and services decreased by 10% quarter over quarter (1.2% of overall revenue), 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 $168.0 billion increased by 11% from March 31, 2011, driven by a 6% and 5% increase in selling price and home sale activity, respectively. For the three months ended March 31, 2012, the Canadian market transactional dollar volume was up 5% over the same period in 2011, driven by a 1% and 4% increase in selling price and home sale activity, respectively.
On a rolling twelve-month basis, the GTA Market experienced a quarter-over-same-quarter increase of 19% driven by a 9% increase in selling price and 10% increase in home sale activity. For the three months ended March 31, 2012, the GTA Market experienced an 18% increase on a 10% and 8% 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, resulting in competition among home buyers for the Quarter, and low interest rates, which continue 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 was essentially flat, period over period. This structure provides revenue protection from the impact of revenue dips when the market cools, but also reduces the degree to which the Company participates in periods of rapid market expansion.
"In terms of network expansion, our contract sales funnel is healthy," said Phil Soper, President and Chief Executive Officer, Brookfield Real Estate Services, Inc. "On a year-over-year basis, the number of agents in our growth funnel is up considerably."
Since the Company recognizes variable fees when home sales close, which typically is 45 to 60 days after the sales date used for Canadian market data, the improved market activity is expected to materialize as increased variable and premium fees in the second quarter.
"Price appreciation and strong unit sales reflect Canadians taking advantage of a highly competitive banking environment and borrowing rates that for the first time fell below 3.0 per cent for a five year fixed mortgage," continued Mr. Soper. "The lure of historically low mortgage rates, as well as unseasonably warm weather, particularly in Central Canada, encouraged sellers to list their homes earlier than normal, pulling ahead transactions into the early part of the year."
The Company Network
As at March 31, 2012 the Company Network was comprised of 15,250 REALTORS®, operating under 414 franchise agreements providing services from 668 locations, with an approximate 22% share of the Market based on 2011 transactional dollar volume.
On a year-over-year basis, price appreciation and housing sales are expected to modestly increase in 2012. While the pace of appreciation is slowing in some regions across Canada as higher home prices negatively impact affordability, the positive impact of a gradually improving domestic and U.S. economy, and a gentle upward pressure on wages and salaries, should support the residential real estate market through 2012.
Monthly Cash Dividend
The Company declared a cash dividend of $0.092 per share for the month of May 2012, payable on June 29, 2012, to shareholders of record on May 31, 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.
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.
Brookfield Real Estate Services Inc. will host a conference call on Tuesday, May 1, 2012 at 2 p.m. ET to discuss its first 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 Wednesday, May 2, 2012 at http://www.brookfieldresinc.com/content/investor_centre-25063.html.
The Company's Interim Condensed Consolidated Financial Statements and Supplemental Information for the three months ended March 31, 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 March 31, 2012, the Company network consisted of 15,250 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.
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Brookfield Real Estate Services Inc.