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Brookfield Real Estate Services Inc. Reports Second Quarter 2012 Results And Monthly Dividend

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."

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