Brookfield Real Estate Services Fund Announces Plan to Convert to a Corporation

Brookfield Real Estate Services Fund Announces Plan to Convert to a Corporation

Toronto, ON – November 8, 2010 - The Brookfield Real Estate Services Fund (the “Fund”) (TSX: BRE.UN) today announced its intention to submit to its unitholders a plan to convert to a corporation (the “Transaction”) named Brookfield Real Estate Services Inc. (the “Company”). A Special Committee of the Board of Trustees (the “Special Committee”), comprised of trustees independent of Brookfield Asset Management Inc., has unanimously approved the Transaction. The conversion is being undertaken as a result of legislative changes to the tax treatment of business income trusts. It will be completed pursuant to a plan of arrangement under the
Business Corporations Act (Ontario) and must be approved by not less than 66_% of the votes cast in person or by proxy at a special meeting of unitholders to be held in Toronto on December 10, 2010. Unitholders of record as at November 5, 2010 will be entitled to vote at the meeting. Additionally, the plan of arrangement must satisfy customary conditions including receipt of applicable regulatory, court and TSX approvals.

The Fund also announced that the Company is expected to pay monthly dividends, beginning in 2011 at an initial annualized rate of $1.10 per share ($0.092 monthly). The Fund intends to maintain its current annualized distributions of $1.40 per unit ($0.117 monthly) for the remainder of 2010. The reduced level of distribution reflects the approximate level of taxes which will be payable by the business commencing in 2011.

Phil Soper, President and Chief Executive of the Fund said: “Conversion of the Fund to a corporate structure does not change our strong underlying business, with its portfolio of long-term royalty contracts, or our core business strategy of pursuing growth both organically and through acquisition within the residential real estate services industry. Since going public in 2003, the Fund has provided an attractive return to investors through cash distributions, which have been increased several times, and through unit appreciation. We believe the new corporate structure will broaden our appeal in capital markets and enhance our ability to achieve consistent, reliable growth while providing an attractive dividend yield.”

Benefits of the Conversion

The Trustees and Management believe the proposed conversion is in the best interest of unitholders and the business and is expected to provide the following benefits:

  • broaden the investor base by attracting new investors and provide a more liquid trading market for the shares than currently exists for the Fund Units;
  • provide enhanced access to capital markets, which will benefit the business as it continues to expand and grow its REALTOR®¹ network;
  • create a more flexible structure that will allow the Company to retain more of its cash flow, thereby supporting continuing growth of the business; and
  • remove the existing restrictions on non-resident ownership.
Dividend Policy

Whether the Fund converts to a corporation or remains an income trust, it will be subject to income taxes commencing in 2011 that will reduce the amount of cash flow otherwise available for distribution. Assuming conversion takes effect on or about December 31, 2010, the intention is for the Company to pay monthly dividends at an annualized rate of $1.10 per share commencing in January 2011. This level of dividends represents an adjustment to the current annualized rate of cash distributions of $1.40 per unit, reflecting the anticipated tax that will be payable by the business commencing in 2011.

Following the conversion, distributions made by the Company will be taxed as dividends rather than regular income as they are today. Certain investors will be entitled to dividend tax credits which will enhance the after-tax yield and offset the after-tax impact of the reduction in distributions. Going forward, the Board will determine the actual amount of dividends to be paid based on the financial performance of the Company, expectations of future economic conditions, acquisition opportunities and other factors as appropriate.

Details of the Conversion

Pursuant to the conversion, unitholders will exchange their units of the Fund for restricted voting shares of the Company, receiving, on a tax-deferred basis, one restricted voting share of the Company for each unit held. The shares will be designated as “restricted voting shares” in accordance with the applicable securities laws and the rules of the TSX, but the rights attached to the restricted voting shares will be identical in all material respects to those of the Fund Units. The basic structure of Residential Income Fund L.P. and La Capitale L.P., which own the assets from which the Fund currently derives its sole source of revenue, will continue and be unaffected with the Company owning all of the outstanding units of the Fund and indirectly owning and operating the business of the Fund and its subsidiaries post-closing of the conversion. The existing trustees of the Fund will become the directors of the Company. An information circular in respect of the special unitholders’ meeting, providing a detailed outline of the proposed conversion process and substance, and of the consequences of same, will be mailed to unitholders on or about November 16, 2010.

“We carefully considered all of the alternatives available to the Fund and believe that the conversion to a corporation is the best approach for us to take in light of the new taxation environment and to support the future growth of the business,” said Allen Karp, Chair of the Special Committee.

As part of the conversion process, certain consequential amendments will be made to the existing Management Services Agreement in respect of the Fund to account for the conversion to the new corporate structure. One such amendment will include an adjustment to the formula for the assignment of Incremental Franchises which will be revised to incorporate a reduction on the net Royalties equal to the effective cash tax applicable to the Company following conversion. The intent of this adjustment is that the Company not be adversely impacted with respect to amounts payable for Incremental Franchises.
The Special Committee and the Fund have retained financial, legal and accounting advisors in connection with a review of the proposed conversion.

About the Brookfield Real Estate Services Fund

The Fund is a leading provider of services to residential real estate brokers and their REALTORS®. The Fund 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, La Capitale Real Estate Network and Johnston & Daniel brands. At September 30, 2010, the Fund Network was comprised of 15,322 agents. The Fund Network has an approximate 22% share of the Canadian residential resale real estate market based on transactional dollar volume.

The Fund is a TSX-listed income trust that pays monthly distributions and trades under the symbol “BRE.UN”. The Fund’s website address is

1 REALTOR® is a trademark identifying real estate licensees in Canada who are members of the Canadian Real Estate Association.

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”, “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 Fund 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 Fund that reduce the number of and/or royalty revenue from the Fund’s 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

The Fund 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.

For more information, contact:
Kevin Cash
Chief Financial Officer
Brookfield Real Estate Services Fund
(416) 510-5634

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