Brookfield Residential Reports 2011 First Quarter Results

May 05, 2011

Calgary, Alberta – (BRP: NYSE/TSX) Brookfield Residential Properties Inc. (“Brookfield Residential”) today announced net new orders and financial results for the quarter ended March 31, 2011:

Operating Data

 Three Months Ended Mar 31.
2011 2010
Home closings(units) 220 224
Net new home orders(units) 382 468
Backlog of homes(units at end of period) 537 824
Average home selling price(US$) $380,000 $372,000
Lot closings(units) 593 558

Home closings and housing revenue were similar during the three months ended March 31, 2011 in comparison to the same period in 2010, and the company’s average selling price of homes delivered was $380,000, compared to $372,000 during the same period last year. Lot closings to homebuilders for the three months ended March 31, 2011 was 593 units, compared to 558 units for the first quarter in 2010. Net new home orders for the three months ended March 31, 2011 were 382 units, a decrease from 468 units for the three months ended March 31, 2010 as a result of the industry’s 2011 slow spring selling season.

Results of Operations
(US$ millions, except per share amounts)

 Three Months Ended Mar 31.
2011 2010
Total revenue $180 $141
Housing revenue 83 83
Land revenue 97 58
Gross margin - $ 55 41
Gross margin - % 33% 29%
Income before income taxes 26 20
Income tax expense (84) (4)
Net (loss)/income attributable to Brookfield Residential (57) 18
Basic (loss)/income per share $(0.56) $0.13
Diluted (loss)/income per share $(0.56) $0.13

Revenue for the three months ended March 31, 2011 totaled $180 million, an increase compared to $141 million for the first quarter of 2010. Revenues from lot sales, the increase in gross margin, and the marginal increase in the average selling price contributed to the increase during the first quarter of 2011. A change in business practice in Alberta to implement title transfer on lot sales at the time of sale to the builder not the ultimate consumer, will result in a non-recurring land margin in 2011 of approximately $50 million with approximately $26 million recorded in the first quarter of 2011.

Brookfield Residential’s net loss for the three months ended March 31, 2011 was $57 million or $0.56 per share, compared to net income of $18 million or $0.13 per share for the three months ended March 31, 2010. The loss is primarily a result of a valuation allowance against deferred tax assets driving income tax expense of $84 million for the three months ended March 31, 2011, compared to $4 million for the same period in 2010.

On the completion of the merger, Brookfield Residential reviewed the ability of the company on a combined entity basis to realize its deferred tax asset. The three-year cumulative loss of the U.S. operations of the combined company, together with the continued uncertainty in the U.S. housing market was evidence of a need for a valuation allowance against its net U.S. deferred tax asset. As a result, a valuation allowance of $76 million was recorded on the completion on March 31, 2011 of the merger and contribution transactions. The company has the ability to reverse the valuation allowance in any future period upon utilization of the losses which can be carried forward for up to 15 years or when a valuation allowance against the deferred tax asset is no longer deemed necessary.

Operating Highlights and Recent Developments

Brookfield Residential currently sells from 34 active housing communities and 24 active land communities. A summary by region of lots owned or controlled under option follows:

Housing & Land Unconsolidated Entities
(Lots) Owned1 Options Owned Options Total Lots
3/31/2011		 Total Lots
12/31/2010
Calgary 27,807 - 1,064 - 28,871 28,643
Edmonton 17,957 - - - 17,957 18,229
Toronto 9,471 - - - 9,471 9,320
Canada 55,235 - 1,064 - 56,299 56,192
Northern California 3,265 4,950 - - 8,215 8,223
Southland/Los Angeles 859 320 760 2,759 4,698 4,734
San Diego/Riverside 8,696 - 50 - 8,746 8,761
Other 195 - 56 - 251 253
California 13,015 5,270 866 2,759 21,910 21,971
Austin 14,822 - - - 14,822 15,870
Denver 10,697 - - - 10,697 10,828
Washington D.C. Area 2,572 1,066 1,025 - 4,663 4,846
Central and Eastern U.S. 28,091 1,066 1,025 - 30,182 31,544
Total March 31, 2011 96,341 6,336 2,955 2,759 108,391
Entitled Lots 51,591 1,066 1,837 1,395 55,889
Unentitled Lots 44,750 5,270 1,118 1,364 52,502
Total March 31, 2011 96,341 6,336 2,955 2,759 108,391
Total December 31, 2010 97,381 6,435 3,132 2,759 109,707

1) Includes consolidated options

“We completed the transaction combining Brookfield Office Properties’ residential land and housing division and Brookfield Homes Corporation, strengthening our balance sheet and our ability to participate in key acquisitions for long-term growth across our business,” commented Alan Norris, CEO of Brookfield Residential. “Our North American diversification allows us the benefit of strong Canadian markets, while positioning the company for a recovery in the U.S.”

Additional Information

Brookfield Residential comprises the assets formerly owned by Brookfield Office Properties’ residential land and housing division and Brookfield Homes Corporation. The 2010 comparative results presented are based on the combined financial results of these entities.

The Letter to Shareholders and the company’s Supplemental Information for the quarter ended March 31, 2011 contain further information on the company’s strategy, operations and financial results. Shareholders are encouraged to read these documents, which are available on the company’s website at www.brookfieldrp.com.

The attached financial statements are based primarily on information that has been extracted from our interim financial statements for the three months ended March 31, 2011, which have been prepared using the standards and interpretations currently issued under U.S. Generally Accepted Accounting Principles. The amounts have not been audited or subject to review by our external auditor.


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Brookfield Residential Properties Inc. is a North American land developer and homebuilder, active in ten principal markets with over 100,000 lots controlled. We entitle and develop land and build homes for our own communities, as well as sell lots to third-party builders. The company is listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbol BRP. For more information, please visit our website at www.brookfieldrp.com.

Please note that Brookfield Residential’s unaudited quarterly report will be filed on EDGAR and SEDAR and can also be found in the investor section of our website at www.brookfieldrp.com. Hard copies of the quarterly report can be obtained free of charge upon request. 

For more information, please visit our website at www.brookfieldrp.com or contact:

Investors:
Nicole French
Manager, Investor Relations & Communications
Tel.: (403) 231-8952
Email:nicole.french@brookfieldrp.com		 Media:
Andrew Willis
SVP, Communications & Media
Tel.: (416) 369-8236
Email:andrew.willis@brookfield.com
Note: This news release contains forward-looking information within the meaning of Canadian provincial securities laws and other “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995 and in any applicable Canadian securities regulations. Certain statements in this press release that are not historical facts, including information concerning possible or assumed future results of operations of the company, the company’s future outlook and growth plans including acquisitions and lots controlled, and those statements preceded by, followed by, or that include the words “believe”, “planned”, “anticipate”, “should”, “goals”, “expected”, “potential,” “estimate,” “targeted,” “scheduled” or similar expressions, constitute “forward-looking statements.” Undue reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results to differ materially from the anticipated future results 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, but are not limited to: changes in general economic, real estate and other conditions; mortgage rate changes; availability of suitable undeveloped land at acceptable prices; adverse legislation or regulation; ability to obtain necessary permits and approvals for the development of our land; availability of labor or materials or increases in their costs; ability to develop and market our master-planned communities successfully; confidence levels of consumers; ability to raise capital on favorable terms; adverse weather conditions and natural disasters; relations with the residents of our communities; risks associated with increased insurance costs or unavailability of adequate coverage and ability to obtain surety bonds; competitive conditions in the homebuilding industry, including product and pricing pressures; and additional risks and uncertainties referred to in our filings with the security regulators in Canada and the United States, many of which are beyond our control. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.