Commercial real estate operations drag down FirstService earnings
Editor's note: An earlier version of this story incorrectly characterized FirstService's property services, which include Field Asset Services, as "dragging down" earnings at FirstService. The first quarter net loss at FirstService was instead attributable to the company's commercial real estate operations and not to the company's property services segment. We apologize for the error.
FirstService Corp. reported a first-quarter loss of $16.4 million, or 55 cents per share, as the company's commercial real estate operations dragged down earnings during the first three months of 2012. FirstService is the corporate parent of commercial real estate giant Colliers International, as well as property preservation firm Field Asset Services.
The company's operating loss for the period ended March 31 widened from an unadjusted $9.9 million loss in the year-ago period. FirstService's adjusted net loss was $3 million, or a loss of 10 cents a share, after taking into account acquisition-related items and other adjustments. That compares to adjusted earnings in the year-ago quarter of $4.4 million, or 14 cents a share.
Analysts polled by Thomson Reuters estimated FirstService would earn an average of 24 cents a share.
While consolidated revenues at FirstService increased by 2%, the quarterly net loss was the result of widening operating losses in the company's commercial real estate operations segment, which posted a net operating loss of $14.4 million during the first quarter of 2012, compared with a net operating loss of $3.4 million in the year-ago quarter.
The company's other operating segments, including residential property management and property services, contributed positive operating net income that somewhat offset the loss in commercial real estate operations.
Property services revenue totaled $84.8 million for the quarter, down 26% from $114.5 million in the prior-year period, attributable to a significant decline in volumes of distressed assets under management at Field Asset Services, the company said.
Volumes "came in below prior year levels, but generally in line with overall market reductions in foreclosure repossessions," said Jay Hennick, founder and CEO.
Despite the drop in revenue, the property services segment at FirstService posted positive operating earnings for the quarter at $604,000, compared to $8.9 million in the year-ago period.
FirstService continued to see strong growth in its residential property management segment during the first quarter, as well, with the operating segment posting a $8.1 million operating profit during Q1, up nearly 21% versus the year-ago period.
FirstService's Hennick said that he expects revenues in the firm's property services segment should improve over the course of the year, attributing much of the revenue drop to seasonal and likely transient factors. "While the backlog of properties in distress remains at near-record levels, assuming no change in the regulatory environment, foreclosure repossessions are expected to remain at current levels for the balance of the year," the company said in its earnings statement.
The company also characterized its commercial real estate operations as "strong," with Hennick saying that the company is beginning to realize "the benefits of our investments in recruiting and corporate solutions over the past 18 months."