MISSISSAUGA, ON, May 9, 2024
/CNW/ - Chartwell Retirement Residences ("Chartwell") (TSX: CSH.UN)
announced today its results for the first quarter ended
March 31, 2024.
Q1 2024 Highlights
- Resident revenue increased by $18.1
million from Q1 2023.
- Net loss was $2.0 million
compared to $9.3 million in Q1
2023.
- Funds from Operations ("FFO")(1) up 61.2% from Q1
2023.
- Same property adjusted net operating income
("NOI")(1) up 24.7% from Q1 2023.
- Weighted average same property occupancy up 610 basis points
from Q1 2023 and expected to grow to 87.3% by June 2024.
"Our teams have done a great job building on the strong momentum
of occupancy growth with a 610 basis points increase over the last
twelve months. We see this momentum continuing into the summer and
expect to achieve 87.3% occupancy by June of this year. This
occupancy growth drove significant improvements in our operating
margins and cash flows in the quarter," commented Vlad Volodarski, Chartwell's CEO. "With the
growing demand and limited new construction, we expect these
positive trends to persist in 2024 and beyond. Our teams are
focused on the execution of our successful operations, sales and
marketing initiatives to accelerate this growth."
Operating Performance Trends
- In Q1 2024 compared to Q1 2023, same property adjusted NOI
increased $11.3 million or 24.7%,
primarily due to higher revenue from rental and service rate
increases and higher occupancy.
- In Q1 2024, weighted average occupancy in our same property
portfolio was 86.2% compared to 80.1% in Q1 2023. All platforms
achieved occupancy gains in Q1 2024 compared to Q1 2023.
- Same property adjusted operating margin(1) was 35%
in Q1 2024 compared to 32% in Q1 2023.
Financial Results
The following table summarizes select financial and operating
performance measures:
|
|
Three Months Ended
March 31
|
($000s, except per unit
amounts, number of units, and occupancy)
|
|
|
|
2024
|
2023
|
Change
|
Resident
revenue
|
|
|
|
183,920
|
165,824
|
18,096
|
Direct property
operating expense
|
|
|
|
121,374
|
117,874
|
3,500
|
Net loss
|
|
|
|
(1,971)
|
(9,253)
|
7,282
|
FFO(1)
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
39,239
|
20,918
|
18,321
|
Total
|
|
|
|
39,239
|
24,338
|
14,901
|
FFO per
unit(1)
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
0.16
|
0.09
|
0.07
|
Total
|
|
|
|
0.16
|
0.10
|
0.06
|
Weighted average number
of units outstanding (000s)(2)
|
|
|
|
244,216
|
239,948
|
4,268
|
Weighted average
occupancy rate - same property portfolio(3)
|
|
|
|
86.2 %
|
80.1 %
|
6.1pp
|
Same property adjusted
NOI(1)
|
|
|
|
56,798
|
45,539
|
11,259
|
G&A
expenses
|
|
|
|
14,471
|
15,429
|
(958)
|
For Q1 2024, resident revenue increased $18.1 million or 10.9% and direct property
operating expense increased $3.5
million or 3.0%.
For Q1 2024, net loss was $2.0 million compared to $9.3 million in Q1 2023 primarily due
to:
- higher resident revenue,
- lower depreciation of property, plant and equipment
("PP&E"),
- higher net income from joint ventures, and
- lower G&A expenses,
partially offset by:
- deferred tax expense in Q1 2024 as compared to a deferred tax
benefit in Q1 2023,
- higher direct property operating expenses,
- absence of income from discontinued operations due to the sale
of the Ontario Long Term Care platform ("OLTC
Platform")(4),
- lower gain on asset sales, and
- higher negative changes in fair values of financial
instruments, primarily due to increases in trading prices of our
Trust Units.
For Q1 2024, FFO from continuing operations was $39.2 million or $0.16 per unit, compared to $20.9 million or $0.09 per unit for Q1 2023. The change in FFO
from continuing operations was primarily due to:
- higher adjusted NOI from continuing operations of $16.9 million,
- lower G&A expenses of $1.0
million, and
- higher interest income of $0.4
million.
FFO from continuing operations for Q1 2024 includes $0.4 million of Lease-up-Losses(1) and
Imputed Cost of Debt(1) related to our development
projects (Q1 2023 – $0.8
million). Total FFO for Q1 2023 includes results of
LTC Discontinued Operations of $3.4
million or $0.01 per unit.
Financial Position
As at March 31, 2024
liquidity(1) amounted to $290.5
million, which included $24.5
million of cash and cash equivalents and $266.0 million of available borrowing capacity on
our credit facilities.
The interest coverage ratio(5) was 2.5 at
March 31, 2024, compared to 2.3 at
December 31, 2023. The net debt
to adjusted EBITDA ratio(5) at March 31, 2024 was 9.7 compared to 10.2 at
December 31, 2023.
2024 Outlook and Recent Developments
An updated discussion of our business outlook can be found in
the "2024 Outlook" section of our Management's Discussion and
Analysis for the three months ended March
31, 2024 (the "Q1 2024 MD&A").
Operations
We continue to experience strong demand fundamentals having
achieved occupancy growth through the historically weaker winter
season. Our same property portfolio occupancy increased from
December to March by 50 bps compared to a 50 bps decline for the
same period last year. We expect to reach 87.3% occupancy in
our same property portfolio in June
2024, representing 640 bps growth over the prior year.
Initial contacts and personalized tour activity remains robust, and
we are experiencing strong conversion rates to permanent move-ins.
We expect this positive momentum to continue throughout 2024. The
growth in same property occupancy combined with our blended rental
and service rate growth of 4.8%, resulted in a 12.1% increase in
same property adjusted resident revenue in Q1 2024 compared to Q1
2023.
The chart included (Figure 1) provides an update in respect of
our same property occupancy.
Growth, Portfolio Optimization, and Repositioning
Activities
We continue to execute on our portfolio strategies of enhancing
our asset base to generate increased NOI, acquiring new strategic
facilities in core markets and selling non-core assets,
including:
- On May 3, 2024, we acquired an
85% interest in Chartwell Le Prescott from Batimo. Le Prescott is a 324-suite residence completed
in 2017 and is located in the Montreal suburb of Vaudreuil, Quebec. The residence is operating
at 97.7% current occupancy. The acquisition price of $80.2 million was partially settled through the
assumption of a $41.8 million
mortgage bearing interest at the rate of 8.5% maturing on
December 1, 2024. We expect to
refinance the assumed mortgage with CMHC insured debt. Of the total
purchase price, $1.7 million will be
held in escrow for other contingent liabilities. The remainder of
the purchase price, subject to normal working capital and other
closing adjustments was paid in cash utilizing cash on hand and
credit facilities.
- We expect to close on an 85% interest in the 361-suite
Chartwell Trait-Carré residence located in Quebec City in Q2 2024 for a purchase price of
$85.8 million. Trait-Carré is a new
build having been completed in February
2021 and is currently operating at 94.6% occupancy. The
acquisition price will be partially settled through the assumption
of a $58.3 million mortgage bearing
an interest rate of 8.3%. Chartwell expects to refinance the
assumed mortgage with CMHC insured debt. The remainder of the
purchase price, subject to normal working capital, other closing
adjustments and $0.2 million of NOI
support for six months, will be paid in cash utilizing cash on hand
and credit facilities.
- During Q1 2024, we invested $15.5
million in our same property portfolio on suite turns, suite
upgrades, interior upgrades and building components as we continue
to allocate capital to modernize our residences.
- On March 19, 2024, we commenced
the operational closure of Chartwell Heritage Glen Retirement
Residence (323 suites).
- The completed sale of our OLTC Platform in 2023 included a
forward sale contract for $64.5
million related to Ballycliffe LTC, a 224-bed long term care
home redevelopment. With the announced LTC funding increases in
Ontario, we expect the value of
the completed property to be higher than the forward sale contract
price. We exercised our option to terminate the forward sale
contract effective April 1, 2024, as
the agreement allowed for this if the development was not completed
by this date. We intend to commence a sale process for Ballycliffe
LTC once the construction is completed.
Liquidity and Financing
As at May 9,
2024, liquidity amounted to $279.5 million, which included $37.5 million of cash and cash equivalents
and $242.0 million of available
borrowing capacity on our Credit Facilities.
As of the date of this release, and for the remainder of 2024,
we have $141.1 million of mortgage
debt maturing at the weighted average rate of 3.32%. At
May 9, 2024, 10-year CMHC-insured
mortgage rates are estimated at approximately 4.57% and five-year
conventional mortgage financing is available at 5.75%.
In May 2024, our $125.0 million unsecured term loan will be
maturing. We expect to refinance or repay this loan with proceeds
from CMHC financings on our unencumbered properties.
Quarterly Investor Materials and Conference Call
We invite you to review our Q1 2024 investor materials on our
website at investors.chartwell.com
Q1 2024 Financial Statements
Q1 2024 Management's Discussion and Analysis
Q1 2024
Investor Presentation
A conference call hosted by Chartwell's senior management will
be held Friday May 10, 2024, at
10:00 AM ET. The telephone
numbers to participate in the conference call are: Local: (416)
340-2217 or Toll Free: 1-800-806-5484. The passcode for the
conference call is: 8636626#. Please log on at least 15
minutes before the call commences to register for the
Q&A. A slide presentation to accompany management's
comments during the conference call will be available on the
website. A live webcast of the call will be available
at https://events.q4inc.com/attendee/898562151. Joining via webcast
is recommended for those who will not be participating in the
Q&A.
The telephone numbers to listen to the call after it is
completed (Instant Replay) are: Local (905) 694-9451 or Toll-Free:
1-800-408-3053. The Passcode for the Instant Replay is 6025332#.
These numbers will be available for 30 days following the call. An
audio file recording of the call, along with the accompanying
slides, will also be archived on Chartwell's website at
investors.chartwell.com.
Footnotes
(1)
|
FFO, FFO for
continuing operations, Total FFO, including per unit amounts,
adjusted resident revenue, adjusted direct property operating
expense, adjusted NOI, adjusted operating margin, liquidity,
interest coverage ratio, Lease-up Losses, Imputed Cost of Debt, and
net debt to adjusted EBITDA ratio are non-GAAP measures. These
measures do not have standardized meanings prescribed by GAAP and,
therefore, may not be comparable to similar measures used by other
issuers. These measures are used by management in evaluating
operating and financial performance. Please refer to
the heading "Non-GAAP Financial Measures" on page 6 of this press
release. Certain information about non-GAAP financial measures,
non-GAAP ratios, capital management measures and supplementary
measures found in Chartwell's Q1 2024 MD&A, is incorporated by
reference. Full definitions of FFO & FFO per unit can be found
on page 13, same property adjusted NOI on page 14, adjusted
NOI on page 14, adjusted operating margin on page 14, liquidity on
page 20, interest coverage ratio on page 28, and net debt to
adjusted EBITDA ratio on page 44 of the Q1 2024
MD&A available on Chartwell's website, and under
Chartwell's profile on the System for Electronic Document and
Analysis Retrieval ("SEDAR+") website at sedarplus.com. The
definition of these measures have been incorporated by
reference.
|
(2)
|
Includes Trust
Units, Class B Units of Chartwell Master Care LP, and Trust Units
issued under Executive Unit Purchase Plan and Deferred Trust Unit
Plan.
|
(3)
|
'pp' means
percentage points.
|
(4)
|
Refer to the
"Significant Events – Portfolio Optimization" section on page 10 of
the Q1 2024 MD&A.
|
(5)
|
Non-GAAP; calculated
in accordance with the Trust indentures for Chartwell's 4.211%
Series B senior unsecured debentures and 6.000% Series C senior
unsecured debentures and may not be comparable to similar metrics
used by other issuers or to any GAAP measures.
|
(6)
|
Forecast includes
leases and notices as at April 30, 2024, and an estimate of
mid-month move-ins of 20 bps for May and 40 bps for June, based on
the preceding 12-month average of such activity.
|
Forward-Looking Information
This press release contains forward-looking information that
reflects the current expectations, estimates and projections of
management about the future results, performance, achievements,
prospects or opportunities for Chartwell and the seniors housing
industry. Forward-looking statements are based upon a number of
assumptions and are subject to a number of known and unknown risks
and uncertainties, many of which are beyond our control, and that
could cause actual results to differ materially from those that are
disclosed in or implied by such forward-looking statements.
Examples of forward-looking information in this document include,
but are not limited to, statements regarding our business
strategies, operational sales, marketing and optimization
strategies including targets, and the expected results of such
strategies, predictions and expectations with respect to industry
trends including growth in the senior population, a deficit of long
term care beds and the slow down of new construction starts,
expectations with respect to taxes that are expected to be payable
in the current and future years and statements regarding the tax
classification of distributions, and occupancy rate forecasts.
There can be no assurance that forward-looking information will
prove to be accurate, as actual results and future events could
differ materially from those expected or estimated in such
statements. Accordingly, readers should not place undue reliance on
forward-looking information. These factors are more fully described
in the "Risks and Uncertainties and Forward-Looking Information"
section in Chartwell's Q1 2024 MD&A, and in materials filed
with the securities regulatory authorities in Canada from time to time, including but not
limited to our most recent Annual Information Form the ("AIF"). A
copy of the Q1 2024 MD&A, the AIF, and Chartwell's other
publicly filed documents can be accessed under Chartwell's profile
on the SEDAR+ website at sedarplus.com.
About Chartwell
Chartwell is in the business of serving and caring for
Canada's seniors, committed to its
vision of Making People's Lives BETTER and to providing a happier,
healthier, and more fulfilling life experience for its residents.
Chartwell is an unincorporated, open-ended real estate trust which
indirectly owns and operates a complete range of seniors housing
communities, from independent living through to assisted living and
long term care. Chartwell is one of the largest operators in
Canada, serving over 25,000
residents in four provinces across the
country. For more information visit
www.chartwell.com.
For more information, please contact:
Chartwell Retirement Residences
Jeffrey Brown, Chief Financial
Officer
Tel: (905) 501-6777
Email: investorrelations@chartwell.com
Non-GAAP Financial Measures
Chartwell's condensed consolidated interim financial
statements are prepared in accordance with International Financial
Reporting Standards ("IFRS"). Management uses certain
financial measures to assess Chartwell's operating and financial
performance, which are measures not defined in generally accepted
accounting principles ("GAAP") under IFRS. The following
measures: FFO, FFO per unit, same property adjusted NOI,
adjusted NOI, adjusted operating margin, liquidity, interest
coverage ratio and net debt to adjusted EBITDA ratio as well as
other measures discussed elsewhere in this release, do not have a
standardized definition prescribed by IFRS. They are presented
because management believes these non-GAAP measures are relevant
and meaningful measures of Chartwell's performance and as computed
may differ from similar computations as reported by other issuers
and may not be comparable to similarly titled measures reported by
such issuers. For a full definition of these measures, please refer
to the Q1 2024 MD&A available on Chartwell's website and on
SEDAR+.
The following table reconciles resident revenue and direct
property operating expense from our financial statements to
adjusted resident revenue and adjusted direct property operating
expense and NOI to Adjusted NOI from continuing operations and
Adjusted NOI and identifies contributions from our same property
portfolio, our growth portfolio, and our repositioning
portfolio:
($000s, except
occupancy rates)
|
|
|
|
Q1
2024
|
Q1 2023
|
Change
|
Resident
revenue
|
|
|
|
183,920
|
165,824
|
18,096
|
Add:
Share of resident
revenue from joint ventures (1)
|
|
|
|
33,616
|
30,428
|
3,188
|
Resident revenue from
LTC Discontinued Operations (2)
|
|
|
|
-
|
61,815
|
(61,815)
|
Adjusted resident
revenue
|
|
|
|
217,536
|
258,067
|
(40,531)
|
Comprised
of:
|
|
|
|
|
|
|
Same
property
|
|
|
|
161,193
|
143,819
|
17,374
|
Growth
|
|
|
|
24,687
|
21,519
|
3,168
|
Repositioning
|
|
|
|
31,656
|
92,729
|
(61,073)
|
Adjusted resident
revenue
|
|
|
|
217,536
|
258,067
|
(40,531)
|
Direct property
operating expense
|
|
|
|
121,374
|
117,874
|
3,500
|
Add:
Share of direct
property operating expense from joint ventures
(1)
|
|
|
|
22,572
|
21,723
|
849
|
Direct property
operating expense from LTC Discontinued Operations
(2)
|
|
|
|
-
|
56,653
|
(56,653)
|
Adjusted direct
property operating expense
|
|
|
|
143,946
|
196,250
|
(52,304)
|
Comprised
of:
|
|
|
|
|
|
|
Same
property
|
|
|
|
104,395
|
98,280
|
6,115
|
Growth
|
|
|
|
15,654
|
14,815
|
839
|
Repositioning
|
|
|
|
23,897
|
83,155
|
(59,258)
|
Adjusted direct
property operating expense
|
|
|
|
143,946
|
196,250
|
(52,304)
|
NOI
|
|
|
|
62,546
|
47,950
|
14,596
|
Add:
Share of NOI from joint ventures
|
|
|
|
11,044
|
8,705
|
2,339
|
Adjusted NOI from
continuing operations
|
|
|
|
73,590
|
56,655
|
16,935
|
Add:
NOI from LTC
Discontinued Operations
|
|
|
|
-
|
5,162
|
(5,162)
|
Adjusted
NOI
|
|
|
|
73,590
|
61,817
|
11,773
|
Comprised
of:
|
|
|
|
|
|
|
Same
property
|
|
|
|
56,798
|
45,539
|
11,259
|
Growth
|
|
|
|
9,033
|
6,704
|
2,329
|
Repositioning
|
|
|
|
7,759
|
9,574
|
(1,815)
|
Adjusted
NOI
|
|
|
|
73,590
|
61,817
|
11,773
|
Weighted average
occupancy rate:
|
|
|
|
|
|
|
Same property
portfolio
|
|
|
|
86.2 %
|
80.1 %
|
6.1pp
|
Growth
portfolio
|
|
|
|
79.6 %
|
73.5 %
|
6.1pp
|
Repositioning
portfolio
|
|
|
|
82.0 %
|
82.9 %
|
(0.9pp)
|
Total
portfolio
|
|
|
|
84.5 %
|
80.1 %
|
4.4pp
|
(1)
|
Non-GAAP; represents
Chartwell's proportionate share of the resident revenue and direct
property operating expense of our Equity-Accounted JVs,
respectively.
|
(2)
|
Represents the
resident revenue and direct property operating expense related to
LTC Discontinued Operations, respectively.
|
The following table provides a reconciliation of net
income/(loss) to FFO for continuing operations:
($000s, except per
unit amounts and number of units)
|
|
|
|
Q1
2024
|
Q1 2023
|
Change
|
|
Net
income/(loss)
|
|
|
|
(1,971)
|
(12,590)
|
10,619
|
|
Add
(Subtract):
|
|
|
|
|
|
|
B
|
Depreciation of
PP&E
|
|
|
|
35,342
|
39,237
|
(3,895)
|
D
|
Amortization of limited
life intangible assets
|
|
|
|
615
|
739
|
(124)
|
B
|
Depreciation of
PP&E and amortization of intangible assets used for
administrative
purposes included in depreciation of PP&E and
amortization of intangible assets above
|
|
|
|
(1,055)
|
(1,144)
|
89
|
E
|
Loss/(gain) on disposal
of assets
|
|
|
|
(638)
|
(2,712)
|
2,074
|
J
|
Transaction costs
arising on dispositions
|
|
|
|
1,992
|
402
|
1,590
|
F
|
Tax on gains or losses
on disposal of properties
|
|
|
|
(351)
|
-
|
(351)
|
G
|
Deferred income
tax
|
|
|
|
1,053
|
(7,477)
|
8,530
|
O
|
Distributions on Class
B Units recorded as interest expense
|
|
|
|
232
|
234
|
(2)
|
M
|
Changes in fair value
of financial instruments
|
|
|
|
3,285
|
2,509
|
776
|
Q
|
FFO adjustments for
Equity-Accounted JVs
|
|
|
|
735
|
1,720
|
(985)
|
|
FFO
|
|
|
|
39,239
|
20,918
|
18,321
|
|
Weighted average number
of units (000)
|
|
|
|
244,216
|
239,948
|
4,268
|
|
FFOPU
|
|
|
|
0.16
|
0.09
|
0.07
|
The following table provides a reconciliation of net
income/(loss) to Total FFO for total operations:
($000s, except per
unit amounts and number of units)
|
|
|
|
Q1
2024
|
Q1 2023
|
Change
|
|
Net
income/(loss)
|
|
|
|
(1,971)
|
(9,253)
|
7,282
|
|
Add
(Subtract):
|
|
|
|
|
|
|
B
|
Depreciation of
PP&E
|
|
|
|
35,342
|
39,237
|
(3,895)
|
D
|
Amortization of limited
life intangible assets
|
|
|
|
615
|
739
|
(124)
|
B
|
Depreciation of
PP&E and amortization of intangible assets used for
administrative
purposes included in depreciation of PP&E and
amortization of intangible assets above
|
|
|
|
(1,055)
|
(1,144)
|
89
|
E
|
Loss/(gain) on disposal
of assets
|
|
|
|
(638)
|
(2,701)
|
2,063
|
J
|
Transaction costs
arising on dispositions
|
|
|
|
1,992
|
474
|
1,518
|
F
|
Tax on gains or losses
on disposal of properties
|
|
|
|
(351)
|
-
|
(351)
|
G
|
Deferred income
tax
|
|
|
|
1,053
|
(7,477)
|
8,530
|
O
|
Distributions on Class
B Units recorded as interest expense
|
|
|
|
232
|
234
|
(2)
|
M
|
Changes in fair value
of financial instruments
|
|
|
|
3,285
|
2,509
|
776
|
Q
|
FFO adjustments for
Equity-Accounted JVs
|
|
|
|
735
|
1,720
|
(985)
|
|
FFO
|
|
|
|
39,239
|
24,338
|
14,901
|
|
Weighted average number
of units (000)
|
|
|
|
244,216
|
239,948
|
4,268
|
|
FFOPU
|
|
|
|
0.16
|
0.10
|
0.06
|
SOURCE Chartwell Retirement Residences (IR)