TD Currently have a $14.00 target. GLTA
Chartwell Retirement Residences
(CSH.UN-T) C$12.32
Q4/23 First Look; Results in Line; SPNOI Growth of 21.5%
Event
Q4/23 results. Conference call today at 10:00 AM ET (416-340-2217; passcode:
8931311#).
Impact: SLIGHTLY POSITIVE
Our take: Q4 results were largely in line as retirement home fundamentals held
strong in the quarter. Average retirement occupancy continued to rebound nicely
to 83.3% (+30bps versus our estimate), with management seeing further increases
in Q1 with the reversal of seasonal declines. Management's outlook calls for
continued occupancy gains in 2024, +5% growth in rental rates/services
income (vs 4.5% in 2023), and same-property NOI margins of 38% (vs 34% in
2023), all of which are slightly ahead of our current estimates.
FFO/unit (f.d.) of $0.161 was +15% y/y, and in line with our estimate (consensus:
$0.167). AFFO/unit of $0.148 was also in line with our estimate.
Operations
Q4 Retirement SPNOI was +21.5% y/y. Revenues were +10.4% y/y due to
rental rate increases and higher same-property occupancy. Operating margins were
+310bps y/y to 34.5%. Average same-property occupancy was +460bps to 84.1%,
with Ontario +420bps to 81.4%, Quebec +540bps to 82.5%, and Western Canada
+430bps to 91.4%. Occupancy has improved thus far in Q1, with Chartwell reporting
85.7%/85.5% in January/February (versus 84.9% at year-end) and forecasting
85.5%/85.7% for March/April. Management noted it remains on track to meet its
95% occupancy target in 2025.
Acquisitions/Dispositions
Chartwell expects to acquire an 85% interest in Chartwell Trait-Carr in Q2/24
for $85mm. In Q4, Batimo exercised its put right for Chartwell to acquire an 85%
interest in the 361-suite Chartwell Le Prescott residence in Quebec.
Chartwell's Ridgepoint residence development was completed in Q4, with
expected stabilization in Q2/25 (pushed back two quarters).
Completed the sale of one residence (161 suites) that was operationally closed
in 2023 for $13.9m ($86k/suite). Post Q4, completed the sale of Chartwell's
Bridlewood Residence (61 suites) for $3.8mm ($62k/suite).
The dissolution of the Chartwell/Welltower JV (link), remains on track for Q2/24.
Balance Sheet
As at March 7, 2024, Chartwell had $368.4mm of liquidity ($32.4mm cash;
$336.0mm capacity on credit lines). Leverage was +160bps higher q/q to 49.0%.
Issued $250mm of unsecured debentures (6.0%) to repay the $200mm unsecured
debentures (3.786%) that came due in December.