Chartwell Retirement Residences T.CSH.UN

TD

[retiredcf]

Have an $18.00 target. GLTA

Q3/24: RESULTS IN-LINE. EXPECTED TO REACH 90.2% OCCUPANCY IN DECEMBER

THE TD COWEN INSIGHT

Q3 results were in line with our est/cons as retirement fundamentals remain strong across the portfolio (+17% SPNOI). SP occupancy continued its upward trend and is now expected to surpass 90% by year-end. Chartwell announced another acquisition in Vancouver Island for $75mm as it continues to high grade the portfolio, with YTD announced transactions now at $1.2bln. Chartwell remains our top pick.

Impact: NEUTRAL
FFO/unit of $0.204 was +26% y/y and largely in line with our $0.202 estimate and slightly ahead of consensus at $0.191. AFFO/unit (our calculation) of $0.190 was also in-line. Improving industry fundamentals translating into strong operating metrics.

• Q3 SPNOI was +17.1% y/y. By region, Quebec was 32.4%, followed by Western Canada at +16.8% and Ontario at +14.0%.

• SP revenues were +11.0% y/y on rental rate increases and higher occupancy. Operating margins were +200bps y/y to 38.4%.

• Average same-property occupancy was +610bps to 88.5%, with Quebec +650bps to 89.0%, Western Canada +730bps to 95.4%, and Ontario +520bps to 84.7%. Overall SP occupancy is forecasted to improve further to 90.2% by December 2024 (represents 430bps y/y growth).

  Management remains on track and reiterated its 95% same-property occupancy target for Q4/25. Leading indicators are showing continued strength despite the seasonally slower winter season. The combination of elevated tour activity and conversion rates is expected to drive further occupancy growth through the balance of the year.

  Acquisitions/Dispositions

• Announced an agreement to acquire a 131-suite ISL retirement home in Victoria for $75mm ($573k/suite). The property was constructed in 2021 (currently 28% occupied), with modern amenities/finishes. The transaction is expected to close in Q1 2025.

• Previously announced transactions completed in Q3 include the acquisition of three homes in Vancouver Island for $227mm (link) and five homes in Quebec for $297mm (link). Three non-core asset sales were also completed for $95mm.

  Balance Sheet

As at November 14, Chartwell had $401.3mm of liquidity ($54.1mm cash; $347.2mm capacity on credit lines). Leverage was +200bps q/q to 46.7%). CSH also announced an ATM program for up to $250mm.

Conference call Nov 15 at 10:00 AM (416-340-2217, pass 5352093#).