TD REIT conference - Seniors panelHere are TD's thoughts on the Seniors panel it hosted:
Senior Housing Panel
Chartwell Retirement Residences, Sienna Senior Living, Extendicare
• Both Sienna and Chartwell believe the current strong fundamentals in the
retirement home space will continue given strong demand and a slowdown in
new supply.
• Given the current elevated construction costs, Chartwell does not see the
economics penciling out on new retirement home construction in the near term.
Management expects it would require several years of high single-digit rent
increases before the sentiment on new development changes. Sienna has been
able to make retirement home math work where there is also an LTC
development (campus of care).
• Chartwell continues to seek large, newer property acquisitions in regional
clusters so that buildings can be managed by the same teams. The REIT sees
B.C. as an attractive market because it has experienced minimal new supply
compared to other provinces. Sienna has seen acquisitive growth opportunities
in Western Canada, with a significant number of new government-funded LTC
beds being added to the market. Management expects to ramp up acquisition
activity in both Alberta and British Columbia.
• SIA is targeting $150mm to $200mm of development per year and will focus
these efforts primarily in Ontario. EXE has eight projects under construction
and plans to break ground on three to four more each year. Given the
government's commitment to building 58,000 Ontarian LTC beds by 2028 and
just 18,000 of these signed to development in 2024, EXE believes there is
significant construction runway in this space.
• Due to the availability of union collective agreements in long-term and home
care, Extendicare has a good visibility on labor costs. Management expects
revenue to track costs in these two business lines moving forward. CSH
projects that its labor costs will grow 4% to 5% in 2025, followed by slightly
lower levels in 2026. SIA has experienced reduced agency costs (down to
~$1mm to $2mm) but anticipates that operating costs will grow 3% to 4% this
year despite rent increases.
• EXE is confident that it can grow its home care segment moving forward. This is
driven by significant growth in the aging population and Ontario's LTC waitlist
(48,000) that has pushed many to pursue alternative care options. As a result,
management noted that the market has experienced a 30% increase in home
care volume, with retirement side growth stagnating. The company also
observed that the capacity constraint for hiring PSWs has dissipated over the
last 18 months. This is a positive indication that EXE can bolster future home
care growth because the company can now hire as many workers in the space
as it needs. Employee turnover has decreased to a range of 20% to 25%, down
from 40% pandemic levels.