TD Investor Day Reaffirms Our View For Sector-
Leading AFFO/Unit Growth
THE TD COWEN INSIGHT
Chartwell hosted a well-attended investor day with management presentations affirming our confidence that the company can meet its 2028 financial targets, which were released November 12. We have made no changes to our forecast. CSH remains very well positioned to benefit from Canadian retirement home fundamentals that continue to strengthen. Maintain Buy rating and $23 TP.
Impact: NEUTRAL
Chartwell put forth new 2028 targets with its investor day (Fig. 1), including guidance on operational/financial metrics, and portfolio optimization that were largely in-line with our
expectations from last week (link). We view Chartwell's targets as very achievable and slightly on the conservative side, with today's investor day reiterating our view of very strong market
fundamentals that should support peer-leading earnings growth.
Targeting >95% SP occupancy. Management sees further upside in SP occupancy levels above the prior 95% target (expected in December). As more homes become stabilized/
full, this should allow Chartwell to push higher growth on new leases (MSD/HSD uplifts) in addition to improving operating margins. We expect occupancy gains from the growth and
repositioning portfolios, as well as acquisitions to meaningfully contribute to top-line growth as well. Management is also targeting >4% SP revenue growth and <4% SP expense growth
(based on the current SP portfolio), supported by new competitive growth strategies including a priority wait-list, faster contact center, and lower incentive usage. Our forecast has 9%/8%
SPNOI growth for 2026/27.
Portfolio optimization includes ~$2bln in growth investments and ~$1bln in non-core asset sales. Chartwell has announced/closed over $2.3bln in acquisitions during the past two years, which suggests a slightly slower pace going forward. With management more than willing to use its current favourable cost of capital to fund portfolio growth, we believe the true pace of growth is more opportunity dependent. Management is targeting newer assets at pricing below replacement cost and is also partnering with developers to build an acquisitions
pipeline. Dispositions will be focused on non-core properties that do not fit into Chartwell's longer-term strategy (e.g. age/size/location of assets).
Developments coming into greater focus. We expect developments to fall into two buckets. On balance sheet where there is excess density at an existing property, and off balance sheet, where CSH will partner with a developer to essentially build an acquisition pipeline of newly build properties.
Developments will be subject to guardrails such that CSH does not overextend itself in any one bucket, or to any one counterparty. Window for annual distribution increases starting to open. Chartwell is targeting a 60% FFO/unit payout ratio on distributions, and would look to introduce consistent annual increases upon reaching this threshold (our 2026 estimate is 58%). Chartwell last increased its distribution in 2019, and another increase would mark the second seniors' operator in Canada to raise the payout post-pandemic.
Leverage expected to remain steady at <7.5x. With Q3/25 D/EBITDA sitting at 6.9x, management expects leverage to remain in its current range through 2028.
Interest coverage ratio is targeted at >3.0x (Q3/25: 3.2x).