Chartwell Announces First Quarter 2024 Results

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:

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

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:

The following table provides a reconciliation of net income/(loss) to FFO for continuing operations:

The following table provides a reconciliation of net income/(loss) to Total FFO for total operations:

SOURCE Chartwell Retirement Residences (IR)

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