MISSISSAUGA, ON, May 5, 2022 /CNW/ - Chartwell Retirement Residences ("Chartwell") (TSX: CSH.UN) announced today its results for the first quarter ended March 31, 2022.
"Following continuing improvements in our leading sales indicators, and strong recent leasing activity we expect our same property portfolio occupancy to begin to increase in May with a further 0.2 percentage points increase in June." commented Vlad Volodarski, CEO. "I am confident with the strength and ingenuity of our Chartwell people, driven by our vision of Making People's Lives Better, our innovative marketing and sales programs, combined with the accelerated growth of the seniors population and slow-down of new construction starts in our markets for the last two years, we will recover our occupancies and continue to create sustainable value for all our stakeholders over time."
In Q1 2022, net loss was $3.3 million compared to $4.9 million in Q1 2021 primarily due to the following:
partially offset by:
FFO from continuing operations for Q1 2022 was $20.3 million or $0.09 per unit, or $14.2 million lower compared to Q1 2021 FFO from continuing operations of $34.5 million or $0.16 per unit primarily due to:
FFO from continuing operations for Q1 2022 was impacted by $1.0 million of Lease-up-Losses and Imputed Cost of Debt related to our development projects (Q1 2021 – $1.0 million).
Total FFO for Q1 2022 was $31.3 million or $0.13 per unit, compared to $35.1 million or $0.16 per unit in Q1 2021. Effective March 31, 2022, our Long Term Care Operations segment was reclassified as discontinued operations as described below. Total FFO per unit for Q1 2022 includes $0.04 per unit from discontinued operations compared to $nil per unit in Q1 2021 due to higher Adjusted NOI from Long Term Care Operations primarily as a result of government reimbursements for prior years direct operating expenses and higher ancillary, preferred and retirement accommodation revenues.
For Q1 2022, resident revenue increased $0.7 million or 0.5%, primarily due to acquisitions and developments and revenue growth in our existing portfolio, partially offset by the disposition of properties.
For Q1 2022, direct operating expense increased $12.6 million or 12.4%, primarily due to higher expenses in our existing property portfolio, partially offset by the disposition of properties.
In Q1 2022, weighted average occupancy in our retirement same property portfolio was 76.5%, compared to 78.9% in Q1 2021 a decrease of 2.4 percentage points due to lower move-in activity as a result of the pandemic. Move-in activity improved significantly in Q1 2022 increasing 47% compared to Q1 2021.
The following table summarizes select financial and operating performance measures:
Three Months Ended March 31 |
|||||||
($000s, except per unit amounts, number of units, and occupancy) |
2022 |
2021 |
Change |
||||
Resident revenue |
157,668 |
156,927 |
741 |
||||
Direct property operating expense |
113,787 |
101,211 |
12,576 |
||||
Net income/(loss) |
(3,316) |
(4,933) |
1,617 |
||||
FFO (1) |
|||||||
Continuing operations |
20,259 |
34,461 |
(14,202) |
||||
Total |
31,324 |
35,134 |
(3,810) |
||||
FFO per unit (1) |
|||||||
Continuing operations |
0.09 |
0.16 |
(0.07) |
||||
Total |
0.13 |
0.16 |
(0.03) |
||||
Weighted average number of units outstanding (000s) (2) |
236,048 |
218,331 |
17,717 |
||||
Same property occupancy (3) |
76.4% |
78.7% |
(2.3pp) |
||||
Same property adjusted NOI (1) |
46,754 |
59,930 |
(13,176) |
||||
G&A expenses |
13,828 |
12,792 |
1,036 |
||||
At March 31, 2022, liquidity (1) amounted to $374.8 million, which included $160.0 million of cash and cash equivalents and $214.9 million of available borrowing capacity on our credit facilities. In addition, Chartwell's share of cash and cash equivalents held in its equity-accounted joint ventures was $3.8 million.
The interest coverage ratio (1) on a rolling 12-month basis was 2.6 at March 31, 2022 compared to 2.8 at March 31, 2021. The net debt to adjusted EBITDA ratio (1) at March 31, 2022 was 10.4 compared to 9.9 at March 31, 2021.
Additionally, our unencumbered asset pool value was $1.0 billion at March 31, 2022, and our unencumbered asset value to unsecured indebtedness ratio was 2.1 at March 31, 2022.
On April 11, 2022, DBRS confirmed the BBB(low) rating of our Issuer Rating and the Senior Unsecured Debentures Rating with a negative trend as described in their report. (Details are available on their website at www.dbrsmorningstar.com.)
On March 31, 2022, we entered into definitive agreements to substantially exit our Long Term Care Operations in Ontario, including all operations for owned and managed Ontario Long Term Care properties. These agreements, together, the "LTC Transactions" include:
The combined value of the LTC Transactions, before closing costs and customary adjustments, is $446.5 million.
The sale price for the LTC Discontinued Operations is $382.0 million, subject to customary adjustments in accordance with the terms of the purchase and sale agreement. The transition of our LTC Discontinued Operations and the transition of management of our three long term care homes that we currently own as well as the four third-party owned long term care homes that we currently manage, subject to regulatory and other required approvals, is expected to occur within one year from the announcement of the sale. The purchase price for the LTC Discontinued Operations will be paid through the assumption of mortgage debt by the purchaser related to certain of these properties, which, assuming a December 31, 2022, closing, would carry an estimated balance of $126.2 million bearing a weighted average interest rate of 5.43%, with the remainder to be paid in cash. A portion of the cash proceeds will be used to repay the remaining mortgage debt which is not being assumed by the purchaser for the LTC Discontinued Operations which assuming, a December 31, 2022 closing, would carry an estimated balance of $15.8 million bearing a weighted average interest rate of 6.13%. Net proceeds estimated based on a December 31, 2022 closing date, after deductions for repayment of property-specific debt, transaction costs, and specified investment flow-through ("SIFT") cash taxes are estimated to be approximately $214.4 million.
Concurrently with the sale of the LTC Discontinued Operations, we entered into a forward purchase agreement to sell our Ballycliffe long-term care home with an existing operating capacity of 100 beds that we are currently expanding and redeveloping to a 224-bed state of the art long term care home. The sale price for Ballycliffe is $64.5 million and net proceeds after deductions for repayment of property-specific debt, transaction costs, and specified investment flow-through ("SIFT") cash taxes are estimated to be approximately $62.9 million. The forward sale contract will close when the redevelopment of Ballycliffe is completed which is estimated to occur in early Q3 2023.
On April 1, 2022, we acquired three recently developed retirement residences in Ontario with 467 suites for a purchase price of $228.0 million which includes a deferred payment of $3.0 million to be paid on the earlier of the completion of a 132-suite condominium development at one of the locations currently in construction, or June 30, 2024. The owners of these condominium units will enjoy access to the amenities of the retirement residence for a monthly fee. In addition, $3.0 million of the purchase price has been allocated to 1.8 acres of excess land at one of the locations where approximately 112 suites could be developed over time. The purchase price for these properties was settled by the assumption of in place mortgages on two of the acquired properties with an estimated principal balance of $85.6 million, bearing a weighted average interest rate of 3.7% and maturing in November 2023. The remainder of the purchase price was settled with cash on hand and borrowings on our secured credit facility.
Chartwell expects, subject to market conditions, to use the net proceeds of the LTC Transactions, estimated at $277.3 million in total, to continue to grow our retirement business through acquisition and development activity, with a portion being used to pay down our credit facilities which have been used to fund such investments in advance of closing the LTC Transactions.
Chartwell is privileged to be a leader in a sector that generates tremendous positive societal impact by serving and caring for Canada's growing seniors population. As the leading provider in the retirement living sector in Canada, Chartwell imbeds sound ESG practices throughout our organization and activities to fulfill our duty to continuously evolve, improve and grow our contribution to society and our residents, employees, stakeholders, and local communities.
On March 29, 2022, we issued our second ESG Report, in which we highlight our progress and targets in enriching the lives of our residents and their loved ones; attracting, engaging and developing our employees; creating positive societal impact through community building and charitable activities; environmental stewardship; and corporate governance.
Find our 2022 ESG Report at: investors.chartwell.com/company-profile.
Same property retirement operations occupancy decreased to 76.0% or 0.2 percentage points in April 2022, is forecasted to increase 0.1 percentage points in May with a further 0.2 percentage points increase in June 2022, achieving growth in our Quebec and Western platforms, and stabilizing in our Ontario platform, based on known leases and notices as at April 28, 2022. April 2022 same property retirement leasing activity and permanent move-ins exceeded April 2021 by 27% and 35%, respectively. Our Western platform is forecast to deliver strong occupancy growth of 0.5 percentage points starting in June, consistent with the recovery experienced in 2021 in this platform. Our Ontario platform is forecast to stabilize occupancy starting in June. Our Quebec platform is forecast to deliver strong occupancy growth of 0.5 percentage points in May with growth continuing in June.
We believe that there is a pent-up demand for retirement accommodation and services, driven by the increased ageing population, disruptions of community-based support services for seniors during the pandemic and a persistent shortage of long-term care beds. Accelerated growth in the population of seniors over the age of 75 over the next 20 plus years, as well as the slowdown of construction activity in the last two years should support occupancy recovery in the short term and growth from pre-pandemic levels over the long term. In addition, our retirement operations acquisition and development portfolio has shown continued lease up progress. Pandemic related restrictions have significantly eased, and assuming this continues, we expect our occupancy to continue to recover in 2022 across all platforms.
We expect the temporary elevation in direct operating expenses in our retirement residences through the COVID-19 Omicron variant of concern driven waves of the pandemic to continue to be higher due to higher-than-normal staffing costs as a result of increased agency staffing and overtime used to augment vacancies resulting from more staff being required to self-isolate due to the high transmissibility of the Omicron variants. As the first Omicron wave receded, costs began to decline. However, with the resurgence in April, we anticipate that incremental net pandemic related expenses could range from $4.0 to $6.0 million in Q2 2022. In addition, in 2021 and to date in 2022, excluding pandemic related agency staffing utilization, we experienced an increase in agency staffing costs. In Q1 2022, agency staffing costs increased $2.9 million or 4.7% of compensation costs compared to Q1 2021 in our same property retirement operations. As the pandemic wanes, labour markets normalize and our staffing levels are optimized, we expect to bring these costs down gradually through the latter half of 2022.
As at May 5, 2022 liquidity amounted to $264.1 million, which included $68.2 million of cash and cash equivalents and $195.9 million of available borrowing capacity on our credit facilities. In addition, Chartwell's share of cash and cash equivalents held in its equity-accounted joint ventures was $13.1 million.
Additionally, our unencumbered asset pool value was $1.1 billion at May 5, 2022, and our unencumbered property asset value to unsecured indebtedness ratio increased to 2.2 at May 5, 2022.
We invite you to review our Q1 2022 investor materials on our website at investors.chartwell.com
Q1 2022 Financial Statements
Q1 2022 Management's Discussion and Analysis
First Quarter 2022 Investor Presentation
A conference call hosted by Chartwell's senior management team will be held Friday, May 6, 2022, at 10:00 AM ET. The telephone numbers for the conference call are: Local: (416) 340-2217 or Toll Free: 1-800-898-3989. The passcode for the conference call is: 5558906#. The conference call can also be heard over the Internet by accessing the Chartwell website at www.chartwell.com, clicking on "Investor Relations" and following the link at the top of the page. A slide presentation to accompany management's comments during the conference call will be available on the website. Please log on at least 15 minutes before the call commences.
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 1236621#. These numbers will be available for 90 days following the call. An audio file recording of the call, along with the accompanying slides, will also be archived on the Chartwell website at www.chartwell.com.
Footnotes
(1) |
FFO, FFO per unit, same property adjusted NOI, adjusted NOI, liquidity, interest coverage ratio, and net debt to adjusted EBITDA ratio are non-GAAP measures. These measures do not have standardized meanings prescribed by GAAP and, therefore, may not be comparable to similar measures used by other issuers. These measures are used by management in evaluating operating and financial performance. Please refer to the heading "Non-GAAP Financial Measures" on page 5 of this press release. Full definitions of FFO & FFO per unit can be found on page 16, same property adjusted NOI on page 17, adjusted NOI on page 18, liquidity on page 26, interest coverage ratio on page 33 and net debt to adjusted EBITDA ratio on page 50 of the Q1 2022 MD&A available on Chartwell's website and at www.sedar.com. The definition of these measures have been incorporated by reference. |
(2) |
Includes Trust Units, Class B Units of Chartwell Master Care LP, and Trust Units issued under Executive Unit Purchase Plan and Deferred Trust Unit Plan. |
(3) |
Forecast includes leases and notices as at April 28, 2022. |
(4) |
'pp' means percentage points. |
COVID-19 Risk Factors
Please refer to the 2021 MD&A to review risk factors to Chartwell relating to COVID-19.
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. 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 "COVID-19 Business Impacts and Related Risks" section, and the "Risks and Uncertainties and Forward-Looking Information" section in Chartwell's 2021 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.
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, 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 financial 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 2021 MD&A available on Chartwell's website and at www.sedar.com.
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 identifies contributions from our same property portfolio and our acquisition, development and other portfolio:
($000s, except occupancy rates) |
Q1 2022 |
Q1 2021 |
Change |
Resident revenue |
157,668 |
156,927 |
741 |
Add: Share of resident revenue from joint ventures (1) |
28,080 |
27,743 |
337 |
Resident revenue from discontinued operations (2) |
67,955 |
60,748 |
7,207 |
Adjusted resident revenue (3) |
253,703 |
245,418 |
8,285 |
Comprised of: |
|||
Same property (3) |
170,707 |
169,071 |
1,636 |
Acquisitions, development, and other (3) |
82,996 |
76,347 |
6,649 |
Adjusted resident revenue (3) |
253,703 |
245,418 |
8,285 |
Direct property operating expense |
113,787 |
101,211 |
12,576 |
Add: Share of direct property operating expenses from joint ventures (4) |
20,743 |
18,581 |
2,162 |
Direct property operating expense from discontinued operations (5) |
55,200 |
58,294 |
(3,094) |
Adjusted direct property operating expense (3) |
189,730 |
178,086 |
11,644 |
Comprised of: |
|||
Same property (3) |
123,953 |
109,141 |
14,812 |
Acquisitions, development, and other (3) |
65,777 |
68,945 |
(3,168) |
Adjusted direct property operating expense (3) |
189,730 |
178,086 |
11,644 |
Adjusted NOI (3) |
63,973 |
67,332 |
(3,359) |
Comprised of: |
|||
Same property (3) |
46,754 |
59,930 |
(13,176) |
Acquisitions, development, and other (3) |
17,219 |
7,402 |
9,817 |
Adjusted NOI (3) |
63,973 |
67,332 |
(3,359) |
Weighted average occupancy rate - same property portfolio |
76.4% |
78.7% |
(2.3pp) |
Weighted average occupancy rate - total portfolio |
77.1% |
77.9% |
(0.8pp) |
The following table provides a reconciliation of net income/(loss) to FFO for:
Continuing Operations |
Total Operations |
||||
($000s, except per unit amounts) |
Q1 2022 |
Q1 2021 |
Q1 2022 |
Q1 2021 |
|
Net income/(loss) |
(11,862) |
(2,675) |
(3,316) |
(4,933) |
|
Add (Subtract): |
|||||
B |
Depreciation of PP&E |
36,621 |
37,679 |
38,437 |
40,401 |
D |
Amortization of limited life intangible assets |
744 |
786 |
946 |
995 |
B |
Depreciation of PP&E and amortization of intangible assets used |
(1,222) |
(1,264) |
(1,222) |
(1,264) |
E |
Loss/(gain) on disposal of assets |
(545) |
(361) |
(545) |
(361) |
J |
Transaction costs arising on dispositions |
55 |
64 |
556 |
64 |
G |
Deferred income tax |
641 |
(1,188) |
641 |
(1,188) |
O |
Distributions on Class B Units recorded as interest expense |
234 |
233 |
234 |
233 |
M |
Changes in fair value of financial instruments and foreign |
(2,641) |
435 |
(2,641) |
435 |
Q |
FFO adjustments for Equity-Accounted JVs (1) |
(1,766) |
752 |
(1,766) |
752 |
FFO (2) |
20,259 |
34,461 |
31,324 |
35,134 |
|
Weighted average number of units |
236,048 |
218,331 |
236,048 |
218,331 |
|
FFOPU |
0.09 |
0.16 |
0.13 |
0.16 |
|
About Chartwell
Chartwell is an unincorporated, open-ended real estate trust which indirectly owns and operates a complete range of seniors housing communities, from independent supportive living through assisted living to long term care. It is the largest operator in the Canadian seniors living sector with over 200 quality retirement communities in four provinces including properties under development. Chartwell is committed to its vision of Making People's Lives BETTER and to providing a happier, healthier, and more fulfilling life experience for its residents. For more information, visit www.chartwell.com
For more information, please contact:
Chartwell Retirement Residences
Sheri Harris, Chief Financial Officer
Tel: (905) 501-6777
[email protected]
SOURCE Chartwell Retirement Residences
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...
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