MISSISSAUGA, ON, March 7, 2024 /CNW/ - Chartwell Retirement Residences ("Chartwell") (TSX: CSH.UN) announced today its results for the fourth quarter and year ended December 31, 2023.
Highlights
"Our teams continued building the strong momentum of occupancy growth in Q4 2023, finishing the year at 84.9% in our same property portfolio. Importantly, we expect to reverse the historical seasonal trends of occupancy declines in the winter months with a projected occupancy of 85.7% in April 2024. As we build on execution of our innovative operating, sales and marketing strategies, we expect continuing occupancy and cash flow growth in 2024 and beyond," commented Vlad Volodarski, Chartwell's CEO. "We continue to reimagine our corporate support processes and implementing technology solutions to help us transition to an even more agile and scalable organization. The completion of the sale of our Ontario Long Term Care Platform, and the announcement of the wind-up of our joint ventures with Welltower, combined with other asset management projects underway, will reposition our property portfolio toward high growth, well-located, and highly competitive properties. These initiatives will help to set a solid foundation for future profitable growth of our portfolio."
The following table summarizes select financial and operating performance measures:
Three Months Ended |
Year Ended |
|||||
($000s, except per unit amounts, number of units, and occupancy) |
2023 |
2022 |
Change |
2023 |
2022 |
Change |
Resident revenue |
179,946 |
170,467 |
9,479 |
687,324 |
661,029 |
26,295 |
Direct property operating expense |
118,853 |
120,672 |
(1,819) |
463,361 |
464,704 |
(1,343) |
Net income/(loss) |
(13,173) |
47,463 |
(60,636) |
128,273 |
49,531 |
78,742 |
FFO(1) |
||||||
Continuing operations |
39,246 |
27,744 |
11,502 |
122,151 |
102,013 |
20,138 |
Total |
39,099 |
33,357 |
5,742 |
133,190 |
126,917 |
6,273 |
FFO per unit(1) |
||||||
Continuing operations |
0.16 |
0.12 |
0.04 |
0.51 |
0.43 |
0.08 |
Total |
0.16 |
0.14 |
0.02 |
0.55 |
0.53 |
0.02 |
Weighted average number of units outstanding (000s)(2) |
243,262 |
238,831 |
4,431 |
241,688 |
237,402 |
4,286 |
Weighted average occupancy rate - same property portfolio(3) |
84.1 % |
79.5 % |
4.6pp |
81.1 % |
78.6 % |
2.5pp |
Same property adjusted NOI(1) |
50,864 |
41,880 |
8,984 |
189,012 |
165,384 |
23,628 |
G&A expenses |
13,455 |
9,334 |
4,121 |
60,450 |
49,641 |
10,809 |
Fourth Quarter Results
For Q4 2023, net loss was $13.2 million compared to net income of $47.5 million in Q4 2022 primarily due to:
partially offset by:
For Q4 2023, FFO from continuing operations was $39.2 million or $0.16 per unit, compared to $27.7 million or $0.12 per unit for Q4 2022. The change in FFO from continuing operations was primarily due to:
partially offset by:
FFO from continuing operations for Q4 2023 included $0.6 million of Lease-up-Losses(1) and Imputed Cost of Debt(1) related to our development projects (Q4 2022 – $1.1 million).
Annual/Year End Results
For 2023, net income was $128.3 million compared to $49.5 million in 2022 primarily due to
partially offset by:
For 2023, FFO from continuing operations was $122.2 million or $0.51 per unit, compared to $102.0 million or $0.43 per unit for 2022. The change in FFO from continuing operations was primarily due to:
partially offset by:
FFO from continuing operations for 2023 included recoveries of pandemic expenses for preceding years of $0.2 million (2022 - $2.4 million).
FFO from continuing operations for 2023 includes $2.3 million of Lease-up-Losses and Imputed Cost of Debt related to our development projects (2022 – $4.4 million).
For 2023, Total FFO which includes results of LTC Discontinued Operations was $133.2 million or $0.55 per unit, compared to $126.9 million or $0.53 per unit in 2022. LTC Discontinued Operations results for 2022 included recoveries of pandemic and other expenses for preceding years of $6.2 million or $0.03 per unit for which there was not a comparable amount in 2023.
As at December 31, 2023 liquidity(1) amounted to $348.6 million, which included $24.6 million of cash and cash equivalents and $324.0 million of available borrowing capacity on our credit facilities.
The interest coverage ratio(5) for the year ended was 2.3 at December 31, 2023, compared to 2.5 at December 31, 2022. The net debt to adjusted EBITDA ratio(5) at December 31, 2023 was 10.2 compared to 11.1 at December 31, 2022.
A discussion of our business outlook can be found in the "2024 Outlook" section of our Management's Discussion and Analysis for the year ended December 31, 2023 (the "2023 MD&A").
The chart included (Figure 1) provides an update in respect of our same property retirement occupancy.
Due to seasonally lower move-in activity, we have historically experienced declines in occupancy from December to April. The three-year average for 2017, 2018, 2019 (the "pre-pandemic average") decline in our same property occupancy from December to April was 180 basis points ("bps") compared to a 60 bps decline in 2023.
February 2024 same property occupancy was 85.5% and we expect April 2024 occupancy to be 85.7%, an increase of 80 bps from December 2023.
We increased our same property occupancy by 520 basis points in 2023. We anticipate continuing occupancy growth in 2024 supported by the favourable market conditions and execution of our proven sales and marketing strategies. We expect to achieve rent and services rate increases of approximately 5% in 2024. As a result of this expected occupancy and rate growth we expect our same property operating margins to increase to approximately 38% in 2024 from 34% in 2023.
In 2023, 27.9% of our distributions were classified as return of capital and 72.1% of our distributions were classified as eligible dividends. The eligible dividends are primarily due to the taxable capital gains on the sale of our OLTC Platform which resulted in specified investment flow through ("SIFT") tax payable of $27.2 million for the 2023 taxation year.
Based on our current expectations, the Welltower Transaction (as described below) will result in SIFT taxes payable of approximately $6.8 million in 2024. Based on current forecasts, Chartwell does not expect any other tax to be payable under the SIFT Rules in 2024.
During Q4 2023, two properties that were previously operationally closed were sold. One property was sold on November 1, 2023 for a sale price of $2.3 million. A vendor take-back mortgage was extended to the purchaser in the amount of $1.8 million, bearing an interest rate of 6.0% per annum with a three-year term. The second property was sold on December 11, 2023 for a sale price of $13.9 million.
During 2023, closure costs related to these repositioning activities were $1.6 million of which $1.1 million was included in NOI.
Chartwell Trait-Carré, Chartwell Le Montcalm, Chartwell Le Prescott, and Chartwell L'Envol achieved the occupancy threshold giving effect to the Batimo put rights. During Q2 2023, Batimo exercised its put right to require Chartwell to acquire an 85% interest in the 361-suite Chartwell Trait-Carré residence located in Quebec City, currently at 96.0% occupancy. Based on negotiations and appraisals completed to date, Chartwell expects to pay approximately $85 million for an 85% interest in the property and expects to close on the acquisition in Q2 2024. During Q4 2023, Batimo exercised its put right to require Chartwell to acquire an 85% interest in the 324-suite Chartwell Le Prescott residence located in Vaudreuil, currently at 95.8% occupancy. We estimate the current value of this residence at 100% ownership interest to be approximately $85.0 million. Batimo has not exercised its put rights with respect to the two other properties. We estimate the current value of Chartwell Le Montcalm and Chartwell L'Envol at approximately $150.0 million at 100% ownership interest.
On November 9, 2023, we announced that we have entered into a definitive agreement with Welltower Inc. ("Welltower") to wind-up our existing joint ventures (the "Welltower Transaction"). Under the terms of the agreement, Chartwell will convey its ownership interest in 23 assets (the "Welltower Assets") to Welltower for consideration of: (i) Welltower's ownership interest in 16 assets (the "Chartwell Assets") and (ii) $97.2 million in cash. Net proceeds to Chartwell after estimated transaction costs of $12.2 million and taxes of $6.8 million are expected to be approximately $78.2 million (the "Cash Consideration"). Closing of the transaction, subject to the required regulatory and lender approvals, is expected in Q2 2024 (the "Closing"). On Closing, Chartwell will assume approximately $140.3 million in debt on the Chartwell Assets, bearing a weighted average interest rate of 2.8% and a weighted average term to maturity of 4.4 years. The net change to total debt on Chartwell's balance sheet will be a reduction of approximately $51.0 million, before any impact of the Cash Consideration. In addition, two properties (314 suites) 100% owned by Welltower will no longer be managed by Chartwell, and one remaining co-owned property (332 suites) will continue to be operated by Chartwell.
(See https://investors.chartwell.com/november2023-transaction-with-welltower)
On February 1, 2024, we completed the sale of Chartwell Bridlewood Retirement Residence (61 suites) located in Ontario which was under a definitive sale contract as of November 27, 2023, for a sale price of $3.8 million. A vendor take-back mortgage was extended to the purchaser in the amount of $2.8 million, maturing in February 2027, and bearing an interest rate of 8% per annum for the first two years and 10% per annum for the third year.
As at March 7, 2024, liquidity amounted to $368.4 million, which included $32.4 million of cash and cash equivalents and $336.0 million of available borrowing capacity on our Credit Facilities.
For 2024, we have $181.6 million of mortgage debt maturing at the weighted average rate of 3.14%. At March 7, 2024, 10-year CMHC-insured mortgage rates are estimated at approximately 4.3% and five-year conventional mortgage financing is available at 5.4%.
In May 2024, our $125.0 million unsecured term loan will be maturing. We expect to refinance or repay this term loan using proceeds of our non-core asset sales.
We expect to complete the sale of Ballycliffe LTC under the forward sale contract upon completion of its redevelopment in the first half of 2024. The contracted sale price is $64.5 million with net proceeds, after transaction costs and taxes, and excluding working capital adjustments to be determined on closing, estimated at $62.9 million. Either party may terminate the forward purchase agreement if the development is not completed by April 1, 2024. We do not expect to complete construction by that date and as such, may sell on different terms. We expect to use the proceeds, subject to market conditions, to pay down debt.
Quarterly Investor Materials and Conference Call
We invite you to review our Q4 and Year End 2023 investor materials on our website at investors.chartwell.com
2023 Financial Statements
2023 Management's Discussion and Analysis
Q4 2023 Investor Presentation
A conference call hosted by Chartwell's senior management will be held Friday March 8, 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: 8931311#. 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/547438182. 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 1404410#. 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.
(1) |
FFO, FFO for continuing operations, Total FFO, including per unit amounts, adjusted resident revenue, adjusted direct property operating expense, adjusted NOI, adjusted operating margin, liquidity, interest coverage ratio, Lease-up Losses, Imputed Cost of Debt, 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 7 of this press release. Certain information about non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary measures found in Chartwell's 2023 MD&A, is incorporated by reference. Full definitions of FFO & FFO per unit can be found on page 19, same property adjusted NOI on page 20, adjusted NOI on page 20, adjusted operating margin on page 10, liquidity on page 30, interest coverage ratio on page 38, and net debt to adjusted EBITDA ratio on page 55 of the 2023 MD&A available on Chartwell's website and under Chartwell's profile on the System for Electronic Document and Analysis Retrieval ("SEDAR+") website at sedarplus.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) |
'pp' means percentage points. |
(4) |
Refer to the "Significant Events – Portfolio Optimization" section on page 15 of the 2023 MD&A. |
(5) |
Non-GAAP; calculated in accordance with the Trust indentures for Chartwell's 4.211% Series B senior unsecured debentures and 6.000% Series C senior unsecured debentures and may not be comparable to similar metrics used by other issuers or to any GAAP measures. |
(6) |
Forecast includes leases and notices as at February 29, 2024 and an estimate of mid-month move-ins of 30 bps for March and 50 bps for April, based on the preceding 12-month average of such activity. |
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 2023 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 2023 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.
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: [email protected]
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 2023 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:
($000s, except occupancy rates) |
Q4 2023 |
Q4 2022 |
Change |
2023 |
2022 |
Change |
Resident revenue |
179,946 |
170,467 |
9,479 |
687,324 |
661,029 |
26,295 |
Add: Share of resident revenue from joint ventures (1) |
33,159 |
30,008 |
3,151 |
126,765 |
115,864 |
10,901 |
Resident revenue from LTC Discontinued Operations (2) |
258 |
64,165 |
(63,907) |
167,326 |
252,614 |
(85,288) |
Adjusted resident revenue |
213,363 |
264,640 |
(51,277) |
981,415 |
1,029,507 |
(48,092) |
Comprised of: |
||||||
Same property |
147,279 |
133,382 |
13,897 |
559,795 |
520,586 |
39,209 |
Growth |
34,905 |
30,733 |
4,172 |
132,669 |
111,673 |
20,996 |
Repositioning |
31,179 |
100,525 |
(69,346) |
288,951 |
397,248 |
(108,297) |
Adjusted resident revenue |
213,363 |
264,640 |
(51,277) |
981,415 |
1,029,507 |
(48,092) |
Direct property operating expense |
118,853 |
120,672 |
(1,819) |
463,361 |
464,704 |
(1,343) |
Add: Share of direct property operating expense from joint ventures (1) |
22,566 |
21,138 |
1,428 |
87,219 |
82,533 |
4,686 |
Direct property operating expense from LTC Discontinued Operations (2) |
405 |
56,884 |
(56,479) |
151,671 |
220,729 |
(69,058) |
Adjusted direct property operating expense |
141,824 |
198,694 |
(56,870) |
702,251 |
767,966 |
(65,715) |
Comprised of: |
||||||
Same property |
96,415 |
91,502 |
4,913 |
370,783 |
355,202 |
15,581 |
Growth |
21,938 |
20,452 |
1,486 |
84,801 |
75,281 |
9,520 |
Repositioning |
23,471 |
86,740 |
(63,269) |
246,667 |
337,483 |
(90,816) |
Adjusted direct property operating expense |
141,824 |
198,694 |
(56,870) |
702,251 |
767,966 |
(65,715) |
NOI |
61,093 |
49,795 |
11,298 |
223,963 |
196,325 |
27,638 |
Add: |
10,593 |
8,870 |
1,723 |
39,546 |
33,331 |
6,215 |
Adjusted NOI from continuing operations |
71,686 |
58,665 |
13,021 |
263,509 |
229,656 |
33,853 |
Add: NOI from LTC Discontinued Operations |
(147) |
7,281 |
(7,428) |
15,655 |
31,885 |
(16,230) |
Adjusted NOI |
71,539 |
65,946 |
5,593 |
279,164 |
261,541 |
17,623 |
Comprised of: |
||||||
Same property |
50,864 |
41,880 |
8,984 |
189,012 |
165,384 |
23,628 |
Growth |
12,967 |
10,281 |
2,686 |
47,868 |
36,392 |
11,476 |
Repositioning |
7,708 |
13,785 |
(6,077) |
42,284 |
59,765 |
(17,481) |
Adjusted NOI |
71,539 |
65,946 |
5,593 |
279,164 |
261,541 |
17,623 |
Weighted average occupancy rate: |
||||||
Same property portfolio |
84.1 % |
79.5 % |
4.6pp |
81.1 % |
78.6 % |
2.5pp |
Growth portfolio |
79.8 % |
74.6 % |
5.2pp |
76.5 % |
72.4 % |
4.1pp |
Repositioning portfolio |
83.7 % |
81.4 % |
2.3pp |
87.1 % |
80.4 % |
6.7pp |
Total portfolio |
83.3 % |
79.3 % |
4.0pp |
81.9 % |
78.2 % |
3.7pp |
(1) |
Non-GAAP; represents Chartwell's proportionate share of the resident revenue and direct property operating expense of our Equity-Accounted JVs, respectively. |
(2) |
Represents the resident revenue and direct property operating expense related to LTC Discontinued Operations, respectively. |
The following table provides a reconciliation of net income/(loss) to FFO for continuing operations:
($000s, except per unit amounts and number of units) |
Q4 2023 |
Q4 2022 |
Change |
2023 |
2022 |
Change |
|
Net income/(loss) |
(12,758) |
41,904 |
(54,662) |
(60,941) |
27,388 |
(88,329) |
|
Add (Subtract): |
|||||||
B |
Depreciation of PP&E |
38,955 |
39,482 |
(527) |
154,005 |
152,988 |
1,017 |
D |
Amortization of limited life intangible assets |
632 |
773 |
(141) |
2,690 |
3,148 |
(458) |
B |
Depreciation of PP&E and amortization of intangible assets used for administrative purposes included in depreciation of PP&E and amortization of intangible assets above |
(1,127) |
(1,181) |
54 |
(4,461) |
(4,791) |
330 |
E |
Loss/(gain) on disposal of assets |
(5,770) |
(70,125) |
64,355 |
(12,074) |
(71,751) |
59,677 |
J |
Transaction costs arising on dispositions |
192 |
1,792 |
(1,600) |
1,167 |
1,992 |
(825) |
H |
Impairment losses |
10,273 |
- |
10,273 |
10,898 |
- |
10,898 |
F |
Tax on gains or losses on disposal of properties |
(869) |
- |
(869) |
27,231 |
- |
27,231 |
G |
Deferred income tax |
(3,419) |
16,849 |
(20,268) |
(24,510) |
14,131 |
(38,641) |
O |
Distributions on Class B Units recorded as interest expense |
234 |
234 |
- |
936 |
937 |
(1) |
M |
Changes in fair value of financial instruments |
10,752 |
(2,929) |
13,681 |
21,964 |
(21,785) |
43,749 |
Q |
FFO adjustments for Equity-Accounted JVs |
2,151 |
945 |
1,206 |
5,246 |
(244) |
5,490 |
FFO |
39,246 |
27,744 |
11,502 |
122,151 |
102,013 |
20,138 |
|
Weighted average number of units (000) |
243,262 |
238,831 |
4,431 |
241,688 |
237,402 |
4,286 |
|
FFOPU |
0.16 |
0.12 |
0.04 |
0.51 |
0.43 |
0.08 |
|
The following table provides a reconciliation of net income/(loss) to Total FFO for total operations:
($000s, except per unit amounts and number of units) |
Q4 2023 |
Q4 2022 |
Change |
2023 |
2022 |
Change |
|
Net income/(loss) |
(13,173) |
47,463 |
(60,636) |
128,273 |
49,531 |
78,742 |
|
Add (Subtract): |
|||||||
B |
Depreciation of PP&E |
38,955 |
39,482 |
(527) |
154,005 |
154,804 |
(799) |
D |
Amortization of limited life intangible assets |
632 |
773 |
(141) |
2,690 |
3,350 |
(660) |
B |
Depreciation of PP&E and amortization of intangible assets used for administrative purposes included in depreciation of PP&E and amortization of intangible assets above |
(1,127) |
(1,181) |
54 |
(4,461) |
(4,791) |
330 |
E |
Loss/(gain) on disposal of assets |
(5,539) |
(70,122) |
64,583 |
(190,747) |
(71,743) |
(119,004) |
J |
Transaction costs arising on dispositions |
229 |
1,843 |
(1,614) |
1,665 |
2,727 |
(1,062) |
H |
Impairment losses |
10,273 |
- |
10,273 |
10,898 |
- |
10,898 |
F |
Tax on gains or losses on disposal of properties |
(869) |
- |
(869) |
27,231 |
- |
27,231 |
G |
Deferred income tax |
(3,419) |
16,849 |
(20,268) |
(24,510) |
14,131 |
(38,641) |
O |
Distributions on Class B Units recorded as interest expense |
234 |
234 |
- |
936 |
937 |
(1) |
M |
Changes in fair value of financial instruments |
10,752 |
(2,929) |
13,681 |
21,964 |
(21,785) |
43,749 |
Q |
FFO adjustments for Equity-Accounted JVs |
2,151 |
945 |
1,206 |
5,246 |
(244) |
5,490 |
FFO |
39,099 |
33,357 |
5,742 |
133,190 |
126,917 |
6,273 |
|
Weighted average number of units (000) |
243,262 |
238,831 |
4,431 |
241,688 |
237,402 |
4,286 |
|
FFOPU |
0.16 |
0.14 |
0.02 |
0.55 |
0.53 |
0.02 |
|
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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