MISSISSAUGA, ON, May 4, 2023
/CNW/ - May 4, 2023 – Chartwell
Retirement Residences ("Chartwell") (TSX: CSH.UN) announced today
its results for the first quarter ended March 31, 2023.
Highlights
- Net loss was $9.2 million
compared to $3.3 million in Q1
2022.
- Same property adjusted net operating income ("NOI")
(1) up 7.7% in Q1 2023 from Q1 2022, or 11.7% excluding
$1.6 million of prior period expense
recoveries in Q1 2022.
- Funds from operations ("FFO")(1) for continuing
operations up 3.3% in Q1 2023 from Q1 2022, or 14.1% excluding
$2.2 million of prior period expense
recoveries in Q1 2022.
- Weighted average same property occupancy increased 1.4
percentage points compared to Q1 2022, with all platforms achieving
growth.
"I am encouraged by the progress our teams are making driving
occupancy recovery and reducing reliance on agency staffing - our
key priorities for 2023. Our focus on growing resident, family, and
business referrals, property specific marketing and sales
strategies, now supported by new technology solutions, are
generating positive results in increasing initial contacts,
personalized tours and new leases. We have also begun to see a
meaningful reduction in utilization of staffing agencies resulting
from our recruitment and retention efforts. With the upcoming
rollout of our new website and marketing automation system, the
continuing implementation of electronic health records system and
completion of our staffing optimization project across our
portfolio, our teams will have even better tools to accelerate
occupancy recovery and cash flow growth for the remainder of this
year, " commented Vlad Volodarski,
CEO. " There is significant embedded potential value in our
portfolio. We are committed to realizing it through our operating
initiatives and numerous portfolio optimization strategies
underway."
Operating Performance Trends
- In Q1 2023 compared to Q1 2022, same property adjusted NOI
increased $3.6 million or 7.7% on
higher revenue from both rental and service rate increases and
increased occupancy. Q1 2022 included recoveries of pandemic
expenses for preceding years of $1.6
million for which there was not a comparable amount in Q1
2023.
- In Q1 2023, weighted average occupancy in our same property
portfolio was 78.5% compared to 77.1% in Q1 2022, an increase of
1.4 percentage points. All platforms achieved occupancy gains in Q1
2023 compared to Q1 2022.
Financial Results
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)
|
|
2023
|
2022
|
Change
|
Resident
revenue
|
|
165,824
|
157,668
|
8,156
|
Direct property
operating expense
|
|
117,874
|
113,787
|
4,087
|
Net
income/(loss)
|
|
(9,253)
|
(3,316)
|
(5,937)
|
FFO
(1)
|
|
|
|
|
Continuing
operations
|
|
20,918
|
20,259
|
659
|
Total
|
|
24,338
|
31,324
|
(6,986)
|
FFO per unit
(1)
|
|
|
|
|
Continuing
operations
|
|
0.09
|
0.09
|
-
|
Total
|
|
0.10
|
0.13
|
(0.03)
|
Weighted average number
of units outstanding (000s) (2)
|
|
239,948
|
236,048
|
3,900
|
Weighted average
occupancy rate -same property portfolio (3)
|
|
78.5 %
|
77.1 %
|
1.4pp
|
Same property adjusted
NOI (1)
|
|
49,645
|
46,092
|
3,553
|
G&A
expenses
|
|
15,429
|
13,828
|
1,601
|
For Q1 2023 net loss was $9.2 million
compared to $3.3 million in Q1 2022
primarily due to:
- negative changes in fair values of financial instruments,
- lower net income from LTC Discontinued Operations (as defined
below),
- higher direct operating expenses,
- higher finance costs,
- higher depreciation of property, plant and equipment
("PP&E"),
- higher net loss from joint ventures, and
- higher G&A expenses.
partially offset by:
- higher resident revenue,
- deferred tax benefit in Q1 2023 as compared to a deferred tax
expense in Q1 2022, and
- higher gain on disposal of assets.
For Q1 2023, resident revenue increased $8.2 million or 5.2% primarily due to revenue
growth in our same property portfolio and contributions from our
acquisitions and development portfolio partially offset by our
dispositions and repositioning portfolio.
For Q1 2023, direct property operating expense increased
$4.1 million or 3.6% primarily due to
higher expenses in our same property portfolio and our acquisitions
and development portfolio partially offset by lower expenses in our
dispositions and repositioning portfolio.
For Q1 2023, FFO from continuing operations was $20.9 million or $0.09 per unit compared to $20.3 million or $0.09 per unit for Q1 2022. Q1 2022
included recoveries of pandemic expenses for preceding years of
$2.2 million for which there was not
a comparable amount in Q1 2023. Excluding these recoveries,
FFO from continuing operations increased 14.1%. The change in
FFO from continuing operations was primarily due to:
- higher adjusted NOI from continuing operations of $5.4 million which is comprised of changes as
follows:
- higher adjusted NOI of $3.9
million from our acquisitions and development
portfolio,
- higher same property adjusted NOI of $3.6 million or 7.7%. Q1 2022 included recoveries
of pandemic expenses for preceding years of $1.6 million as described above. The increase in
same property adjusted NOI is due to higher revenue from rental and
service rate increases and increased occupancy and lower pandemic
expenses partially offset by higher overall staffing net of
declining agency staffing, repairs and maintenance, supplies, food
and utilities expenses, and
- lower NOI of $2.0 million from
our dispositions and repositioning portfolio,
- partially offset by:
- higher finance costs of $3.5
million, and
- higher G&A expenses of $1.6
million, primarily timing related.
FFO from continuing operations for Q1 2023 includes $0.8 million of Lease-up-Losses (1)
and Imputed Cost of Debt (1) related to our development
projects (Q1 2022 – $1.0
million).
Total FFO for Q1 2023 was $24.3
million or $0.10 per unit,
compared to $31.3 million or
$0.13 per unit in Q1 2022.
Total FFO per unit for Q1 2023 includes $0.01 per unit compared to $0.04 per unit in Q1 2022, from the 16 long term
care homes in Ontario, one of
which has an adjacent retirement residence, which have been
reclassified as discontinued operations ("LTC Discontinued
Operations") as we have entered into definitive agreements to
substantially exit our Long Term Care operations in Ontario. Q1 2022 LTC Discontinued
Operations included recoveries of pandemic and other expenses for
preceding years of $7.2 million or
$0.03 per unit for which there was
not a comparable amount in Q1 2023.
Financial Position
As at March 31, 2023 liquidity
(1) amounted to $155.6
million, which included $13.8
million of cash and cash equivalents and $141.8 million of available borrowing capacity on
our credit facilities.
The interest coverage ratio (4) on a rolling 12-month
basis was 2.3 at March 31, 2023
compared to 2.6 at March 31,
2022. The net debt to adjusted EBITDA ratio (4) at
March 31, 2023 was 11.5 compared to
10.4 at March 31, 2022.
2023 Outlook
An updated discussion of our business outlook can be found in
the "2023 Outlook" section of our Management's Discussion and
Analysis for the three months ended March
31, 2023 (the "Q1 2023 MD&A"). The following
provides an update on our near term outlook for our same property
occupancy and staffing costs.
Same Property Occupancy Update
The chart included provides an update in respect of our same
property retirement occupancy:
Due to seasonally lower move-in activity, we normally experience
declines in occupancy from December to April. The three year
average for 2017, 2018, 2019 ("pre-pandemic average") decline in
our same property portfolio occupancy from December to April was
180 basis points ("bps"). For the same four months in 2023, the
decline in occupancy was 40 basis points, significantly lower than
the pre-pandemic average. Occupancy and leasing trends are
also outperforming the same months of 2022.
As at April 30, 2023, our same
property weighted average occupancy is expected to increase 30
basis points in May 2023 and a
further 50 basis points in June 2023.
Our marketing and sales initiatives produced improvements in
personalized tours, sales closing ratios, leasing, and permanent
move ins. We expect to see continued occupancy growth in 2023
and beyond, supported by accelerating demographic growth, shortages
of long term care beds and fewer senior housing construction
starts.
Staffing costs increased in Q1 2023 due to higher compensation
offset by a decrease in agency staffing costs. We expect
agency staffing costs to continue to decline gradually through
2023.
Taxation
We estimate the taxable capital gain resulting from the LTC
Transactions will attract SIFT taxes of approximately $34.0 million in 2023. In addition, the majority
of our 2023 distributions are expected to be classified as eligible
dividends as a result of the taxable capital gain. We expect
to have sufficient deductions and losses carried forward to offset
any other SIFT taxes in 2023 and 2024.
Liquidity and Financing Update
As at May 4,
2023, liquidity amounted to $184.7 million, which included $27.9 million of cash and cash equivalents and
$156.8 million of available borrowing
capacity on our Credit Facilities.
As of the date of this MD&A, for the remainder of 2023 we
have $121.5 million of mortgage debt
maturing at the weighted average interest rate of 3.68%, of which
$39.6 million is CMHC insured and
bears a weighted average interest rate of 3.92%. At the date
of this MD&A, 10-year CMHC insured mortgage rates are estimated
at approximately 3.8% and five-year conventional mortgage
financing is available at 5.0%.
On April 19, 2023, we entered into
amending agreements to extend the maturity date of our Credit
Facilities with a combined maximum potential capacity of
$400.0 million from May 29, 2024 to May 29,
2025 with substantially the same terms.
The LTC Transactions are expected to generate net proceeds of
approximately $269.2 million,
which are expected to be used, subject to market conditions, to pay
down our Credit Facilities. On closing of the LTC
Transactions, our unencumbered asset pool and available capacity on
our secured Credit Facilities are expected to decline by
approximately $49.9 million and
$27.1 million, respectively.
In December 2023 our senior
unsecured debentures with a face value of $200.0 million will mature. We expect to
refinance these debentures with new senior unsecured debentures,
other unsecured or secured debt instruments or equity financing,
subject to market conditions.
Quarterly Investor Materials and Conference Call
We invite you to review our Q1 2023 investor materials on our
website at investors.chartwell.com
Q1 2023 Financial Statements
Q1 2023 Management's Discussion and
Analysis
Q1 2023 Investor Presentation
A conference call hosted by Chartwell's senior management team
will be held Friday May 5, 2023,
at 10:00 AM ET. The
telephone numbers for the conference call are: Local: (416)
340-2217 or Toll Free: 1-800-806-5484. The passcode for the
conference call is: 7852181#. 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 6077836#.
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 the Chartwell website at
www.chartwell.com.
Footnotes
(1)
|
FFO, FFO for
continuing operations, Total FFO, including per unit amounts,
Adjusted Resident Revenue, Adjusted Direct Property Operating
Expense, Adjusted NOI, 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
Measures" on page 6 of this press release.
Certain information about non-GAAP financial measures, non-GAAP
ratios, capital management measures and supplementary measure found
in Chartwell's Q1 2023 MD&A, is incorporated by reference. Full
definitions of FFO & FFO per unit can be found on page 13 ,
same property adjusted NOI on page 14, adjusted NOI on page 14,
liquidity on page 23, interest coverage ratio on page 33 and net
debt to adjusted EBITDA ratio on page 49 of the Q1 2023
MD&A available on Chartwell's website and under
Chartwell's profile on the System for electronic Document and
Analysis Retrieval ("SEDAR") 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)
|
'pp' means
percentage points.
|
(4)
|
Non-GAAP: Calculated
in accordance with the trust indentures for Chartwell's 3.786%
Series A senior unsecured debentures and 4.211% Series B senior
unsecured debentures and may not be comparable to similar metrics
used by other issues or to any GAAP measures.
|
(5)
|
Forecast includes
leases and notices as at April 30, 2023 and an estimate of
mid-month move-ins of 20 and 40 basis points for May and June
respectively, based on the preceding 12 months average of such
activity for the respective period.
|
(6)
|
Non-GAAP; Share of
resident revenue and direct property operating expense from joint
ventures represents Chartwell's proportionate share of the resident
revenue and direct property operating expense of our
Equity-Accounted JVs.
|
(7)
|
Resident revenue and
direct property operating expense reported in LTC Discontinued
Operations represents the resident revenue and direct property
operating expense related to LTC Discontinued
Operations.
|
|
|
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 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 Q1 2023 MD&A, the AIF and Chartwell's other
publicly filed documents can be accessed under Chartwell's profile
on SEDAR at www.sedar.com.
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 nearly 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
slharris@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, 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 2023 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 NOI to Adjusted NOI from continuing operations and
Adjusted NOI and identifies contributions from our same property
portfolio and our acquisition, development, dispositions,
repositioning and other portfolio:
($000s, except
occupancy rates)
|
|
|
|
Q1
2023
|
Q1 2022
|
Change
|
|
|
|
|
|
|
|
Resident
revenue
|
|
|
|
165,824
|
157,668
|
8,156
|
Add:
Share of resident
revenue from joint ventures (6)
|
|
|
|
30,428
|
28,080
|
2,348
|
Resident revenue from
LTC Discontinued Operations (7)
|
|
|
|
61,815
|
67,955
|
(6,140)
|
Adjusted resident
revenue
|
|
|
|
258,067
|
253,703
|
4,364
|
Comprised
of:
|
|
|
|
|
|
|
Same
property
|
|
|
|
165,375
|
157,429
|
7,946
|
Acquisitions
and development
|
|
|
|
20,262
|
11,172
|
9,090
|
Dispositions
and repositioning
|
|
|
|
72,430
|
85,102
|
(12,672)
|
Adjusted resident
revenue
|
|
|
|
258,067
|
253,703
|
4,364
|
|
|
|
|
|
|
|
Direct property
operating expense
|
|
|
|
117,874
|
113,787
|
4,087
|
Add:
Share of direct
property operating expense from joint ventures
(6)
|
|
|
|
21,723
|
20,743
|
980
|
Direct property
operating expense from LTC Discontinued Operations
(7)
|
|
|
|
56,653
|
55,200
|
1,453
|
Adjusted direct
property operating expense
|
|
|
|
196,250
|
189,730
|
6,520
|
Comprised
of:
|
|
|
|
|
|
|
Same
property
|
|
|
|
115,730
|
111,337
|
4,393
|
Acquisitions and development
|
|
|
|
12,607
|
7,376
|
5,231
|
Dispositions and repositioning
|
|
|
|
67,913
|
71,017
|
(3,104)
|
Adjusted direct
property operating expense
|
|
|
|
196,250
|
189,730
|
6,520
|
|
|
|
|
|
|
|
NOI
|
|
|
|
47,950
|
43,881
|
4,069
|
Add:
Share of NOI from joint ventures
|
|
|
|
8,705
|
7,337
|
1,368
|
Adjusted NOI from
continuing operations
|
|
|
|
56,655
|
51,218
|
5,437
|
Add:
NOI from LTC
Discontinued Operations
|
|
|
|
5,162
|
12,755
|
(7,593)
|
Adjusted
NOI
|
|
|
|
61,817
|
63,973
|
(2,156)
|
Comprised
of:
|
|
|
|
|
|
|
Same
property
|
|
|
|
49,645
|
46,092
|
3,553
|
Acquisitions and development
|
|
|
|
7,655
|
3,796
|
3,859
|
Dispositions and repositioning
|
|
|
|
4,517
|
14,085
|
(9,568)
|
Adjusted
NOI
|
|
|
|
61,817
|
63,973
|
(2,156)
|
|
|
|
|
|
|
|
Weighted average
occupancy rate – same property portfolio
|
|
|
|
78.5 %
|
77.1 %
|
1.4pp
|
Weighted average
occupancy rate – acquisitions and development portfolio
|
|
|
|
75.8 %
|
59.8 %
|
16.0pp
|
Weighted average
occupancy rate – dispositions and repositioning
portfolio
|
|
|
|
91.5 %
|
83.2 %
|
8.3pp
|
Weighted average
occupancy rate - total portfolio
|
|
|
|
80.1 %
|
77.1 %
|
3.0pp
|
The following table provides a reconciliation of net income/(loss)
to FFO for continuing operations:
|
($000s, except per unit
amounts and number of units)
|
|
|
|
Q1
2023
|
Q1 2022
|
Change
|
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
|
|
(12,590)
|
(11,862)
|
(728)
|
|
|
|
|
|
|
|
|
|
Add
(Subtract):
|
|
|
|
|
|
|
B
|
Depreciation of
PP&E
|
|
|
|
39,237
|
36,621
|
2,616
|
D
|
Amortization of limited
life intangible assets
|
|
|
|
739
|
744
|
(5)
|
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
|
|
|
|
(1,144)
|
(1,222)
|
78
|
E
|
Loss/(gain) on disposal
of assets
|
|
|
|
(2,712)
|
(545)
|
(2,167)
|
J
|
Transaction costs
arising on dispositions
|
|
|
|
402
|
55
|
347
|
G
|
Deferred income
tax
|
|
|
|
(7,477)
|
641
|
(8,118)
|
O
|
Distributions on Class
B Units recorded as interest expense
|
|
|
|
234
|
234
|
-
|
M
|
Changes in fair value
of financial instruments
|
|
|
|
2,509
|
(2,641)
|
5,150
|
Q
|
FFO adjustments for
Equity-Accounted JVs
|
|
|
|
1,720
|
(1,766)
|
3,486
|
|
FFO
|
|
|
|
20,918
|
20,259
|
659
|
|
Weighted average number
of units
|
|
|
|
239,948
|
236,048
|
3,900
|
|
FFOPU
|
|
|
|
0.09
|
0.09
|
-
|
|
|
|
|
|
|
|
|
|
The following table provides a reconciliation of net income/(loss)
to FFO for total operations:
|
($000s, except per unit
amounts and number of units)
|
|
|
|
Q1
2023
|
Q1 2022
|
Change
|
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
|
|
(9,253)
|
(3,316)
|
(5,937)
|
|
|
|
|
|
|
|
|
|
Add
(Subtract):
|
|
|
|
|
|
|
B
|
Depreciation of
PP&E
|
|
|
|
39,237
|
38,437
|
800
|
D
|
Amortization of limited
life intangible assets
|
|
|
|
739
|
946
|
(207)
|
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
|
|
|
|
(1,144)
|
(1,222)
|
78
|
E
|
Loss/(gain) on disposal
of assets
|
|
|
|
(2,701)
|
(545)
|
(2,156)
|
J
|
Transaction costs
arising on dispositions
|
|
|
|
474
|
556
|
(82)
|
G
|
Deferred income
tax
|
|
|
|
(7,477)
|
641
|
(8,118)
|
O
|
Distributions on Class
B Units recorded as interest expense
|
|
|
|
234
|
234
|
-
|
M
|
Changes in fair value
of financial instruments
|
|
|
|
2,509
|
(2,641)
|
5,150
|
Q
|
FFO adjustments for
Equity-Accounted JVs
|
|
|
|
1,720
|
(1,766)
|
3,486
|
|
FFO
|
|
|
|
24,338
|
31,324
|
(6,986)
|
|
|
|
|
|
|
|
|
|
Weighted average number
of units
|
|
|
|
239,948
|
236,048
|
3,900
|
|
FFOPU
|
|
|
|
0.10
|
0.13
|
(0.03)
|
SOURCE Chartwell Retirement Residences