Chartwell Announces Fourth Quarter and Year End 2023 Results
Highlights
- Resident revenue increased by
$9.5 million in Q4 2023 compared to Q4 2022. - Net loss was
$13.2 million in Q4 2023 compared to net income of$47.5 million in Q4 2022. - Funds from Operations ("FFO")(1) for continuing operations up 41.4% and Total FFO up 17.2% in
Q4 2023 from Q4 2022. - Same property adjusted net operating income ("NOI")(1) up 21.5% in Q4 2023 from Q4 2022.
- Weighted average same property occupancy was 84.1% in Q4 2023, compared to 79.5% in Q4 2022, and expected to grow to 85.7% by
April 2024 .
"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
- In Q4 2023 compared to Q4 2022, same property adjusted NOI increased
$9.0 million or 21.5%, primarily due to higher revenue from rental and service rate increases and higher occupancy. - In Q4 2023, weighted average occupancy in our same property portfolio was 84.1% compared to 79.5% in Q4 2022. All platforms achieved occupancy gains in Q4 2023 compared to Q4 2022.
- Same property adjusted operating margin(1) was 35% in Q4 2023 compared to 31% in Q4 2022.
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
- lower gain on asset sales,
- negative changes in fair values of financial instruments, primarily due to increases in trading prices of Chartwell Trust Units,
- higher impairment losses,
- lower income from discontinued operations due to the sale of the Ontario Long Term Care platform ("OLTC Platform")(4) completed on
September 6, 2023 , and - higher general, administrative and Trust ("G&A") expenses,
partially offset by:
- higher deferred tax benefit,
- higher resident revenue, and
- lower direct operating expenses.
For Q4 2023, FFO from continuing operations was
- higher adjusted NOI from continuing operations of
$13.0 million , - higher management fee revenue of
$1.7 million , - higher interest income of
$0.6 million , - lower finance costs of
$0.3 million , and - lower depreciation of PP&E and amortization of intangibles assets used for administrative purposes of
$0.1 million ,
partially offset by:
- higher G&A expenses of
$4.1 million , and - other items combined of
$0.1 million .
FFO from continuing operations for Q4 2023 included
Annual/Year End Results
For 2023, net income was
- higher gains of
$178.7 million on asset sales from discontinued operations, - higher deferred tax benefit, and
- higher resident revenue,
partially offset by:
- lower gain on disposal of assets included in continuing operations,
- negative changes in fair values of financial instruments, primarily due to increases in trading prices of Chartwell Trust Units,
- current income tax expense of
$27.2 million primarily due to the sale of the OLTC Platform, - higher impairment losses,
- higher G&A expenses, and
- higher finance costs.
For 2023, FFO from continuing operations was
- higher adjusted NOI from continuing operations of
$33 .9 million, - higher management fee revenue of
$3.1 million , - higher interest income of
$1.0 million , - lower depreciation of PP&E and amortization of intangibles assets used for administrative purposes of
$0.3 million , and - other items combined of
$0.1 million ,
partially offset by:
- higher G&A expenses of
$10 .8 million, and - higher finance costs of
$7 .4 million.
FFO from continuing operations for 2023 included recoveries of pandemic expenses for preceding years of
FFO from continuing operations for 2023 includes
For 2023, Total FFO which includes results of LTC Discontinued Operations was
As at
The interest coverage ratio(5) for the year ended was 2.3 at
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
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.
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
Based on our current expectations, the Welltower Transaction (as described below) will result in SIFT taxes payable of approximately
During Q4 2023, two properties that were previously operationally closed were sold. One property was sold on
During 2023, closure costs related to these repositioning activities were
Chartwell Trait-Carré,
On
(See https://investors.chartwell.com/november2023-transaction-with-welltower)
On
As at
For 2024, we have
In
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
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
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 |
(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 |
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
Chartwell is in the business of serving and caring for
For more information, please contact:
Chartwell Retirement Residences
Tel: (905) 501-6777
Email: investorrelations@chartwell.com
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 |
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 |
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 (IR)