Chartwell Announces First Quarter 2024 Results
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
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:
|
|
Three Months Ended |
||||
($000s, except per unit amounts, number of units, and occupancy) |
|
|
|
2024 |
2023 |
Change |
Resident revenue |
|
|
|
183,920 |
165,824 |
18,096 |
Direct property operating expense |
|
|
|
121,374 |
117,874 |
3,500 |
Net loss |
|
|
|
(1,971) |
(9,253) |
7,282 |
FFO(1) |
|
|
|
|
|
|
Continuing operations |
|
|
|
39,239 |
20,918 |
18,321 |
Total |
|
|
|
39,239 |
24,338 |
14,901 |
FFO per unit(1) |
|
|
|
|
|
|
Continuing operations |
|
|
|
0.16 |
0.09 |
0.07 |
Total |
|
|
|
0.16 |
0.10 |
0.06 |
Weighted average number of units outstanding (000s)(2) |
|
|
|
244,216 |
239,948 |
4,268 |
Weighted average occupancy rate - same property portfolio(3) |
|
|
|
86.2 % |
80.1 % |
6.1pp |
Same property adjusted NOI(1) |
|
|
|
56,798 |
45,539 |
11,259 |
G&A expenses |
|
|
|
14,471 |
15,429 |
(958) |
For Q1 2024, resident revenue increased
For Q1 2024, net loss was
- 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
- 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
Financial Position
As at
The interest coverage ratio(5) was 2.5 at
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
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
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 inChartwell Le Prescott from Batimo. Le Prescott is a 324-suite residence completed in 2017 and is located in theMontreal suburb ofVaudreuil, 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 onDecember 1, 2024 . We expect to refinance the assumed mortgage withCMHC 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 inFebruary 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 withCMHC 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 inOntario , 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 effectiveApril 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
As of the date of this release, and for the remainder of 2024, we have
In
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
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
(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 6 of this press release. Certain information about non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary measures found in Chartwell's Q1 2024 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, adjusted operating margin on page 14, liquidity on page 20, interest coverage ratio on page 28, and net debt to adjusted EBITDA ratio on page 44 of the Q1 2024 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 10 of the Q1 2024 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 |
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
About Chartwell
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
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:
($000s, except occupancy rates) |
|
|
|
Q1 2024 |
Q1 2023 |
Change |
Resident revenue |
|
|
|
183,920 |
165,824 |
18,096 |
Add: Share of resident revenue from joint ventures (1) |
|
|
|
33,616 |
30,428 |
3,188 |
Resident revenue from LTC Discontinued Operations (2) |
|
|
|
- |
61,815 |
(61,815) |
Adjusted resident revenue |
|
|
|
217,536 |
258,067 |
(40,531) |
Comprised of: |
|
|
|
|
|
|
Same property |
|
|
|
161,193 |
143,819 |
17,374 |
Growth |
|
|
|
24,687 |
21,519 |
3,168 |
Repositioning |
|
|
|
31,656 |
92,729 |
(61,073) |
Adjusted resident revenue |
|
|
|
217,536 |
258,067 |
(40,531) |
Direct property operating expense |
|
|
|
121,374 |
117,874 |
3,500 |
Add: Share of direct property operating expense from joint ventures (1) |
|
|
|
22,572 |
21,723 |
849 |
Direct property operating expense from LTC Discontinued Operations (2) |
|
|
|
- |
56,653 |
(56,653) |
Adjusted direct property operating expense |
|
|
|
143,946 |
196,250 |
(52,304) |
Comprised of: |
|
|
|
|
|
|
Same property |
|
|
|
104,395 |
98,280 |
6,115 |
Growth |
|
|
|
15,654 |
14,815 |
839 |
Repositioning |
|
|
|
23,897 |
83,155 |
(59,258) |
Adjusted direct property operating expense |
|
|
|
143,946 |
196,250 |
(52,304) |
NOI |
|
|
|
62,546 |
47,950 |
14,596 |
Add:
|
|
|
|
11,044 |
8,705 |
2,339 |
Adjusted NOI from continuing operations |
|
|
|
73,590 |
56,655 |
16,935 |
Add: NOI from LTC Discontinued Operations |
|
|
|
- |
5,162 |
(5,162) |
Adjusted NOI |
|
|
|
73,590 |
61,817 |
11,773 |
Comprised of: |
|
|
|
|
|
|
Same property |
|
|
|
56,798 |
45,539 |
11,259 |
Growth |
|
|
|
9,033 |
6,704 |
2,329 |
Repositioning |
|
|
|
7,759 |
9,574 |
(1,815) |
Adjusted NOI |
|
|
|
73,590 |
61,817 |
11,773 |
Weighted average occupancy rate: |
|
|
|
|
|
|
Same property portfolio |
|
|
|
86.2 % |
80.1 % |
6.1pp |
Growth portfolio |
|
|
|
79.6 % |
73.5 % |
6.1pp |
Repositioning portfolio |
|
|
|
82.0 % |
82.9 % |
(0.9pp) |
Total portfolio |
|
|
|
84.5 % |
80.1 % |
4.4pp |
(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) |
|
|
|
Q1 2024 |
Q1 2023 |
Change |
|
|
Net income/(loss) |
|
|
|
(1,971) |
(12,590) |
10,619 |
|
Add (Subtract): |
|
|
|
|
|
|
B |
Depreciation of PP&E |
|
|
|
35,342 |
39,237 |
(3,895) |
D |
Amortization of limited life intangible assets |
|
|
|
615 |
739 |
(124) |
B |
Depreciation of PP&E and amortization of intangible assets used for administrative |
|
|
|
(1,055) |
(1,144) |
89 |
E |
Loss/(gain) on disposal of assets |
|
|
|
(638) |
(2,712) |
2,074 |
J |
Transaction costs arising on dispositions |
|
|
|
1,992 |
402 |
1,590 |
F |
Tax on gains or losses on disposal of properties |
|
|
|
(351) |
- |
(351) |
G |
Deferred income tax |
|
|
|
1,053 |
(7,477) |
8,530 |
O |
Distributions on Class |
|
|
|
232 |
234 |
(2) |
M |
Changes in fair value of financial instruments |
|
|
|
3,285 |
2,509 |
776 |
Q |
FFO adjustments for Equity-Accounted JVs |
|
|
|
735 |
1,720 |
(985) |
|
FFO |
|
|
|
39,239 |
20,918 |
18,321 |
|
Weighted average number of units (000) |
|
|
|
244,216 |
239,948 |
4,268 |
|
FFOPU |
|
|
|
0.16 |
0.09 |
0.07 |
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) |
|
|
|
Q1 2024 |
Q1 2023 |
Change |
|
|
Net income/(loss) |
|
|
|
(1,971) |
(9,253) |
7,282 |
|
Add (Subtract): |
|
|
|
|
|
|
B |
Depreciation of PP&E |
|
|
|
35,342 |
39,237 |
(3,895) |
D |
Amortization of limited life intangible assets |
|
|
|
615 |
739 |
(124) |
B |
Depreciation of PP&E and amortization of intangible assets used for administrative |
|
|
|
(1,055) |
(1,144) |
89 |
E |
Loss/(gain) on disposal of assets |
|
|
|
(638) |
(2,701) |
2,063 |
J |
Transaction costs arising on dispositions |
|
|
|
1,992 |
474 |
1,518 |
F |
Tax on gains or losses on disposal of properties |
|
|
|
(351) |
- |
(351) |
G |
Deferred income tax |
|
|
|
1,053 |
(7,477) |
8,530 |
O |
Distributions on Class |
|
|
|
232 |
234 |
(2) |
M |
Changes in fair value of financial instruments |
|
|
|
3,285 |
2,509 |
776 |
Q |
FFO adjustments for Equity-Accounted JVs |
|
|
|
735 |
1,720 |
(985) |
|
FFO |
|
|
|
39,239 |
24,338 |
14,901 |
|
Weighted average number of units (000) |
|
|
|
244,216 |
239,948 |
4,268 |
|
FFOPU |
|
|
|
0.16 |
0.10 |
0.06 |
SOURCE Chartwell Retirement Residences (IR)