Chartwell Retirement Residences Risky With No Earnings

Chartwell Retirement Residences owns and operates a complete range of seniors housing communities in Canada. It is the largest operator in the Canadian seniors living sector with over 200 quality retirement communities, in four provinces, ranging from independent retirement residences to assisted living services and long-term care. It provides long-term care, assisted living, independent living, and memory care.

The company continues to focus strongly on the four most populous provinces of Canada. Ontario is its largest market accounting for 52% of NOI, followed by Quebec (30%), British Columbia (10%), and Alberta (8%). Chartwell’s segments are the Retirement Operations segment (~73% of owned suites/beds and accounting for 91% of adjusted NOI) and Long Term Care Operations segment (11% of owned suites/beds and accounting for 9% of adjusted NOI).

A majority of Chartwell’s portfolio (~75%) comprises independent supportive living. Chartwell owns 100% of the outstanding Trust Units of CSH Trust, an unincorporated, open-ended trust.

DISCLOSURE: Please note that links to merchants mentioned within this post might be using an affiliate link. Using an affiliate link means that, at zero cost to you, I might earn a commission if you buy something through that affiliate link.
Investment Data
 

Questrade offers the cheapest trades!
The best broker for small accounts and new investors.
Quickly create your account online and get started with $50 in Free Trades.


Revenue Growth & Market Exposure

Chartwell Retirement’s portfolio comprises 133, 100% owned (~70% of total portfolio), 47 partially owned (~25%), and 11 managed communities (5%) across retirement and long-term care operations. The REIT serves age-qualified residents at rates that are set by Chartwell in most cases. It continues to develop modern, market-specific, and efficient seniors communities that remain competitive over the long term.

Given its long-standing experience in the healthcare REIT sector, Chartwell has developed strong ties with reputable developers which helps it to easily gain access to attractive sites in strong markets in urban and suburban areas. 

The company’s personalized services and focus on the upscale and mid-retirement markets ensure higher client retention and credibility. Chartwell does not operate in markets with populations less than 25,000 within a 10 km radius of its residences. Healthcare tenants have specialized real estate needs and Chartwell Retirement Residences is well-positioned to provide customized real estate solutions to the healthcare industry. 

The spread of COVID-19 negatively affected Chartwell’s business. It witnessed decreased occupancy levels due to reduced move-in activity in both retirement residences and long-term care homes. The same property adjusted Long Term Care and Retirement operations NOI both decreased during the year.

The REIT established a Resident Satisfaction score of 52% in 2020 declining from 61% in 2019 and 58% in 2018. The occupancy in Chartwell Retirement’s same property portfolio was 80% in December 2020 falling from 88% in January 2020. However, the performance is expected to improve as a large population of seniors gets vaccinated in Canada and in the hope that the intensity of the pandemic eases in the coming year.

The company aims to attain Resident Satisfaction of 67% and Same Property Occupancy of 95% by 2025. Its strong focus on client servicing and satisfaction plays a major role in customer recommendations.

Dividends

Chartwell is a Dividend Aristocrat offering a juicy yield of ~5% and has successfully grown its dividend payouts at the rate of 2.2% CAGR in the last three years. Its funds from operations have grown by 10.5% CAGR in the past three years. Chartwell Retirement last increased its distributions by 2% in March 2020. It has a history of distributing cash in excess of net income to its unitholders. The management believes its current distributions will be sustainable in the future.

Chartwell has made significant progress in improving its financial position and liquidity over the years. The long-term prospects of Chartwell’s Retirement Residences are promising. This sector alone is expected to witness a 150% growth by 2036. The population of 75+ people in Canada is expected to grow significantly in the next two decades. Health care costs in Canada are also expected to go up due to the growth in the older adult population. 

Chartwell’s long-term care operations generate stable cash flows with meaningful economies of scale and significant operating expertise. The REIT continues to regularly reinvest capital in its owned property portfolio by assessing the long-term capital needs of the acquired properties.

The company generally prepares a five-year capital plan for acquired properties and considers these capital requirements in the purchase price determination. The REIT anticipates a slowdown in new retirement residence openings in 2022 and 2023 but expects under-construction projects at the onset of the pandemic likely to be opened in 2021.

Other than its own development activities, Chartwell has also built an important pipeline of future acquisition opportunities with Batimo and expects to acquire ownership interests in close to 1,900 suites. Its promising pipeline of own development projects, as well as future acquisition opportunities in other developers’ projects, act as huge growth drivers.

Chartwell (CSH.UN) historical yield
Make your own charts. Try Stock Rover NOW!

Competition

Healthcare is a recession-proof industry with high demand despite the economic conditions. However, the development of new retirement residences remains active in certain markets, particularly in Ontario, Alberta, Quebec. Chartwell Retirement suffers from extensive competition from a significant number of new competing residence openings in a few of its markets.

It competes directly with Northwest Healthcare Properties REIT in the healthcare REIT segment, which is a leading owner and operator of healthcare real estate properties located throughout major markets in Canada, Brazil, Germany, Australia, and New Zealand.

Bottom Line

Though the effects of the pandemic continue to cast a dark spell on Chartwell’s future, the REIT sees some hope as more and more adults in Canada get vaccinated. The REIT is in a good position to benefit from the long-term demand growth for senior living and assisted care. A robust pipeline, sound financial health, and attractive distribution yield should support future growth. 

This REIT is a pass for my portfolio. Definitely not the best Canadian REIT.

Chartwell (CSH.UN) vs TSX vs SP500
Dividend Adjusted Chart by Stock Rover - Try it out.
Chartwell (CSH.UN) historical PE
Make your own charts. Try Stock Rover NOW!

A Winning Investment Strategy

My portfolio is generating over 12% annual returns since 2009. It's not from the beginning of the year or from 2019, it's from 2009 !!! That's a consistent return which means using the rule of 72, I double my portfolio every 6 years.

My approach is simple but you need key data that I have cultivated with the Dividend Snapshot Screeners. No other investment services provide you with easy to understand data but also actionable data. No hidden magic.

In fact, I have tried all of the investment services for dividend investors like a crash test dummy of investment services. Just ask me, and you'll learn why there was nothing I could use out there and that's how the Dividend Snapshot Screeners were borned!

Join 128,000+ Monthly Investors & Build a Winning Portfolio

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.