Chartwell Announces Third Quarter 2022 Results – QNT Press Release


MISSISSAUGA, ON, Nov. 9, 2022 /CNW/ – Chartwell Retirement Residences ("Chartwell") (TSX:CSH) announced today its results for the third quarter ended September 30, 2022.

Highlights
  • In Q3 2022 same property Retirement Operations average occupancy increased 60 basis points from Q2 2022 and 50 basis points from Q3 2021, led by strong growth in Western Canada.
  • Execution of operating, sales, marketing, and portfolio optimization strategies is underway. Further occupancy growth of 40 basis points was achieved in October 2022.
  • In Q3 2022, net income was $4.3 million compared to $0.9 million in Q3 2021 primarily due to higher resident revenue, higher positive changes in fair values of financial instruments and higher net income from discontinued operations partially offset by higher pandemic-related expenses due in part to lower government reimbursements and higher General and Administrative ("G&A") expenses.

"We continue to focus on occupancy and cash flow recovery. Various operational, sales and marketing strategies are in place to support our residences' leadership teams and staff in their efforts to drive faster recovery in 2023 and beyond," commented Vlad Volodarski, CEO. "We are also building on the strength of our management platform to become an even more agile and scalable organization to support the future growth of our portfolio, through stronger empowerment of our managers and front-line employees, streamlining our corporate support and deploying specialized teams to execute complex operating and capital allocation strategies. Such strategies may include service model changes, capital upgrades, changes in use or dispositions of properties identified as non-core. We believe that these strategies, combined with pent-up demand for retirement accommodation, driven by Canada's increasingly ageing population, slower new construction starts, and the persistent shortage of long term care beds will support sustainable long-term value for all our stakeholders."

Operating Performance Trends
  • For Q3 2022 compared to Q3 2021, same property adjusted Net Operating Income ("NOI") decreased $0.5 million or 1.1% primarily due to higher net pandemic expenses of $3.7 million, in part due to lower government reimbursements, higher agency staffing, and food and utilities expenses, partially offset by higher revenue from regular annual and market-based rental and service rate increases and higher occupancy.
  • Same property retirement leasing activity and permanent move-ins exceeded Q3 2021 by 12.8% and 6.3% respectively.
Financial Results

For Q3 2022, net income was $4.3 million compared to $0.9 million in Q3 2021 primarily due to:

  • higher resident revenue,
  • higher positive changes in fair values of financial instruments, and
  • higher net income from LTC Discontinued Operations,

partially offset by:

  • higher direct operating expenses,
  • higher depreciation of property, plant and equipment ("PP&E"),
  • higher finance costs,
  • higher G&A expenses, and
  • lower deferred tax benefit.

For Q3 2022, Funds from Operations ("FFO") from continuing operations was $28.3 million or $0.12 per unit compared to $28.8 million or $0.13 per unit for Q3 2021.  The following items impacted the change in FFO from continuing operations:

  • higher G&A expenses of $1.6 million primarily due to higher severance, cloud-based information technology system implementations, education, and travel expenses partially offset by lower performance-based compensation expense, and
  • higher finance costs of $1.5 million,

partially offset by:

  • higher adjusted NOI from continuing operations of $2.3 million which is comprised of changes as follows:
    • higher adjusted NOI of $4.6 million due to higher contributions from our acquisitions and development portfolio, and
    • lower same property adjusted NOI of $0.5 million due to the following:
      • higher net pandemic expenses of $3.7 million due to lower government reimbursements and higher pandemic expenses, and
      • and higher agency staffing, food and utilities expenses,

       partially offset by:

  •  
    •  
      • higher revenue from both regular annual and market-based rental and service rate increases and increased occupancy,
    • lower NOI of $1.8 million from our dispositions, repositioning and other portfolio,
  • lower depreciation of PP&E and amortization of intangible assets used for administrative purposes of $0.2 million, and
  • higher interest income of $0.2 million.

FFO from continuing operations for Q3 2022 includes $1.2 million of Lease-up-Losses and Imputed Cost of Debt related to our development projects (Q3 2021 – $1.5 million).

Total FFO for Q3 2022 was $31.9 million or $0.13 per unit, compared to $33.9 million or $0.15 per unit in Q3 2021. Effective March 31, 2022, our Long Term Care Operations segment was reclassified as discontinued operations. Total FFO per unit includes $0.01 per unit in Q3 2022 and $0.02 per unit in Q3 2021, respectively from LTC Discontinued Operations or a decrease of $0.01 per unit in Q3 2022 due to lower preferred accommodation revenue, timing of flow through funding envelope expenditures and incremental pandemic expense funding partially offset by higher retirement accommodation and ancillary revenue.

For Q3 2022, resident revenue increased $12.3 million or 7.9% primarily due to revenue growth in our same property portfolio and contributions from our acquisitions and development portfolio partially offset by our dispositions, repositioning and other portfolio.

For Q3 2022, direct property operating expense increased $10.4 million or 9.7% primarily due to higher expenses in our same property portfolio and our acquisitions and development portfolio partially offset by our dispositions, repositioning and other portfolio.

In Q3 2022, weighted average occupancy in our same property portfolio was 77.6%, compared to 77.1% in Q3 2021 an increase of 0.5 percentage points. In Q3 2022, move-ins exceeded Q3 2021 by 6.0% and move outs were 3.3% lower than Q3 2021. All platforms experienced occupancy gains in Q3 2022 compared to Q2 2022.

For 2022 YTD, net income was $2.1 million compared to net loss of $8.6 million in 2021 YTD primarily due to:

  • higher resident revenue,
  • positive changes in fair values of financial instruments,
  • higher net income from LTC Discontinued Operations,
  • lower net loss from joint ventures,

partially offset by:

  • higher direct operating expenses,
  • higher G&A expenses,
  • lower gain on disposal of assets,
  • lower deferred tax benefit and,
  • higher finance costs.

For 2022 YTD, FFO from continuing operations was $74.3 million or $0.31 per unit compared to $94.0 million or $0.43 per unit for YTD 2021. The following items impacted the change in FFO from continuing operations:

  • lower adjusted NOI from continuing operations of $13.2 million which is comprised of changes as follows:
    • lower same property adjusted NOI of $16.6 million primarily due to the following items:
      • net pandemic expense of $12.0 million in 2022 YTD compared to net pandemic expense recoveries of $5.5 million in YTD 2021, or higher net pandemic expenses of $17.5 million due to lower government subsidies and higher pandemic expense,
      • lower occupancy, and
      • higher agency staffing, utilities, food and supplies expenses,

       partially offset by:

  •  
    •  
      • increased revenue from regular market-based rental and service rate increases,
    • lower NOI of $5.9 million from our dispositions, repositioning and other portfolio, and
    • higher adjusted NOI of $9.3 million due to higher contribution from our acquisitions and development portfolio,
  • higher G&A expenses of $5.6 million primarily due to lower government subsidies and higher cloud-based information technology system implementations, severance, travel and education expenses partially offset by lower performance-based compensation expense,
  • higher finance costs of $0.8 million, and
  • lower management fee revenue of $0.6 million,

partially offset by:

  • lower depreciation of PP&E and amortization of intangible assets used for administrative purposes of $0.4 million.

FFO from continuing operations for 2022 YTD includes $3.3 million of Lease-up-Losses and Imputed Cost of Debt related to our development projects (2021 YTD – $3.7 million).

Total FFO for 2022 YTD was $93.6 million or $0.39 per unit, compared to $103.8 million or $0.47 per unit in 2021 YTD. Total FFO per unit for 2022 YTD includes $0.08 per unit from LTC Discontinued Operations compared to $0.04 per unit in 2021 YTD, due to higher adjusted NOI from Long Term Care Operations primarily as a result of government reimbursements for prior years direct operating expenses and higher ancillary, preferred and retirement accommodation revenues.

For 2022 YTD, resident revenue increased $22.3 million or 4.8% primarily due to revenue growth in our same property portfolio and contributions from our acquisitions and development portfolio, partially offset by our dispositions, repositioning and other portfolio.

For 2022 YTD, direct property operating expense increased $33.0 million or 10.6% primarily due to higher expenses in our same property portfolio and our acquisitions and development portfolio, partially offset by our dispositions, repositioning and other portfolio.

The following table summarizes select financial and operating performance measures:

Three Months Ended

September 30

Nine Months Ended

September 30

($000s, except per unit amounts, number of units, and
occupancy)

2022

2021

Change

2022

2021

Change

Resident revenue

168,758

156,430

12,328

490,562

468,260

22,302

Direct property operating expense

117,811

107,374

10,437

344,032

311,017

33,015

Net income/(loss)

4,278

917

3,361

2,068

(8,600)

10,668

FFO (1)

Continuing operations

28,290

28,830

(540)

74,269

94,026

(19,757)

Total

31,880

33,937

(2,057)

93,560

103,824

(10,264)

FFO per unit (1)

Continuing operations

0.12

0.13

(0.01)

0.31

0.43

(0.12)

Total

0.13

0.15

(0.02)

0.39

0.47

(0.08)

Weighted average number of units outstanding (000s) (2)

237,837

225,074

12,763

236,921

220,673

16,248

Same property occupancy (3)

77.6 %

77.1 %

0.5pp

77.2 %

77.8 %

(0.6pp)

Same property adjusted NOI (1)  

50,361

50,899

(538)

146,646

163,256

(16,610)

G&A expenses

11,215

9,652

1,563

40,307

34,695

5,612

Debt leverage and interest coverage metrics

The interest coverage ratio (1) on a rolling 12-month basis was 2.6 at September 30, 2022 compared to 2.9 at September 30, 2021. The net debt to adjusted EBITDA ratio (1) at September, 2022 was 11.2 compared to 9.6 at September 30, 2021.

Outlook

Operations

Our same property weighted average occupancy rate increased 0.4 percentage point to 78.1% in October 2022. Same property leasing activity and permanent move-ins were higher than October 2021 by 5.5% and 7.1%, respectively. Our same property weighted average occupancy rate (based on leases and notices on hand as at October 31, 2022) is forecast to increase 0.1 percentage points in November and ending December at 78.2%. We have consistently experienced mid-month move ins, particularly in our Ontario platform, which are not accounted for in our forecasts.

From April 2022 to September 2022 our total portfolio occupancy increased 1.6% percentage points. Our properties in 11 of our top 15 markets experienced average occupancy increases of 2.8 percentage points in this period. Our properties in the highly competitive Ottawa, Calgary, Durham and Quebec City markets, experienced average occupancy declines of 1.3 percentage points. Property and region-specific sales and marketing strategies such as multi-channel advertising, select use of tailored promotions and incentives, business development and …

Full story available on Benzinga.com



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