Chartwell Seniors Housing REIT

Chartwell Seniors Housing REIT

March 10, 2011 18:43 ET

Chartwell Announces Fourth Quarter and Year End 2010 Results

MISSISSAUGA, ONTARIO--(Marketwire - March 10, 2011) - March 10, 2011 – Chartwell Seniors Housing Real Estate Investment Trust (TSX:CSH.UN) announced today results for the three months and year ended December 31, 2010.


  • Same property NOI up 4.9% in the fourth quarter and 3.5% in the year on stable occupancies and cost control.
  • Acquired interests in 20 high-quality properties for $340.8 million.
  • Reduced risk profile with $34.5 million reduction in mezzanine loan exposure.

"We are pleased with the significant progress made on our strategic objectives in 2010," commented Brent Binions, President and CEO. "We continued growing the AFFO contribution from our core property portfolio, despite challenging conditions in some of our markets. We streamlined our operational, administrative and financial processes, and implemented new research programs and information technology solutions to enhance future efficiencies. We also moved ahead with our development and acquisition programs, and in line with our goal to reduce our risk profile, we substantially reduced our mezzanine loan exposure and strengthened our financial position. 2010 was a year in which we transitioned to a more stable, disciplined and future-oriented focus, and looking ahead we are confident the progress made during the year will position us strongly to capitalize on future opportunities with the ultimate goal of enhancing value for our Unitholders over the long term."

Financial Highlights

Period ending December 31, Three Months   Year
($000s, except number of units and per unit amounts) 2010   2009   2010   2009
Adjusted Funds from Operations ("AFFO") (1) 19,083   14,667   81,489   73,303
AFFO per unit (diluted) (1) 0.14   0.13   0.61   0.69
Funds from Operations ("FFO")(1) 15,933   16,858   81,144   64,713
FFO (diluted) (1) 0.11   0.14   0.61   0.61
Distributions declared 19,462   16,368   72,133   69,106
Distributions declared per unit 0.14   0.14   0.54   0.66
Distributions declared as a percentage of AFFO 102.0%   111.6%   88.5%   94.3%
Weighted average number of units outstanding (diluted) 140,315,468   116,986,471   132,998,080   106,140,729
(1) 2009 amounts exclude the provision for impairment of mezzanine loans and accounts receivable of $30.7 million.

In the fourth quarter of 2010 AFFO increased by $4.4 million or 30.1% compared to the fourth quarter of 2009 due primarily to the increased contribution from the property portfolio, including properties acquired in 2009 and 2010 and lower foreign exchange losses. This growth was offset by lower management fee income due to acquisitions of a number of properties previously managed for Spectrum and ING and higher General, Administrative and Trust ("G&A") costs primarily related to IFRS implementation, process efficiency and legal structure reviews. 

For the year ended December 31, 2010, AFFO increased by $8.2 million or 11.2% compared to 2009. The increase was due to the higher contribution from the property portfolio and lower G&A expenses, partially offset by lower fee income, lower mezzanine loan interest and lower foreign exchange gains.

The per unit amounts in the fourth quarter of 2010 and for the year ended December 31, 2010 were impacted by the 20% and 25% increase in the weighted average number of units outstanding, respectively, due to the equity offerings completed in late 2009 and 2010.

In the fourth quarter of 2010 FFO declined to $15.9 million ($0.11 per unit diluted) from $16.9 million ($0.14 per unit diluted) in the fourth quarter of 2009. For the year ended December 31, 2010, FFO increased to $81.1 million ($0.61 per unit diluted) from $64.7 million ($0.61 per unit diluted). In addition to the items discussed above, changes in FFO were also impacted by unrealized foreign exchange gains and losses, an accelerated accretion and amortization of financing costs on redemption of convertible debentures, and an adjustment to record lease expense on a straight-line basis over the lease term.

Operating Performance

Period ending December 31, Three months   Year
($000s, except occupancy and per unit amounts) 2010   2009   Increase/ (Decrease)   2010   2009   Increase/ (Decrease)
Same Property Occupancy(1) 90.9%   90.7%   0.2pp   90.4%   90.6%   (0.2pp)
Same Property NOI 39,764   37,924   1,840   162,214   156,783   5,431
G&A expenses(2) 5,946   4,680   1,266   20,577   19,031   1,546
G&A as a percentage of revenue(2) 3.1%   2.8%   0.3pp   2.9%   2.9%   -
Mezzanine Loan Interest Income 1,385   1,293   92   5,419   8,056   (2,637)
Canadian Management Operations Income (loss)
Net Loss (16,099)   (7,236)   (8,863)   (26,337)   (71,245)   44,908
Net Loss per unit (diluted) (0.12)   (0.06)   (0.06)   (0.20)   (0.70)   0.50
(1) – pp – percentage points
(2) 2009 amounts exclude severance costs

Same property weighted average occupancies increased in the fourth quarter of 2010 compared to the same period in the prior year primarily due to strong improvements in Western Canada, Quebec and the United States, offset by a slight decline in Ontario. For the year ended December 31, 2010, weighted average occupancies declined slightly to 90.4% compared to 90.6% in the prior year due primarily to softness in the U.S. portfolio through the first half of 2010.

Same property Net Operating Income ("NOI") increased by $1.8 million or 4.9% in the fourth quarter of 2010 and by $5.4 million or 3.5% for the year ended December 31, 2010 compared to the same periods of 2009. The increases are primarily the result of stable occupancies in 2010 combined with the implementation of rental rate increases on renewal and turnover, increases in ancillary revenues due to enhanced services provided to residents, and successful cost control initiatives.

G&A expenses, excluding severance costs increased by $1.3 million in the fourth quarter of 2010 and by $1.5 million for the year ended December 31, 2010 compared to the same periods of 2009. The increase in G&A expenses is primarily due to higher consulting and professional fees related to IFRS implementation, and legal structure and process efficiency reviews, which amounted to approximately $1.5 million for the year. In addition, both property operating results as well as G&A expenses in the second half of 2010 were negatively impacted by the implementation of the Harmonized Sales Tax ("HST") in Ontario and British Columbia on July 1, 2010, which added approximately $1.0 million of new expenses.

Mezzanine loan interest income increased in the fourth quarter of 2010 by $0.1 million compared to the fourth quarter of 2009 primarily due to the recognition of deferred placement fees in the amount of $0.3 million on the settlement of certain mezzanine loans. For the year ended December 31, 2010 mezzanine loan interest income declined by $2.6 million as Chartwell continues to reduce its mezzanine loan exposure. In 2010 Chartwell converted $17.4 million of mezzanine loans into equity interests in five seniors housing communities and collected $14.4 million of mezzanine loans in cash. At December 31, 2010 Chartwell's mezzanine loan exposure was $20.8 million, down from $55.3 million at the prior year end.

Canadian management operations income declined in 2010 as Chartwell acquired 17 properties previously managed for Spectrum and ING during the year.

Net loss increased in the fourth quarter of 2010 to $16.1 million or $0.12 per unit diluted compared to $7.2 million or $0.06 per unit diluted in the fourth quarter of 2009. For the year ended December 31, 2010, net loss was $26.3 million, or $0.20 per unit diluted compared to $71.2 million or $0.70 per unit diluted in 2009. In addition to items that impacted FFO and AFFO, changes in net loss amounts were also impacted by increased depreciation and amortization charges, the write down of the carrying amount of a property, as well as a mezzanine loan impairment provision of $30.7 million recorded in the second quarter of 2009.

Strong Financial Position

At December 31, 2010, the indebtedness ratio was 55.3% (57.7% including convertible debentures). The average term to maturity of the mortgage portfolio was 7.5 years with a contractual weighted average interest rate of 5.44%. In line with the strategy to reduce its debt levels over time, Chartwell completed a public offering of 13.8 million Trust Units at $9.45 per unit in the fourth quarter of 2010, raising proceeds of $124.2 million, net of offering costs of $6.0 million. The proceeds of the offering, and cash on hand, were used to redeem the full outstanding amount of $124.9 million in 6% Convertible Debentures at par.

As at December 31, 2010, cash on hand amounted to $14.7 million and the unused borrowing capacity on the Credit Facility was $21.9 million. During the year Chartwell repaid mortgages totalling $69.2 million on nine properties and expects to refinance two of these properties in the spring of 2011. The proceeds from these two new mortgages are expected to be approximately $45.5 million and will be used to repay amounts outstanding on the Credit Facility. In 2010, Chartwell refinanced existing mortgages or obtained new mortgage financing in the amount of $52.0 million on seven of its properties. These financings were completed at a weighted average interest rate of 4.07% with a weighted average term to maturity of 9.3 years.

Recent Developments


In 2010, 95.162% of Chartwell's distributions were classified as tax-deferred returns of capital, and 4.838% as foreign-source interest income which is not subject to SIFT tax.

In the fourth quarter of 2011, Chartwell completed a comprehensive review of its legal structure alternatives in order to address the SIFT Rules. The review included the analysis of various alternative structures including status quo, conversion to a corporation, reorganization to qualify for the REIT exemption under the SIFT Rules, and others. Based on the results of this review, Chartwell has concluded that no change in its legal structure is warranted at this time.


Chartwell elected, under IFRS 1, to record property, plant and equipment ("PP&E") at fair value as a deemed cost on transition and to subsequently apply the cost model.

Chartwell's opening balance sheet as at January 1, 2010 will reflect a one-time revaluation of substantially all PP&E. This revaluation is expected to result in a carrying value of total assets of $73 million higher than the net book value reported under Canadian GAAP ("CGAAP"). This amount represents the sum of individual property fair values and excludes any portfolio premium and the value of the management platform. As a result of this revaluation, the Adjusted Gross Book Value ("GBV") of total assets is expected to decrease by approximately $394 million to $2.675 billion.

Effective January 1, 2011 the Chartwell Board of Trustees approved, in compliance with the Declaration of Trust, an amendment to the GBV definition in the REIT's Declaration of Trust to add back the difference between the GBV of assets under CGAAP and IFRS on the IFRS transition date and to add back related costs in respect of completed property acquisitions that were expensed in the period incurred. The Board of Trustees determined that this change is required in order to maintain comparability of the indebtedness ratio upon conversion to IFRS with the ratios calculated under CGAAP in prior periods.

Chartwell's financial statements, including its Management's Discussion and Analysis ("MD&A"), are available at A detailed list of Chartwell's property portfolio can also be obtained under "Supplementary Information" in the "Investor Relations" section of the web site.

Investor Conference Call

A conference call hosted by Chartwell's senior management team will be held Friday, March 11, 2011 at 10:00 AM ET. The telephone numbers for the conference call are: Local (416) 849-5562 or Toll Free: (866) 269-7096. The conference call can also be heard over the Internet by accessing the Chartwell website at, 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 (416) 915-1035 or toll-free (866) 245-6755. The Passcode for the Instant Replay is 964112. The call, along with the companying slides, will also be archived on the Chartwell website at

Chartwell is a real estate investment trust which indirectly owns and operates a complete range of seniors housing communities from independent supportive living ("ISL") through assisted living ("AL") to long-term care ("LTC"). It is one of the largest participants in the seniors housing business in North America. Chartwell's aim is to capitalize on the strong demographic trends present in its markets to maximize the value of its existing portfolio of seniors housing communities, and prudently avail itself of opportunities to grow internally and through accretive acquisitions.

Chartwell's Distribution Reinvestment Plan (DRIP) allows Unitholders to have their monthly cash distributions used to purchase units without incurring commission or brokerage fees, and receive bonus units equal to 3% of their monthly cash distributions. More information can be obtained 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. The words "plans", "expects", "does not expect", "is expected", "budget", "scheduled", "estimates", "intends", "anticipates", "does not anticipate", "projects", "believes" or variations of such words and phrases or statements to the effect that certain actions, events or results "may", "will", "could", "would", "might", "occur", "be achieved" or "continue" and similar expressions identify forward-looking statements. 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.

While we anticipate that subsequent events and developments may cause our views to change, we do not have an intention to update this forward-looking information, except as required by applicable securities laws. This forward-looking information represents our views as of the date of this press release and such information should not be relied upon as representing our views as of any date subsequent to the date of this document. We have attempted to identify important factors that could cause actual results, performance or achievements to vary from those current expectations or estimated expressed or implied by the forward-looking information. However, there may be other factors that cause results, performance or achievements not to be as expected or estimated and that could cause actual results, performance or achievements to differ materially from current expectations. 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 not intended to represent a complete list of the factors that could affect us. See "Risks and Uncertainties" in our 2010 MD&A and risk factors highlighted 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.

Non-CGAAP Measures

Funds from Operation ("FFO"), Adjusted Funds from Operations ("AFFO") and Net Operating Income ("NOI") are not measures recognized under Canadian generally accepted accounting principles ("CGAAP") and do not have a standardized meaning prescribed by CGAAP. They are presented because we believe these non-CGAAP measures are relevant measures of Chartwell's performance. FFO, AFFO and NOI as computed may differ from similar computations as reported by other issuers and may not be comparable to those reported by such issuers. Chartwell's 2010 MD&A contains a reconciliation of Net Income/Loss to FFO and the calculation of AFFO for the three months and year ended December 31, 2010. Detailed descriptions of these terms are contained in Chartwell's 2010 MD&A, available at

Contact Information

  • Chartwell Seniors Housing Real Estate Investment Trust
    Vlad Volodarski
    Chief Financial Officer
    (905) 501-4709
    (905) 501-4710 (FAX)