Retirement residences and long-term care (LTC) homes were generally defensive investments until they took a big hit during the pandemic in 2020. Governments were unprepared for the deadly coronavirus, which sent shock waves globally. Canada’s senior housing market sector is still in post-pandemic recovery but into growth.
Chartwell Retirement Residences (TSX:CSH.UN), one of Canada’s largest senior housing operators, continues to generate investors’ interest, as evidenced by its stock performance. Thus far, in 2024, the real estate stock is up 14.6% year-to-date. However, in addition to the attractive 4.7% yield, the enticing factor is the monthly cash dividends. If you invest today, the share price is $13.10.
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Strategic decision
After the first quarter of 2022, Chartwell announced its plan to sell its LTC platform in Ontario. Management said it was a strategic decision and that the company needed to focus more on the growing retirement business. LTC operations comprised less than 10% of the business.
In early September 2023, Chartwell completed the sale of the Ontario LTC homes to Age Care Health Services (16) and Axium (1) for a gross sale price of $445 million. The current senior living options are retirement communities in Alberta, British Columbia, Ontario, and Quebec.
The $3.6 billion unincorporated, open-ended real estate trust offers resident services and care services under its assisted living program in different settings. After the LTC divestment, Chartwell’s key performance targets are occupancy, cash flow, employee engagement, and resident satisfaction.
Year of change
Vlad Volodarski, CEO of Chartwell, said 2023 was a year of change, learning, and growth. Management streamlined many corporate processes and invested in technology platforms for faster information sharing, decision-making, and improved focus.
The new technology enhanced business intelligence capabilities, and rolled out an electronic health records platform, an integrated recruitment system, and a workforce management tool. Chartwell wants to focus it operations in mid-market and upscale residences in urban and suburban areas.
The 5% and 7% year-over-year increases in employee engagement and resident satisfaction scores were the first encouraging signs. In 2023, resident revenue increased nearly 4% year-over-year to $687.3 million, while net income jumped 158.5% to $128.3 million.
According to Volodarski, the senior housing sector benefitted from the favourable industry dynamics in 2023. He also expects favourable conditions to support occupancy and revenue growth this year. The occupancy rate rose to 84.9% from 77.5% in 2022.
In Q1 2024, total revenue increased 10.3% to $183.9 million from a year ago, while net loss improved 84.3% to $1.3 million versus Q1 2023. The occupancy rate increased to 86.1% due to strong demand fundamentals despite a historically weaker winter season.
Higher performance scores
Chartwell Retirement Residences now provides exceptional resident experiences in its upscale and mid-market residences in urban and suburban locations. Volodarski expects occupancy to hit 87.3% in June 2024 due to improved operating margins and cash flows in Q2 2024.
“In 2025, we will achieve in our retirement residences, employee engagement of 55% (highly engaged), resident satisfaction of 67% (very satisfied) and same-property occupancy of 95%,” he added. Notably, Chartwell hasn’t missed a monthly cash dividend payment since December 2003.
