Release Date: November 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chartwell Retirement Residences (CWSRF, Financial) reported a strong 43.2% growth in Funds from Operations (FFO) for Q3 2024, driven by increased occupancy and improved operating margins.
- The company achieved a significant 610 basis points increase in same-property occupancy, reaching 88.5% by the end of Q3 2024.
- Chartwell Retirement Residences (CWSRF) has been actively optimizing its portfolio, with $1.2 billion in transactions announced, including acquisitions of high-quality properties and divestitures of non-core assets.
- The company reduced staffing agency costs by 43% in Q3 2024 compared to the previous year, indicating effective recruitment and retention strategies.
- Chartwell Retirement Residences (CWSRF) exceeded its 2025 employee engagement target with a score of 57% highly engaged employees, reflecting strong internal culture and workforce satisfaction.
Negative Points
- Net income for Q3 2024 was $23.6 million, significantly lower than the $158.2 million reported in Q3 2023, primarily due to a gain on sale in the previous year.
- Higher finance costs and negative changes in the fair value of financial instruments partially offset the positive contributions to net income.
- The company continues to face challenges in filling certain positions, particularly in specific regions, despite efforts to recruit internationally.
- Occupancy growth is still below the aspirational target of 95% for the same property portfolio, indicating room for improvement.
- Some recent acquisitions, such as the Victoria property, are not yet stabilized, with current occupancy at only 28%, which could impact short-term financial performance.
Q & A Highlights
Q: Can you provide more details on the Victoria acquisition announced yesterday, which is only 28% occupied despite being built in 2021?
A: Jonathan Boulakia, Chief Investment Officer, explained that the property, Sunrise in Victoria, is in a great location and will be added to Chartwell's portfolio. The plan includes changing the operating model and targeted customer base, along with focused marketing efforts, which are expected to result in a faster lease-up and more success than the previous management.
Q: As the portfolio approaches the 95% occupancy target, how should we think about the potential uplift on new leases or tenants?
A: CEO Vlad Volodarski stated that achieving high occupancy will allow Chartwell to drive market rates higher, as new construction requires significantly higher rates. The company is eliminating discounts in properties with high occupancy and expects growth to come from rate increases and operational efficiencies. Occupancy could potentially exceed 95%.
Q: What are your expectations for seasonality in occupancy, given the current circumstances?
A: Vlad Volodarski noted that while the flu season is unpredictable, enhanced infection prevention and control protocols have been implemented since the pandemic. Last year, occupancy grew during the typically slow winter season, and the hope is for this trend to continue.
Q: Quebec's same-property NOI growth is the strongest among regions. What factors are driving this?
A: Vlad Volodarski attributed Quebec's strong NOI growth to good rate growth, strong occupancy growth, and effective cost control. While agency staffing reductions have benefited Quebec, similar benefits are also being seen in Ontario.
Q: Regarding the ATM program, what will trigger its use, and do you have a specific leverage or equity price in mind?
A: CFO Jeffrey Brown indicated that the ATM program is not intended for deleveraging, which is expected to occur organically through NOI growth. The program may be used in conjunction with other capital sources for growth funding, providing a cost-effective way to raise smaller amounts of equity when needed.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
