By Beatrice Britneff
A Canadian seniors’ housing company is looking at a 138 per cent increase in profits for 2013, according to its third-quarter report.
After ending 2012 deep in the red, this is good news for Chartwell Retirement Residences. Chartwell suffered a $140 million loss in profits in 2012 — a 126.6 per cent drop in profits from 2011.
This debt came primarily from extensive property acquisition. In 2012, Chartwell bought two groups of properties in Collingwood, Ont. and Kamloops, B.C. The company also partnered up with Health Care REIT Inc. — an American real estate investment trust — to a buy a larger portfolio with properties located in B.C., Alberta, Ontario, and Quebec.
While these acquisitions cost the company a lot of money, Chartwell’s chief financial officer Vlad Volodarski said that it was an opportunity not to be missed.
“This was just a unique opportunity where a large portfolio came to market,” Volodarski said.“These opportunities don’t come around very often in Canada or actually, almost never, where you can make an acquisition of 8,000 units or almost a billion dollars … and these properties that were for sale were in the markets that we operate.”
Investments paying off in 2013
The company’s third quarter report shows that new property acquisition and operation in 2012 caused total expenses to increase by nearly six per cent in 2013. However, revenues and savings in other areas helped offset this increase.
By the end of the 2013 third quarter, revenues from Chartwell residences increased by nearly seven per cent due to occupancy improvements, increases in regular annual rental rates, and “higher ancillary services revenues.”
Chartwell is also experiencing increased revenues in 2013 thanks to the sale of company assets. Chartwell sold a portfolio of five seniors living communities located in New York State in February 2013 — referred to as the “Bristal Portfolio” in the company’s financial reports. The sale brought in $49.1 million.
According to Volodarski, the sale of the Bristal Portfolio was part of a recently implemented company strategy to concentrate its American properties in three core states — Colorado, Florida and Texas.
“We used to have properties in 15 different states,” Volodarski said. “We made the strategic decision a few years ago … to make sure that we can manage and provide proper oversight of the [core] properties.”
Volodarski said Chartwell will continue looking at what properties it can sell on an annual basis.
“We have over 200 properties in our portfolio, and some of these properties become old,” he said. “If they were not built necessarily with a kind of futuristic view to begin with, at some point in time they’ll become obsolete.”
As of September, 76 per cent of Chartwell’s retirement residences were located in Canada. The remaining 24 per cent are all located in the United States.
According to the company’s third-quarter report, 22 per cent of its residences are dedicated to assisted living, 16 per cent are for long-term care, and 62 per cent are independent supportive living.
Chartwell also saved money in 2013 through decreased spending on interest. The third-quarter report shows that the company’s interest expenses on same property portfolios decreased due to “regular mortgage principal repayments and lower interest rates achieved on renewals.” Interest expenses on the company’s acquisitions also saw a decrease with the sale of the Bristal Portfolio.
If all goes well in the 2013 fourth-quarter report, Chartwell will return to making a profit for the first time in at least three years.