Chartwell Retirement Residences (CSH.UN.TO)

Stock vs. Stock. EXE-T vs. CSH.UN-T. EXE-T is more into nursing homes. CSH.UN-T is more focused on retirement care, which is privately funded. He would not be adding to it right now. EXE-T looks like it is trading at a slight premium to its NAV. CSH.UN-T is affected by the 4.5% cap rate that another was taken out at. It would have room to move in the case of a takeover, but is trading rich relative to other REITs otherwise.

(A Top Pick Nov 11/14. Up 17.65%.) Likes the seniors housing community. Everyone is getting older. Statscan just came out that presently the 65+ population is about 16% of the Canadian population. They envision that in 15 years it is going to be 25%. Penetration rate is still very low in Canada at about 8%, so she can envision that the demand will grow. This company divested their US assets and are focused in Canada. Pays a nice distribution of around 4%.

Demographics are good behind the retirement business and these are good operators. They sold off their US portfolio and are expanding in Canada. He continues to like it. What is the next one? They kept on getting taken out.

(A Top Pick Oct 6/15. Up 4.93%.) He picked this because it fits in with a dominant theme that he likes, healthcare.

Really likes the seniors’ housing space in Canada. It is supported by great long-term demographics. The biggest issue in the last few years is that the sector has been oversupplied. This is probably the 1^st year where you are going to see demand exceed supply. This will show up in higher occupancy and rent in 2016. Thinks there is at least an upside of $1-$2 next year, in addition to the healthy dividend yield.

A very well-run company. It has the demographic tailwind behind it. The demand is going to be there. Have run their business very well. Recently made an interesting move by cashing in their chips in the US and taking advantage of the US$. Solid dividend that is well covered by their cash flow.

Trading at 28X earnings. This is in an interesting part of the business, retirement residences, where there is a lot of future demand. Looking at the balance sheet from his perspective, the BV has been steadily going down. Those kinds of companies make him queasy. He likes to see companies where the BV is rising. There are better yields out there than this.

The sector is incredibly hot. They benefited from recent M & A activity in the sector. You had to deal with this US exposure in the past, but now they have cleaned up the balance sheet by selling the US assets. It is expensive because there is this underlying tone that all seniors housing will be bought out. It is a tough business with a lot of regulations. It has outperformed because of the repositioning and restructuring. He preferred ACC-T, but he exited the space in favour of apartments.

The REITs surprised him in how well they held up. Investors are seeking out yield. It is an outperformer and satisfies one of his dominant themes of aging population. There is some growth possibilities in addition to the decent yield.

(Market Call Minute) It has behaved okay. This is a time you can buy some dividend yield pretty inexpensively.

Senior housing and senior living has seen a lot of M&A activity. A lot of the US REITs are coming up to Canada to pick away at some of our assets, as valuations are cheaper and Cap rates (the net operating income generated versus the cost to buy them) are higher. Currently it is a little bit expensive. Price to AFFO is 17X. Dividend yield of close to 5%. He would prefer Sienna (SIA-T), which has a higher yield and a lower payout ratio and trading at a Price to AFFO of 13X.

(Market Call Minute.) On the back of the take out of another retirement home, this is a very good hold. It looks like a good sector.

Thinks this has further upside. There is the possibility of a takeover, as there is so much demand from Canadian and American institutions for this sector. Because of that, you could see significant upside. If it doesn’t, this is still an excellent company. The challenge is that there is a real estate component and an operating component. The company has always been looked at from a real estate value of about $12 a share, but that operating business is worth something, especially when you are the only remaining public operator and you have an excellent reputation. Should be a core holding of every portfolio. Yield of 4.43%.

One of their peers was taken out by a pension fund, CPP. This moved up their price. She could see more M&A activity.

Continues to like this. It is very operationally intensive and you need to see an increase in occupancy before it dramatically improves the bottom line. It is starting to get there. This is one of the first years where supply/demand are going to remain very well-balanced, and he thinks demand is going to exceed supply this year. He sees $1 or $2 of capital appreciation potential in addition to the dividend.