Chartwell Retirement Residences (CSH.UN.TO)

Done a very good job and focused on balance sheet and payout ratio, reducing it to 80% last year. You may not see a distribution increase this year as they use cash on the balance sheet for growth. They have projects on the go that will contribute to free cash flow. Anyone owning seniors residences could be in play as a result of changes in the US.

Likes it here. It pulled back a little. Likes the sector because of demographics and penetration is really quite low. Expanding rapidly in the US. They are selling off non-core areas of the US and reinvesting in Canada. Attractive yield of about 4.5%. Expects towards the end of this year they could increase distribution. They have the ability to increase occupancy.

(A Top Pick May 7/13. Down 3.96%.) Operationally, the company is doing what it is saying it is going to do, i.e., improve occupancy and focus on certain areas in the US and sell off properties they don’t want. Stock got hit last spring when interest rates pulled back. Has recovered some of its ground, but not to the full extent. She still likes it. Provides a yield in excess of 5%.

Trading at about 14X AFFO and doesn’t trade at a discount to NAV, which you always like to see. This had so many problems back in 2008-2009 with its US exposure. Senior retirement area is hard, but is much harder when you are dealing with US properties. However, they have divested a lot of the US holdings. Management is a lot better than it was, but he still shies away. He would prefer Leisure World (LW-T) which is focused in Ontario.

A core strategy. This is a no brainer, assuming they don’t screw it up. The key is focusing on the operations and making sure they take care of our older ones. You have that demographic flow behind them. It is a great sector to be in. This is the growth side. US REITs are saying they want to come to our market. This one is undervalued. US interest creates a great floor for this one. If it went cheap it would get snapped up.

(A Top Pick April 9/13. Down 4.55%.) Got hit with the rising rates, as all REITs did. Likes the senior housing industry and they are a dominant player. The demographics are working in their favour. Occupancy is still below where they were in prior peaks. Likes that management is focusing on Canada for growth. Yield of about 5.2%.

Likes it and would be buying it here. Great secular growth. Lots of people getting older and will end up in seniors’ residences. They increased capacity and therefore did not increase occupancy recently. If it gets into the $9.50 range he would see someone taking them out.

One of the names he would be buying in the REIT sector. Stumbled a little with occupancy, but are already taking initiatives to meet that. Have been selling non-core assets, which is making their balance sheet better. Growing at about 8.5% compounded annually versus the REITs at around 5%. Trading below a multiple market valuation of 13.9% versus the REITs at around 14.2%.

Likes management and what they have done to the business. This has been one of the REITs that has taken advantage of the climate that we saw coming out of the financial crisis with the demand for REITs. They have right sized the business when it comes to the quality of the assets, the balance sheet and their payout ratio. Looking at the business from what it was 5-6 years ago, it is a completely different business. A few years ago they had to cut the distribution twice because it was not sustainable. Had to get out of a mezzanine lending business for developments that were being done in the retirement space. Improved the quality of their assets by selling a portion of their portfolio. They do have some work to do in decreasing their leverage. Above average free cash flow growth forecast going into 2014. Dividend yield of 5.25%.

Management has done a bunch of good things for this company. Paying down debt, increasing value add on properties through value add services. Should continue for couple of years yet.

Interest rate concern will be trumped by the demographics. Excellent quality and they take Really good care of Moms and Dads. A solid company long term.

Doing a good job in repositioning their portfolio. Have been trying to sell some of their US assets. Have also re-jigged management contracts to get better profitability out of some of their US assets. Made a fairly large acquisition in Canada to increase their size and scale. In the last couple of years they have focused on operations and getting their operating costs and operating strategies in line and have done a very good job. Could be an acquisition target for some of the large US Seniors Housing REITs. Trajectory for earnings is quite good.

Continues to like this and it’s one of his largest REIT holdings. Fair value is $11.50-$12 but could be significantly higher if they eventually get acquired. Senior housing REITs Portfolios tend to be operating businesses so you have to watch as to how they manage their expenses. This sector and this one particularly are supported by longer-term solid demographics and, potentially, a lot of pent-up demand for seniors housing.

Very well run REIT that focuses on the Canadian seniors housing market. Also, have US assets. In his view, this is the operator to own in the long-term care space. Dividend is safe and the balance sheet is good quality.

Leisure World (LW-T) or Chartwell (CSH.UN-T)? Likes both of these. This one has a very good growth rate of 8% versus the REITs of about 5.5%. Slightly less risk. Has a bigger geographical imprint and less regulatory risks.