Chartwell Retirement Residences (CSH.UN.TO)

Sees more upside from here. Occupancy levels have crept back up to over 90%. Fantastic demand profile, over 4% CAGR. New construction is near-low. 

We note that it has been one of the best performing REITs over the past two years amidst broad sector weakness. The Trust has managed to navigate the high-rate environment and execute its acquisitive growth strategy with 2024 being a record year. Unit prices have appreciated significant to where it is quite expensive from a valuation standpoint, but there are plenty of positive fundamental trends, with increasing occupancy rates, fund flows, and margins. We like its recent momentum, and its distribution is well-covered by cash flows. It is not exactly cheap, trading at 3.7X book, but its FFO interest coverage ratio and FFO/debt have all been increasing, showing a positive trend in profitability. We would be comfortable buying here for an income name.
Unlock Premium - Try 5i Free

Of all the long-term care facilities, this would be the one she'd look at the closest. Secular trend of aging demographics isn't going away. Targeting 95% occupancy, which is achievable. Liability risk if another Covid-type outbreak. Healthcare worker shortage. Yield is less than 4%.

See her Top Picks for a name that plays to the same demographic.

Has done extremely well. This has been an extremely good performance year for long-term-care REITs. Not sure there's much more in terms of capital gains from where we are now. Unless substantial pullback, wouldn't buy now.

Excellent company performance. Post Covid-19 recovery has been very strong. Business continues to remain strong. Will continue to own. Expecting earnings to continue growing. M&A has also been very strong. 

Tremendous job filling units since pandemic, occupancy back to near 90%. Leading edge of baby boomer population starting to access this type of product. Discount to NAV. Making great accretive acquisitions, so he expects NAV growth. Great product, high-margin business. Yield is 3.9%.

A high-quality company in seniors living, benefiting from aging demographics. Same-location growth is impressive. The stock's momentum can continue. A caveat: the retirement space is vulnerable to disruption, given that no senior looks forward to entering a retirement home. But seniors are healthier now and they have more options. This trend will continue. So competition could enter this space, not now, but in the future. And yes, CSH is attractive to a private buyer. It's possible.

EXE operates long-term care facilities which require a lot of capital, while CSH is more senior homes. CSH has been divesting lower-return investments to become more of a pure-play. You can charge whatever rent in a market if there's no competition. The seniors' population keeps growing. CSH is paying down debt, which was high a few years ago. In CSH, the easy money has been made, though. It could be a keeper, or take profits.

It was just too cheap before and there is a return to occupancy post Covid. With good M&A it is still growing but down a bit.

Likes this space, because there's a shortage of beds for the elderly. Costs have already been spent to avoid the major problems companies like this faced during Covid. CSH can continue to increase beds, but also offer living spaces and companionship to the elderly when they move out of their homes into CSH facilities. There remains a shortage of beds, so there's good growth ahead. Also, regulatory changes won't be rapid like they were during Covid, should they occur.

Story's played itself out halfway. Accretive acquisition in June, which enhances quality and lowers age of its portfolio by about 3 years. Still bullish on seniors housing. Further gains from occupancy and rent increases. Not cheap (17x) versus other REITs, but he still models 27% growth rate. So on price to growth, still very much works.

He does not own real estate - it is interest rate sensitive. There are a couple of office real estate companies that they're watching for a bottom. He has been looking at this company but is concerned about the cost structure part due to patient care which can be tough on expenses.

Neutral. Valuation's OK. Right point in the ecosystem. Retirement residences are a structurally growing part of the market. But you're more beholden in the short term on individual capital allocations, which are fine for this name.

It's more a question of do you want to be in REITs in the first place? Instead, you probably want to focus on utilities.

Good place to be. One of the top-performing REITs in the space. Lots of tailwinds in the sector, especially after Covid. High on the list of companies that pensions or private equity may take private.

Falling interest rates makes dividend stocks like this attractive. Also, the populating is aging and will need retirement residences, which are undersupplied. CSH's occupancy rate is high-80's% and he predicts around 95% in a year. They pay a near 5% dividend yield and have growth as they build 3-4 homes.