Chartwell REIT Announces Strong Growth In 2004.MISSISSAUGA, Ontario For the First Nation, see . Mississauga (pronounced: [ˌmɪsɪˈsɑgə] listen -- Chartwell Seniors Housing Chartwell Seniors Housing REIT (TSX: CSH.un) is a real estate investment trust in Canada that was founded in 1999. It operates seniors housing properties in six of Canada's provinces and four in The United States. Real Estate Investment Trust (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :CSH csh - C shell .UN) announced today results for the three months and year ended December 31, 2004. The REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). commenced operations on November 14, 2003 following completion of its Initial Public Offering, did not hold any material assets prior to November 14, 2003, and is considered to have begun operations on that date. As a result, there are no comparative results for the prior-year period. HIGHLIGHTS: - Acquisition of interests in over 4,000 suites in 32 properties expands portfolio by 105%. - 2004 Distributable Income of $0.96 per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. Unit achieves revised outlook target - Fourth quarter annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. Distributable Income run-rate of $1.22 per Unit exceeds revised outlook target of $1.16-$1.19 per Unit - Fourth quarter distributable income payout ratio Payout Ratio The percentage of earnings paid out in dividends. It is calculated by dividing dividends per share by earnings per share. Notes: The payout ratio indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend. improves to 84% - Retirement home occupancy remains strong at to 92% at year-end - Stabilized Long-Term Care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. occupancy stable at 97% - 85% Tax deferral tax deferral The delay of a tax liability until a future date. For example, an IRA may result in a tax deferral on the amount contributed to the IRA and on any income earned on funds in the IRA until withdrawals are made. on cash distributions for 2004 Through 2004 Chartwell invested approximately $367.9 million in the acquisition of interests in 32 facilities totaling 4,081 suites. As a result, its total portfolio of owned or managed seniors housing facilities increased 30% to 13,539 suites in 128 facilities compared to December 31, 2003. Chartwell's portfolio of owned facilities grew by 105% to 6,818 suites at year end, and represented approximately 89% of consolidated revenues in the year. In addition, mezzanine loans A mezzanine loan is a relatively large loan, typically unsecured (ie., not backed by a pledging of assets) or with a deeply subordinated security structure (e.g., third lien on the property but non-recourse vis-a-vis the borrower). of $27 million were extended to Chartwell's development partners, generating interest revenue as well as development, management and other fees. Once completed and fully stabilized, the future acquisition of interests in these 22 new properties will further enhance the overall quality and average age of Chartwell's portfolio. As a result of this considerable growth, consolidated revenues in the fourth quarter of 2004 continued to increase compared to prior quarters, rising to $45.4 million, up from $38.7 million in the third quarter of the year. Consolidated revenues for the year ended December 31, 2004 were $137.8 million. Fourth quarter 2004 distributable income was $11.1 million or $0.305 per fully diluted Unit. For the year ended December 31, 2004 distributable income was $30.7 million or $0.96 per fully diluted Unit. As at December 31, 2004 there were approximately 37 million REIT units issued and outstanding (including 0.9 million LTIP LTIP Long Term Incentive Plan LTIP Laughing Till I Puke LTIP Local Transportation Improvement Program LTIP Long Term Instrument Plan LTIP Long Term Infrastructure Program LTIP Long Term Independent Project units under subscription and 4.2 million of Class B Units of Chartwell Master Care LP, a subsidiary of the REIT). In the third quarter of 2004 Chartwell issued 6.25 million Units through a successful public offering. As a result, the weighted average number of fully diluted units outstanding rose 11% to 36.6 million in the fourth quarter compared to 33.0 million in the third quarter of the year. "We were pleased to have exceeded our revised Distributable Income run-rate target in the fourth quarter, the direct result of our significant growth, improved occupancies, our rigorous focus on controlling costs and incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. fee income," commented Stephen Suske, Vice Chair and President. "Looking ahead, we will continue to increase cash flow for our Unitholders as we further expand our portfolio through acquisitions and joint venture development projects and enhance our properties through our renovation and upgrade programs." "Also we are pleased to announce that our 2004 tax deferral on cash distributions will be 85%", Mr. Suske said. "We reinforced our brand in 2004 as Canada's most trusted name in seniors housing," added Robert Ezer, Chief Executive Officer. "Going forward, we are confident that our growing presence in key Canadian markets, our proven reputation for quality care and service, and our full spectrum of retirement lifestyles will continue to enhance our performance." Management's highly effective sales and marketing programs and cost control initiatives enhanced performance in the fourth quarter. Properties net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. as a percentage of revenues rose to 31.6% in the fourth quarter from 31.2% in the prior three-month period. Occupancy in the retirement home portfolio remained strong at 92% as at December 31, 2004 while occupancy in the REIT's stabilized Long-Term Care facilities long-term care facility n. See skilled nursing facility. also remained strong at 97%. Direct operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. increased through 2004 due primarily to the growth in the portfolio during the period. General, administrative and trust expenses increased through the last half of the year as new staff were added to manage Chartwell's future growth. Due to the adoption on January 1, 2004 of two new accounting policies consistent with other Canadian real estate companies and REITs, depreciation and amortization expenses for the fourth quarter and year ended December 31, 2004 increased by $6.0 million ($0.164 per diluted unit) and $18.4 million ($0.577 per diluted unit) respectively due to shorter amortization periods for acquired resident contracts, and by $2.0 million ($0.055 per diluted unit) and $6.2 million ($0.194 per diluted unit) respectively due to the change in the calculation of depreciation for real property from the sinking fund sinking fund, sum set apart periodically from the income of a government or a business and allowed to accumulate in order ultimately to pay off a debt. A preferred investment for a sinking fund is the purchase of the government's or firm's bonds that are to be paid method to the straight line method. Primarily due to the increase in depreciation and amortization expenses resulting from the required changes in accounting policies the REIT generated a net loss of $1.9 million or $0.061 per unit in the fourth quarter and $5.4 million or $0.195 per unit for year ended December 31, 2004. In the second and fourth quarters of 2004 the REIT also wrote down the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of certain management contracts resulting in a charge to income of $1.7 million ($0.055 per unit) for the year.
Financial Highlights:
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Period ended
December 31, 2004 Three Three Year Year
($,000 except per months months Actual Forecast
unit amounts) Actual Forcast
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Revenues 45,406 31,641 137,780 122,810
Net income (loss)(1) (1,934) 6,224 (5,447) 24,051
Net income (loss)
per Unit (diluted)(1) $(0.061) $0.238 $(0.195) $0.924
Distributable Income 11,145 7,691 30,744 29,683
Weighted Avg Units
Outstanding
(diluted)(2) 36,598,309 26,148,365 31,894,180 26,040,932
Distributable Income
per unit - diluted $0.305 $0.294 $0.964 $1.14
Distributions declared 9,394 N/A 32,596 N/A
Distributions
per unit - diluted $0.257 N/A $1.02 N/A
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1. Forecast net income and net income per unit for the three months and year ended December 31, 2004 do not include the impact of the adoption of two changes in accounting policies for depreciation and amortization on January 1, 2004 which reduced actual net income by $8.0 million ($0.219 per fully diluted unit) in the fourth quarter and $24.6 million ($0.771 per fully diluted unit) for the year ended December 31, 2004 respectively. 2. Including Class B units of Chartwell Master Care LP. Actual Results Compared to Forecast The REIT's Initial Public Offering prospectus dated October 31, 2003 included a statement of the forecast income for the three months and year ended December 31, 2004 (the "Forecast"). Due primarily to delays in completing a number of development and mezzanine financing Mezzanine Financing A hybrid of debt and equity financing. Mezzanine financing is typically used to finance the expansion of existing companies, and it is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the transactions resulting from regulatory issues resulting from a change of government in Ontario and municipal elections occurring in the fall of 2003, as well as certain operating and occupancy issues, actual revenue for the first two quarters of 2004 were lower than Forecast. Growth in the portfolio through the year resulted in revenues in the fourth quarter exceeding the Forecast by 44% and 12% for the year. Despite the slower than anticipated start to the year, as well as the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. higher direct operating and administrative expenses than Forecast, the REIT's distributable income for the fourth quarter and year ended December 31, 2004 were higher than the Forecast. Actual per unit amounts were also impacted compared to Forecast by the increase in units outstanding resulting from a successful offering of 6.25 million units in the third quarter of 2004. On July 14, 2004 management updated its outlook for the year ended December 31, 2004 with reference to the Forecast in which it estimated that total distributable income for the year ended December 31, 2004 would be $29.8 million or $0.95 per fully diluted Unit. This compares to distributable income of $29.7 million (or $1.14 per fully diluted Unit) as per the Forecast. Management also estimated its annualized distributable income run-rate in the fourth quarter of 2004 would be between $1.16 and $1.19 per fully diluted Unit. Chartwell exceeded both of these targets in 2004. Chartwell REIT is a growth-oriented investment trust owning and managing a complete spectrum of seniors housing properties in selected centres across Canada Across Canada was an afternoon program that formerly aired on The Weather Network. The segment ran from early 1999 until mid 2002. The show ran from 3:00PM ET until 7:00 PM ET. . Focused solely on the Canadian marketplace, Chartwell REIT is currently the second largest participant in the Canadian seniors housing business. Chartwell REIT will capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the strong demographic trends present in its markets to grow internally and through accretive acquisitions Accretive Acquisition An acquisition that will increase the acquiring company's EPS. Notes: As they are expected to increase the acquiring company's future earnings, these acquisitions tend to be favorable for the company's market price. . Chartwell REIT also has an exclusive option to purchase stabilized facilities from Spectrum Seniors Housing Development LP, Canada's largest and fastest growing developer of seniors housing. To view the 2004 Fourth Quarter Financial Results, including Financial Statements and Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial , please visit our website at www.chartwellreit.ca. Chartwell's Distribution Reinvestment Plan reinvestment plan See dividend reinvestment plan (DRIP). (DRIP) allows Unitholders to have their monthly cash distributions used to purchase units without incurring commission or brokerage fees, and receive bonus units equal to 3% of their monthly cash distributions. More information can be obtained at www.chartwellreit.ca Certain statements contained in this news release may include forward-looking information with respect to Chartwell Seniors Housing Real Estate Investment Trust's operations and future financial results. Such statements are based on current expectations, are subject to a number of uncertainties and risks, and actual results may differ materially from those contained in such statements. These uncertainties and risks include, but are not limited to, availability of resources, competitive pressures, changes in market activity and regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. . Further information can be found in the disclosure documents filed by Chartwell Seniors Housing Real Estate Investment Trust with the securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities , available at www.sedar.com. Distributable Income (which is computed in accordance with the REIT's constating documents and is generally defined as net earnings before depreciation and amortization, future income tax expense or credits, gains or losses on asset dispositions, amortization of discounts or premiums on long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and deferred financing costs, interest on convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. and any exchangeable security Exchangeable Security A security that grants its holder the right to exchange it for the common stock of a firm other than the issuer. Notes: These are often used in takeovers. distribution amount) is not a measure recognized under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). and does not have a standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). by GAAP. Distributable Income is presented because management believes this non-GAAP measure is a relevant measure of the ability of the REIT to earn and distribute cash returns to Unitholders. Distributable Income as computed by the REIT may differ from similar computations as reported by other organizations and, accordingly, may not be comparable to distributable income as reported by such organizations. Distributable income run-rate is calculated by annualizing Annualizing See: Annual basis. quarterly distributable income. Please refer to the reconciliation of distributable income to net income and distributable income to cash flow from operating activities below:
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Three Months Three Months Year ended Year ended
($ 000's) ended ended December 31, December 31,
December 31, December 31, 2004 2004
2004 2004 (Actual) (Forecast)
(Actual) (Forecast)
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Net income (loss) (1,934) 6,224 (5,447) 24,051
Depreciation
and Amortization 10,671 1,563 33,186 6,021
Amortization and
Deferred Financing
expenses 1,363 72 1,990 288
Amortization of
below market
leases (409) - (1,358) -
Amortization of
debt premiums (74) (168) (701) (677)
Management contract
write down 1,159 - 1,660 -
Principal portion
of Capital Funding
Receivable 19 - 70 -
Amounts received
under NOI Guarantee 546 - 1,883 -
Non-controlling
interest (196) (539)
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Distributable
Income 11,145 7,691 30,744 29,683
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($000's) Year ended Three months ended
December 31, 2004 December 31, 2004
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Cash flow from operating
activities 29,490 12,412
Add (Subtract):
Change in non-cash operating items 309 (1,601)
Amortization of debt discounts (270) (164)
Amortization of debt premiums, net (701) (74)
Principal portion of
capital funding received 70 19
Amounts received under Net
Operating Income Guarantees 1,883 546
Other (37) 6
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Distributable Income 30,744 11,144
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