Chartwell REIT Announces Strong Third Quarter 2004 Results.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 and nine months ended September 30, 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 23 properties expands portfolio of owned facilities by 86% from 3,319 suites to 6,191suites. - Revenues and distributable income increase 31% and 64%, respectively over the second quarter. - Third quarter 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 91.4% with an 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. run-rate of $1.14 per fully diluted Unit. - Annualized distributable income run-rate in fourth quarter forecasted to be between $1.16 and $1.19 per fully diluted Unit. - Occupancy rates Noun 1. occupancy rate - the percentage of all rental units (as in hotels) are occupied or rented at a given time pct, per centum, percent, percentage - a proportion in relation to a whole (which is usually the amount per hundred) in retirement home portfolio increase to 98% at October 31, 2004 from 92% at June 30, 2004. - Occupancy rates in long-term care facilities long-term care facility n. See skilled nursing facility. , not in re-development, remain constant at 98%. - 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. from properties increases to 31.2% in the third quarter from 29.5% in the second quarter. - 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 $17.6 million generate interest income, management fees and provide exclusive access to new properties under development. - Completes successful bought-deal public offering of 6.25 million units at $11.25 per unit. Consolidated revenues for the three months ended September 30, 2004 were $38.7 million, a 30.8% increase over the second quarter of the year. For the first nine months of 2004 revenues were $92.4 million. Through the first three quarters of 2004 Chartwell invested approximately $151.7 million in new acquisitions and 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 agreements. With the completion of these acquisitions, Chartwell's total portfolio of owned facilities has grown by 86% to 6,191 suites since December 31, 2003. "One of our stated goals is to become a leading consolidator of the highly fragmented Canadian seniors housing business. With our significant growth so far this year, and the considerable number of opportunities we are currently evaluating, we will continue to grow distributable income while capturing economies of scale and cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. across the entire portfolio," commented Stephen Suske, Vice Chair and President. "We were very pleased to have achieved the high end of our annualized distributable income run rate target in the third quarter, generating a much-improved payout ratio of 91.4% in the period," Mr. Suske continued. "We are also confident we will meet our annualized distributable income run rate target of between $1.16 and $1.19 per unit in the fourth quarter of 2004, resulting in a further improvement in our payout ratio." During the third quarter management also accelerated its internal growth programs with a number of projects in existing facilities to add suites as well as upgrades and repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. strategies at others to enhance revenues and occupancies. The REIT will expand and update additional properties in the quarters ahead. Management's highly effective sales and marketing programs and cost control initiatives enhanced performance in the third quarter compared to the second quarter of 2004. Properties net operating income as a percentage of revenues rose to 31.2% in the third quarter from 29.5% in the prior three-month period. Occupancy in the retirement home portfolio also increased to 98% as at October 31, 2004 compared to 92% at June 30, 2004. Occupancy in the REIT's stabilized Long-Term Care facilities remained stable at 98%. "Our focus on providing residents with a safe and rewarding lifestyle continues to attract seniors to our facilities across the country," added Robert Ezer, Chief Executive Officer. "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 through the balance of the year and going forward." 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. have increased in 2004 compared to the IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. forecast due primarily to the growth in the portfolio during the period. General, administrative and trust expenses increased in the second and third quarters of the year as new staff have been added to manage Chartwell's current and future growth. Due to the adoption of two new accounting policies consistent with other Canadian real estate companies and REITs, effective January 1, 2004 depreciation and amortization expenses were higher than the IPO forecast. Amortization expenses for the third quarter and first nine months of 2004 increased by $5.2 million ($0.157 per diluted unit) and $12.4 million ($0.409 per diluted unit) respectively due to shorter amortization periods for acquired resident contracts, and by $1.0 million ($0.030 per diluted unit) and $4.1 million ($0.135 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, and higher operating and G&A costs through the first nine months of 2004, the REIT generated a net loss of $0.144 million or $0.004 per diluted unit in the third quarter and $3.856 million or $0.127 per diluted unit for the nine months ended September 30, 2004. In addition, in the second quarter of 2004 the REIT 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 $0.5 million. As at September 30, 2004 there were 35.77 million REIT units issued and outstanding (including 0.86 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). Distributable income for the three months ended September 30, 2004 was $9.4 million ($0.285 per diluted unit), higher than the $7.8 million ($0.299 per diluted unit) forecast at the time of the IPO. Per unit amounts in the third quarter were lower than the IPO forecast due to the timing of deployment of the proceeds from the secondary public offering of trust units completed in the quarter. For the nine months ended September 30, 2004 distributable income was $19.6 million ($0.647 per diluted unit) compared to the forecast of $22.0 million ($0.846 per diluted unit).
Financial Highlights:
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Period ended September 30, 2004
($,000 except per unit amounts)
Three Three Nine Nine
months months months months
Actual Forecast Actual Forecast
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Revenues $38,691 $31,135 $92,374 $91,169
Net income (loss) $(144) $6,379 $(3,856) $17,827
Net income (loss) per Unit
(diluted) ($0.004) $0.245 ($0.127) $0.686
Distributable Income $9,398 $7,811 $19,599 $21,992
Weighted Avg Units
Outstanding (diluted) 33,030,198 26,088,942 30,308,905 26,004,191
Distributable Income
per unit - diluted $0.285 $0.299 $0.647 $0.846
Distributions declared $8,585 N/A $23,438 N/A
Distributions
per unit - diluted $0.260 N/A $0.773 N/A
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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 and nine months ended September 30, 2004 (the "Forecast"). Due primarily to delays in completing a number of development and mezzanine financing 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 through 2004 resulted in revenues in the third quarter exceeding the Forecast by 24%. However, due to the slower than anticipated start to the year, as well as the aforementioned higher direct operating and administrative expenses than Forecast, the REIT's distributable income for the first nine months of 2004 was lower than the Forecast. On July 14, 2004 management updated its outlook for the year ended December 31, 2004 with reference to the Forecast. Chartwell now estimates that total distributable income for the year ended December 31, 2004 is expected to be approximately $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 estimates its annualized distributable income run-rate in the fourth quarter of 2004 will be between $1.16 and $1.19 per fully diluted Unit. Management does not intend to provide guidance or forecasts on an ongoing basis. 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 third 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, a seniors housing development company. To view the 2004 Third 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 meaning prescribed 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 below.
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($ 000's) Three Months Three Months Nine Months Nine Months
ended ended ended ended
September 30, September 30, September 30, September 30,
2004 2004 2004 2004
(Actual) (Forecast) (Actual) (Forecast)
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Net income (loss) (144) 6,379 (3,856) 17,827
Depreciation and
Amortization 9,270 1,529 22,515 4,458
Amortization and
Deferred Financing
expenses 452 72 627 216
Amortization of below
market leases (384) - (948) -
Amortization of
debt premiums (281) (169) (627) (509)
Management contract
write down - - 501 -
Principal portion of
Capital Funding
Receivable 19 - 50 -
Amounts received
under NOI Guarantee 466 - 1,337 -
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Distributable Income 9,398 7,811 19,599 21,992
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