Chartwell Retirement Residences (CSH-UN-T) has deals to acquire two seniors’ housing portfolios in Quebec for a total of $511 million, which will give it ownership interests over an additional 2,300 units.
Chartwell plans to acquire 100 per cent ownership in five retirement residences with 1,428 suites in the Greater Montreal Area (GMA), Gatineau and Sherbrooke for $297 million (the GMA portfolio). It is also acquiring 50 per cent ownership in a portfolio of five properties with 1,805 suites in the Quebec City area and Shawinigan (the Quebec City portfolio) for $214 million.
Names of the vendors are not disclosed, but Chartwell said they are separate companies.
“The acquired properties are expected to enhance the quality of Chartwell’s portfolio and fit strategically with Chartwell’s growth objectives, increasing its presence in key cities in Quebec,” a release states.
The Mississauga-headquartered real estate trust also announced it has closed or is negotiating acquisitions for 85 per cent ownership in three Quebec residences from Quebec construction firm EMD-Batimo.
The two portfolio acquisitions and a closed acquisition from EMD-Batimo for two properties total $677 million in purchase price, across 12 properties representing over 3,900 suites.
Chartwell serves over 25,000 residents in Ontario, Quebec, British Columbia and Alberta.
About the latest planned acquisitions
The GMA portfolio is spread across three properties in the GMA (55 per cent of suites), one in Sherbrooke (23 per cent of suites) and one in Gatineau (21 per cent of suites). The GMA portfolio is 95 per cent occupied, Chartwell says.
Properties in the GMA portfolio are being acquired as unencumbered assets, it adds.
The average age of the units in GMA portfolio is six years, with 1,199 apartments offering independent supportive living services, 124 suites offering assisted living services and 105 seniors apartments.
There is potential to develop over 580 units in the GMA portfolio over its five acres of excess land across four properties.
Quebec City portfolio
The Quebec City portfolio consists of five properties with 1,805 units. Eighty-two per cent are in Quebec City, with the remainder in Shawinigan. The average year of a suite in the Quebec City portfolio is five years, with 1,428 units offering independent supportive living services, 196 assisted living suites and 181 seniors apartments.
Occupancy of the Quebec City portfolio is at 82 per cent, but excluding two assets in lease up, the occupancy rises to 94 per cent.
Chartwell will take management over the Quebec City portfolio. The company expects to earn approximately $1.7 million in annual management fees from its joint-venture partner on a stabilized basis, with the vendor agreeing to provide Chartwell a two-year net operating income guarantee.
To support the vendor’s obligation, $4.7 million of the purchase price will be held in escrow.
Chartwell will also be assuming the approximately $154-million mortgage debt on the Quebec City portfolio as its 50 per cent share.
Both transactions are expected to close in Q3.
Starting Aug. 28, 2028, Chartwell will have the option of buying the remaining 50 per cent ownership stake in the Quebec City portfolio.
The properties in both portfolios have amenities such as restaurants, theatres, libraries, swimming pools, exercise facilities and spas.
Chartwell intends to acquire the GMA and Quebec City portfolios to improve the quality of its portfolio and meet its growth plan.
The portfolios are “strategically located” in two of Quebec’s largest cities, the company says. Chartwell’s average portfolio age will decrease by approximately three years if the acquisitions are finalized. It cites strong operating and financial performance at the two portfolios, with high occupancy rates and the expectation for both to generate a stabilized operating margin of over 40 per cent.
Update on EMD-Batimo acquisitions
As it announced its latest acquisitions, Chartwell also updated the transactions with EMD-Batimo.
Chartwell took an 85 per cent interest in Chartwell Le Prescott and Chartwell Trait-Carré for $166 million. The residences have a total of 685 suites.
It is also in late negotiations for 85 per cent ownership in a retirement residence with 368 suites. The acquisition is expected to close at approximately $86 million, including the assumption of existing mortgages of $58 million.
For the GMA and Quebec City portfolios and Chartwell Le Prescott and Chartwell Trait-Carré, Chartwell will fund the acquisitions with proceeds from dispositions, assumption of in-place debt, a $300-million bought deal offering of units of Chartwell and other sources of liquidity.
The acquisitions will not have a significant impact on Chartwell’s net debt-to-adjusted EBITDA ratio, the company says.
