Chartwell Regency Retirement Residence in Mississauga, Ont., January 13, 2014.J.P. Moczulski/The Globe and Mail
Chartwell Retirement Residences could be an acquisition target as deals heat up in the seniors housing and health care space, says Bank of Montreal analyst Heather Kirk.
"We believe Chartwell is an attractive potential takeover target given its dominant platform, significant scale, diversification across Canada and the U.S., and embedded growth potential in the portfolio," she writes in a research note.
She suggested that Wednesday's takeover of HealthLease Properties Real Estate Investment Trust (which went public on the Toronto Stock Exchange two years ago) by Ohio-based Health Care REIT Inc. bodes well for Chartwell's valuation.
Chartwell is currently trading at an implied "price per door" of $160,000 and implied cap rate (or capitalization rate, a measure of the return that an owner will likely receive from a real estate investment) of 7 per cent, but "in a takeover scenario, given recent transactions, we believe a 6 per cent to 6.5 per cent cap rate could be achievable, implying a unit price of $13 to $15 for Chartwell," Ms. Kirk writes.
The units were trading at $11.24 on the TSX Thursday morning, up four cents from Wednesday.
"U.S. health-care focused REITs remain active acquirers as they look to diversify their portfolios beyond the U.S.," Ms. Kirk writes.
She noted that Health Care REIT has significantly grown its presence in Canada since 2012, and that its first deal north of the border was done in a joint venture with Chartwell. In June U.S.-based Vantas Inc., a major player in the seniors housing and health care space, bought 29 Canadian seniors housing communities for $980-million from Holiday Retirement.
Total transaction volumes in the U.S. seniors housing space reached $10.8-billion (U.S.) during the first six months of this year, a 137 per cent jump over the same period last year, Ms. Kirk points out.