Seniors Housing Opportunities in Canada Beckon Investors

Partly for convenience—Chartwell Seniors Housing REIT is based in Mississauga, Canada, after all—but also because the country is going gangbusters on growth, the trust has made moves to drop sites in the U.S. in favor of the northern country.

In the second quarter, Chartwell sold 11 U.S. seniors properties, mostly in central states, but also including a few in New York. In the same months, Chartwell doubled down on Canada by joining Toledo, Ohio-based Health Care REIT Inc. in a $936 million purchase of 42 properties formerly owned by Allegro Residences.

Chartwell CEO Brent Binions says that the move boosts the firm’s presence in Canada, which he currently considers the stronger market of the two countries. “Brookdale in the United States—they’re doing a good job managing our properties there, which we’re trying to streamline into a three-state region,” Binions says. “We manage our own properties here, so it makes sense to buy more here.”

While the demographics are similar—for example, both countries boast large baby boomer populations that are moving into retirement age—Canada’s economy has been stronger during the global downturn. Its financial sector did not get as overextended as America’s. And the more stable economy has created a strong footing for the seniors housing sector, Binions says.

“Canada is running a little ahead [and] the economy never really went into much of a tailspin,” he says. “The creation of new seniors housing supply has been at a rapid pace.”

A caveat, however, is that the conditions have created a boom in new development, putting some pressure on occupancies. In Chartwell’s portfolio, for example, occupancy rates are down from a peak of 93 percent to about 89 percent currently, Binions says.

Even with new development, the vacancy rate for standard seniors housing is at about 10.6 percent, according to a mid-2012 report by the Canada Mortgage and Housing Corp. Vacancy is generally lower in the western portion of the country.

The growth of seniors hitting retirement age will grow by 2 percent in Canada for the next four years, then double and quadruple a few years later, Binions says. “We can see this massive demand coming that will take years to match. There’s a few companies coming to the party a bit early, and those with staying power will do just fine. Those that don’t will provide opportunities for acquisitions,” he says.

Michael Berne, managing director of Lee & Associates’ new senior housing group, says Canada has some catching up to do in regard to private care offerings. “Many sites in Canada operate using home health care firms, similar to the older nursing homes in the United States today. Companies like Chartwell have been improving the market with more modern facilities, emulating what we have in the States,” he says.

Binions agrees that Chartwell is moving to build and manage more assisted living facilities, not just seniors communities, with supportive care blended with a broader spectrum of a continuum of care. “We’re not communities for the well elderly,” he says.

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