Seniors Housing & Healthcare 2014 Market Outlook Canada

Transcription

1 Seniors Housing & Healthcare 2014 Market Outlook Canada

2 Table of Contents Section Section Description Slide No. Intro Industry Overview 1.0 State of the Market: Fundamentals 5 Demographic Trends in Canada 6 Industry Concentration 7 Change Over the Past Decade 8 Sector Performance Through the Market Cycle State of the Market: Investment 10 Returns Analysis 12 Transaction Activity and Historical Trends 13 2 CBRE CLIENT NAME PRESENTATION TITLE

3 Seniors Housing & Care Properties Basic Terms of Reference The seniors housing and care industry provides both accommodation and an array of services and program options to seniors The demand for these properties is primarily driven by the segment of the seniors population over the age of 75 Shelter Activities Transport, Laundry Meals Basic Care Services ADL Care Services Specialized MC Long-Term Chonic Care Seniors Apartments Independent Living Assisted Living Memory Care Long-Term Care Real Estate Component Real Estate Component Real Estate Component Real Estate Component Real Estate Component Services Component Services Component Services Component Services Component Source: NIC Investment Guide The types of properties which facilitate the delivery of accommodation and care services to seniors are typically divided into five categories: seniors apartments ( SA ), independent living ( IL ), assisted living ( AL ), memory care ( MC ) and long-term care ( LTC ) Seniors housing and care properties also include continuing care retirement communities ( CCRCs ), which typically offer all of the care levels noted above on a single campus 3 CBRE CLIENT NAME PRESENTATION TITLE

4 Evolution of the Canadian Seniors Housing Industry M&A, IPO and Portfolio Transaction Activity Acquisition IPO Portfolio Asset Value Traded ($mm) May 1997 CPL LTC REIT Initial Public Offering Sep CPL acquires VersaCare Mar 2001 Apr 2002 RRR Initial Public Offering RRR Acquires CPL REIT Sep 2003 Nov RRR / CPPIB acquire Lifestyle Portfolio Chartwell REIT Initial Public Offering 2000 $3.2 bn $8.1 bn $1,000 $2,000 $3,000 $4,000 Oct 2005 Feb 2007 Feb May Jan 2008 Jun 2009 Mar 2010 Mar 2011 Apr Nov Mar 2012 Apr May May Jun Aug Oct Nov Jan 2013 Apr May Jul Oct Macquarie Bank acquires Leisureworld Inc. Abacus acquires Omni Health Care PSPIB acquires RRR Chartwell / ING Real Estate acquire RegencyCare Leisureworld acquires Counsel Corp. LTC portfolio LIUNA / Fengate acquires Seasons portfolio Leisureworld Senior Care IPO BayBridge acquires Mancal properties Leisureworld acquires Royalton portfolio Confidential Cogir / Dejardins acquire Jazz portfolio BayBridge acquires Holiday properties Chartwell / HCN JV acquires Maestro portfolio Leisureworld acquires Avenir portfolio HealthLease Properties IPO BayBridge acquires Nautical Lands properties Regal Lifestyle Communities IPO Confidential BayBridge acquires Living Life portfolio Leisureworld agrees to acquire Specialty Care Inc. HCN and Revera Joint Venture HealthLease Properties sale-leaseback with Continuum Regal acquires Community Lifecare properties Source: CBRE Limited 4 CBRE CLIENT NAME PRESENTATION TITLE

5 1.0 State of the Market: Fundamentals

6 Demographic Trends in Canada Baby Boomer Generational Cohort Canadian Population Growth Projections: Seniors Aged % 5.00% 4.00% 3.00% 2.00% 1.00% -% Year-over-Year Growth CAGR Source: CBRE Limited and Statistics Canada, Table M % Seniors (75+) Population Growth Between 2013 and CBRE CLIENT NAME PRESENTATION TITLE

7 Industry Concentration Largest Canadian Operators By Units Under Management Largest Seniors Housing Operators As of Q No. of Properties Operated* No. of Units Operated** Chartwell Retirement Residences ,808 Revera Inc ,652 Cogir 56 8,815 Groupe Savoie 14 5,314 Le Groupe Maurice 19 4,800 Réseau Sélection 17 4,412 Diversicare 32 4,235 Amica Mature Lifestyles 26 3,625 Holiday Retirement Canada 29 3,264 BayBridge Seniors Housing 29 3,193 All Seniors Care 20 3,171 Regal Lifestyle Communities**** 14 1,969 Retirement Concepts 19 1,790 Good Samaritan Society 16 1,685 Leisureworld Senior Care**** 15 1, Largest Operators' Share of Total Units 38.5% * Includes properties under development; Includes managed properties for third-parties ** Includes only IL, AL and MC units within the above noted properties ***Excludes holdings in the U.S. ****Includes announced acquisitions Source: CBRE Limited and Company Reports Largest Care Property Operators As of Q No. of Properties Operated* No. of Units Operated** Extendicare Inc ,185 Revera Inc. 76 9,465 Leisureworld Senior Care**** 43 6,866 Chartwell Retirement Residences 28 3,744 Shannex Inc. 18 1,588 Schlegel Villages 10 1,468 Retirement Concepts 14 1,463 Omni Health Care 17 1,415 Jarlette Health Care 12 1,341 Park Place Seniors Living 12 1,337 Good Samaritan Society 23 1,336 Steeves & Rozema Diversicare Conmed Health Care Community Lifecare Largest Operators' Share of Total Units 22.7% * Includes properties under development; Includes managed properties for third-parties ** Includes only LTC units within the above-noted properties ***Excludes holdings in the U.S. ****Includes announced acquisitions Source: CBRE Limited and Company Reports While there has been some consolidation, the seniors housing and care property industry remains fragmented to a large extent, with only about 21% of the existing total supply of seniors housing and care properties being managed by the largest five national operators. 7 CBRE CLIENT NAME PRESENTATION TITLE

8 Change Over the Past Decade More Players, More Capital Over the past decade, the composition of operators has changed dramatically More entities, more transparency, better governance, intelligent capital Chartwell Retirement Residences has exhibited the most growth Since its IPO, Chartwell has grown in Canada by ~125% (added 14,250 beds) Pension funds have also made a notable entrance into the sector Largest Seniors Housing Operators As of Q No. of Units Retirement Residences REIT 11,100 Chartwell Seniors Housing REIT 9,381 Maestro, LP 4,400 Holiday Retirement Corporation 3,700 El-Al Group Canada Inc. 3,000 5 Largest Operators' Share of Total Units 29.2% * Includes properties under development; Includes managed properties for third-parties ** Includes only IL, AL and MC units within the above noted properties ***Excludes holdings in the US Source: Chartwell Seniors Housing REIT Prospectus, October 2003 Largest Care Property Operators As of Q No. of Units Retirement Residences REIT 10,300 Extendicare (Canada) Inc. 10,000 Leisureworld Inc. 2,600 Chartwell Seniors Housing REIT 1,890 Regency Care Corporation 1,700 5 Largest Operators' Share of Total Units 14.5% * Includes properties under development; Includes managed properties for third-parties ** Includes only LTC units within the above-noted properties ***Excludes holdings in the US Source: Chartwell Seniors Housing REIT Prospectus, October CBRE CLIENT NAME PRESENTATION TITLE

9 Sector Performance Through the Market Cycle Outlook Emerging from Recent Cycle Experience Over the Past 5 Years Supply boom from 2006/07 construction starts Certain markets overbuilt Lease-ups were protracted following the recession Recovery setting in, fuelled by consumer optimism, limited new supply and target market population growth Outlook Encouraging examples emerging Only adding supply when market equilibrium will support it (no spec developments) Operator competency and track-record Well articulated marketing strategies Flexible product offering to respond to changing demands (AL/MC conversions) 9 CBRE CLIENT NAME PRESENTATION TITLE

10 2.0 State of the Market: Investment

11 Seniors Housing & Healthcare Market Overview Investment Market Transaction Volumes Coming off of an impressive 2012, Canada s seniors housing market continues to exhibit strong transaction activity volume Over $2.1 billion in asset value traded in 2013 ($2.4 bn in 2012) Majority of volume represented by the Health Care REIT & Revera Inc. joint venture Class A Cap Rates Return to Market Peak Levels Cap rates for Class A assets holding at 7.0% to 7.5%, levels last observed in 2007 Class B & C cap rates have likely reached an inflection point Fundamentals Remain Fairly Static According to CMHC CMHC reported national vacancy at 10.3% in 2013 survey vs. 10.6% in 2012 (excl. LTC) Average monthly rent for private units 1 rose by 1.3% on a national basis Growth in supply was 1.9% (total spaces) 1 Average rent for bachelor units and private rooms, where at least one meal is included in the rent 11 CBRE CLIENT NAME PRESENTATION TITLE

12 Market Peak Pricing Observed in 2013 Cost of Capital Arbitrage National Seniors Housing* Cap Rate vs. 10-Year GoC Benchmark Yield 9.00% 10-Year GoC Seniors Housing Class A Apartment Class A 7.00% 5.00% 272 bps 579 bps 453 bps 3.00% 1.00% * Class A seniors housing (IL/AL) assets Source: CBRE Limited 12 CBRE CLIENT NAME PRESENTATION TITLE

13 Transaction Activity and Historical Trends Portfolio Sales Continue to Drive Transaction Volumes Canadian Seniors Housing & Care Transaction Volume (in millions) 1Q08-4Q13 ($mm) $3,000 Rolling 4-Quarters Quarterly $2,500 $2,000 $1,500 $1,000 $ Source: CBRE Limited 13 CBRE CLIENT NAME PRESENTATION TITLE

14 Seniors Housing a Growing Component of the Asset Mix Canadian Real Estate Transaction Asset Mix 2004 to % 15% 4% 5% Office 24% Industrial 18% 20% Retail Multi-Res Land Hotel Seniors Over $240 billion in investment real estate traded in Canada between 2004 and 2013 Seniors housing represents a growing component within the total asset mix Seniors housing was, on average, 5% of the total volume over the past 10 years, and in 2013 was closer to 7.5% Source: CBRE Limited, RealNet Canada, RealTrack Inc 14 CBRE CLIENT NAME PRESENTATION TITLE

15 Purchaser Profile Growing Roster of Capital Providers Canadian Seniors Housing & Care Purchaser Profile 2001 to 2013 REIT Pension Institutions Private % Total Deal Flow 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: CBRE Limited 76% REITs 0% Pension Funds 42% REITs 39% Pension Funds 15 CBRE CLIENT NAME PRESENTATION TITLE

16 Canadian Pension Funds are Buyers Seniors Housing Gaining More Acceptance with Major Funds Canadian Pension Fund Allocations to Commercial Real Estate $140 Value of Real Estate ($bn) Allocation to Real Estate (%) 12% $120 $100 $80 $60 $40 $20 10% 8% 6% 4% 2% $ % Source: CBRE Limited and Pension Investment Association of Canada OTPPB, PSPIB, BCIMC and LIUNA all have interests in Canadian seniors housing 16 CBRE CLIENT NAME PRESENTATION TITLE

17 Foreign Purchaser Interest Entrance by U.S. Health Care REITs Over the past 24 months, Health Care REIT, Inc. (third largest U.S. seniors housing REIT) has acquired interests in over 90 Canadian properties: Chartwell Retirement Residence JV (42 properties with 8,187 suites; 50% interest*) Revera Inc. JV (47 properties with 5,041 suites; 75% interest) Sunrise Senior Living (3 properties with 246 suites) Canadian seniors housing market cap is ~ 7% of the market cap of the largest-three U.S. entities Canadian dollar discount to USD may provide additional incentive Ticker Price Yield Market Cap ($mm) Enterprise Value ($mm) Net Debt U.S. REIT (US$) HCP Inc. HCP $ % $18,042 $26,579 32% Ventas Inc. VTR $ % $18,468 $27,906 34% Health Care REIT, Inc. HCN $ % $16,720 $28,407 41% Sub-Total 5.2% $53,231 $82,892 36% Canadian REIT (C$) Chartwell Retirement Residences CSH.UN $ % $1,874 $4,043 54% Extendicare Inc. EXE $ % $621 $1,708 64% Leisureworld Senior Care Corp. LW $ % $432 $1,004 57% HealthLease Properties REIT HLP.UN $ % $307 $627 51% Amica Mature Lifestyles Inc. ACC $ % $246 $752 67% Regal Lifestyle Communities Inc. RLC $ % $153 $404 62% Sub-Total 6.1% $3,633 $8,537 57% 6.8% 10.3% Source: BMO Capital Markets, Pricing from January 31, 2014 * 39 of the properties are co-owned with HCN holding a 50% undivided interest; HCN owns a 100% interest in 3 of the 42 properties 17 CBRE CLIENT NAME PRESENTATION TITLE

18 Canadian Public Companies Seniors Housing Names Have Good Price Correlation to Capped RE Index, with a Better Yield Relative Returns Analysis 1Q09-4Q13 21,000 SH Index (Excl. EXE) S&P TSX S&P TSX Capped RE 19,000 17,000 15,000 13,000 11,000 9,000 7,000 5,000 Q1/09 Q2/09 Q4/09 Q2/10 Q4/10 Q2/11 Q4/11 Q2/12 Q4/12 Q2/13 Q4/13 Source: CBRE Limited Notes: 'SH Index' is a market cap-weighted index of CSH.UN, ACC, LW, HLP.UN & RLC; All benchmarks Re-Indexed to 01-Jan-09 TSX Open 18 CBRE CLIENT NAME PRESENTATION TITLE

19 Valuation & Advisory Services Seniors Housing & Healthcare Group Canada Steve Hiscox Sean M c Crorie [email protected] Paul Marsh [email protected] Heather Payne [email protected] This disclaimer shall apply to CBRE Limited, Real Estate Brokerage, and to all other divisions of the Corporation ( CBRE ). The information set out herein (the Information ) has not been verified by CBRE, and CBRE does not represent, warrant or guarantee the accuracy, correctness and completeness of the Information. CBRE does not accept or assume any responsibility or liability, direct or consequential, for the Information or the recipient s reliance upon the Information. The recipient of the Information should take such steps as the recipient may deem necessary to verify the Information prior to placing any reliance upon the Information. The Information may change and any property described in the Information may be withdrawn from the market at any time without notice or obligation to the recipient from CBRE. Photos herein are the property of their respective owners and use of these images without the express written consent of the owner is prohibited.