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<< Return to Part VI

For those readers who are new to this series of articles, I am identifying the universe of Canadian real estate securities - mainly REITs and common shares. The introductory article (Part 1) discussed the overall industry and the availability of these shares for purchase by US investors. Subsequent articles have grouped the 86 Canadian real estate companies by sector, in order to facilitate comparison. At the end of the series, I plan to assemble a list of the top-yielding and the lowest-risk securities, in order to help investors identify potential investments.

In this article, I have combined retirement and nursing homes with cemeteries - I needed to balance the number of securities per article, and this is where it worked-out. I personally have 4 positions in this sector (with no representation in cemeteries), so you can see that Healthcare and Retirement is a personal favorite.

There is one point that I would like to make for US investors. The first is that Extendicare (OTCPK:EXETF) is substantially American (about 75% of their facilities), and Medical Facilities Corp. (OTCPK:MFCSF) is 100% based in the US. Chartwell (OTC:CWSRF) is about 75% Canadian and 25% American. Although these securities are traded in Canada, you may not attain your diversification objective, as these are substantially exposed to the US, rather than Canada. In other words, Americans may choose to directly invest in medical and related REITs on American exchanges, rather than buy the Canadian counterpart. For Canadian investors, these are opportunities to diversify into the US retirement and health real estate market without leaving the Toronto Stock Exchange (TSX).

1. The name, tickers (those with US tickers are grey-filled), and US stock exchange prices. This will help non-Canadians find these securities on US exchanges, when possible.

Name

CDN Ticker

US Ticker

US RECENT

US 52-WK HIGH

US 52-WK LOW

Sector

Arbor Memorial Services Inc

ABO.A or ABO.B

AROAF.PK or AROBF.PK

N/A

N/A

N/A

Cemeteries

Park Lawn Corporation

PLC

N/A

N/A

N/A

N/A

Cemeteries

Amica Mature Lifestyles

ACC

ACCKF.PK

7.415

N/A

N/A

Retirement/Nursing Homes/Healthcare

Chartwell Senior Housing REIT

CSH.UN

CWSRF.PK

8.2991

9.5517

6.6617

Retirement/Nursing Homes/Healthcare

Extendicare REIT

EXE.UN

EXETF.PK

8.43

13.874

5.8225

Retirement/Nursing Homes/Healthcare

GT Canada Medical Properties REIT

MOB.UN

N/A

N/A

N/A

N/A

Retirement/Nursing Homes/Healthcare

Medical Facilities Corp.

DR

MFCSF.PK

11.445

13.84

8.5711

Retirement/Nursing Homes/Healthcare

NorthWest Healthcare Properties REIT

NWH.UN

NWHUF.PK

11.287

12.5592

10.9779

Retirement/Nursing Homes/Healthcare

2. A table of statistics based on the Canadian stock exchange activities. The US sources do not typically carry this data, which may be important to your investment decision.

Name

Pay

out %

CDN Recnt
Price

CDN 52-wk High

CDN 52-wk Low

Yld

%

60
mo Beta

P/E

1-yr Rtn

%

3-yr Rtn

%

5-yr Rtn

%

Mkt Cap $M

Arbor Memorial Services Inc

N/A

23.00

26.68

22.44

1.90

0.17

12.2

-6.47

8.71

-0.33

233

Park Lawn Corporation

7.16

8.05

7.00

6.40

0.32

n.a.

-1.08

25.73

18.82

25

Amica Mature Lifestyles

91

7.86

9.00

6.25

4.80

0.82

13.3

18.25

44.66

1.41

177

Chartwell Senior Housing REIT

N/A

8.65

9.37

6.45

6.20

0.98

n.a.

14.47

33.59

-0.86

1,229

Extendicare REIT

441

8.50

13.35

6.18

9.90

1.28

13.1

4.67

33.74

-0.22

711

GT Canada Medical Properties REIT

8

1.28

2.00

1.10

5.20

n.a.

n.a.

n.a.

n.a.

n.a.

17

Medical Facilities Corp.

N/A

11.75

13.15

8.88

9.40

0.78

n.a.

20.15

30.30

18.36

333

NorthWest Healthcare Properties REIT

34

11.49

12.51

10.80

6.90

n.a.

n.a.

7.58

n.a.

n.a.

493

3. The following (name, website, Description, 2011 Financial and other info) provides a description and financial results. This will help you identify and understand the company activities and results.

Arbor Memorial Services Inc (OTC:AROAF or OTC:AROBF)

First established in 1947, the Company is now comprised of 41 cemeteries, 28 crematoria, 85 funeral homes, and 7 reception centers. Our cemetery properties range in size from approximately 25 to 200 acres and are staffed by permanent maintenance, administrative and sales personnel. The highly trained professionals at our funeral homes supply personalized support and customized services for small and large gatherings. Provides interment rights, cremations, funerals and associated merchandise and services in all provinces of Canada except Prince Edward Island and Newfoundland and Labrador.

Revenue for the 13 weeks ended July 31, 2011 was $65.9 million compared to $80.9 million for the 13 weeks ended July 25, 2010. This represented a decrease of $15.0 million or 18.5%. Sales decreased by $11.1 million or 15.5% in 2011 compared to 2010. Sales in the cemetery division decreased by $13.2 million or 31.3% due primarily to lower sales of pre-need interment rights of $12.4 million or 58.6%. Operating expenses decreased by $12.7 million or 18.7% from 2010 due primarily to a decrease in cemetery cost of sales of $7.9 million or 45.5%, cemetery and funeral obtaining costs of $7.5 million or 50.5% and employee benefits of $0.3 million or 23.4%. The decrease in cemetery cost of sales was due to lower sales and the mix of products sold.

Park Lawn Corporation

Owns and operates six cemeteries in the greater Toronto, Ont., area.

Park Lawn Corporation ("Park Lawn") (TSX VENTURE:PLC) announces that it has signed an Amendment to the Share Purchase Agreement to acquire all the shares of Services Memorables Harmonia Inc. that was announced on December 15, 2011. The maximum dollar value of common shares of Park Lawn that can be issued on conversion of the Promissory Notes and the exercise of the Rights is respectively $1,473,430 and $2,028,634 for a maximum total of $3,502,064. The issuance of shares will be subject to the approval of the TSX Venture Exchange. The transaction was completed on December 22, 2011. Harmonia currently operates in the Quebec City area and provides funeral and cemetery services, and cremation and cremation memorial products. Harmonia has been operating since 2007.

Amica Mature Lifestyles (OTC:ACCKF)

Amica Mature Lifestyles Inc. (Amica) is engaged in the design, development, marketing and management of luxury housing and services for mature lifestyles. The Company owns varying percentage interests in and manages 25 seniors residences (including two that opened in June and July 2010, and three in pre-development) in Canada. It operates in two segments: management operations, and ownership and corporate operations. Under its management operations segment, it supervises all aspects of operations of the seniors residences on behalf of third-party owners, including marketing, accounting, purchasing, budgeting, design and implementation of resident programs. Under its ownership and corporate operations segment, it reports the results of its seven seniors residences, which it wholly owns, the results of the four seniors residences, in which it has control or joint control. In March 2011, the Company completed the acquisition of an additional 51.5% ownership interest in Amica at Bayview.

In November 2011, Amica Mature Lifestyles agreed to acquire luxury retirement residence and announced $29.8 million offering of subscription receipts.

Chartwell Senior Housing REIT

The Trust is engaged in the ownership, operations and management of retirement and long-term care communities in Canada and the United States. It operates in four segments: Canadian Retirement Operations, Canadian Long-Term Care Operations, Canadian Management Operations and United States Operations. On June 1, 2010, it acquired a 50% interest in eight long-term care properties consisting of 1,384 suites in Ontario. On June 1, 2010, it acquired a 50% interest in a 139-suite retirement property in Vaughan, Ontario. On September 1, 2010, it acquired a 50% interest in a 147-suite retirement facility in Oakville, Ontario. In November 2011, it acquired a 50% interest in a portfolio of primarily independent supportive living seniors communities in the United States from ING Real Estate Community Living Group.

Q3/11 FD FFO per unit was $0.17, from $0.17 a year ago, slightly below our $0.18 estimate, mainly due to $1.4 million ($0.01 per unit) of one-time severance costs. Q3 results were boosted by a higher contribution from the property portfolio and reduced interest and G&A costs (even including the severance), but the benefits were offset by lower mezzanine loan interest, reduced management fees, the impact of a stronger Canadian dollar and the dilutive impact of +11.8% higher units outstanding.

Extendicare REIT (OTCPK:EXETF)

It is a North American provider of post-acute and long-term senior care services. Its business is the provision of skilled nursing care and rehabilitative services. In the United States, its skilled nursing and rehabilitative care centers provide post-acute skilled nursing care and therapy services. In Canada, the majority of its centers focus on long-term care services, however it focuses to expand its provision of post-acute services. Extendicare is divided into two operating groups. EHSI operates out of its offices in Milwaukee, Wisconsin in the United States and ECI operates out of its offices in Markham, Ontario in Canada. Extendicare also offers management, consulting, group purchasing, accounting and administrative services to third parties in both Canada and the United States. Author's note: about 75% of its income is derived from US operations.

Q3/11 FD FFO was $0.054/unit, below $0.185/unit last year and significantly lower than our $0.35/unit estimate. The large decrease in FFO resulted from a $31.4 million (US$32.1 million, or $0.322/unit) provision for self-insured liabilities, after an independent actuarial review recommended increasing insurance reserves. Excluding the impact of the higher provisions, FD FFO would have been almost $0.38/unit, and above our estimate. Local currency revenue improvement of +5.5% was driven by funding increases, partially offset by lower U.S. census levels, and the negative effect of translation into a 5.6% higher C$ (67% of revenue is derived in the U.S.). Overall EBITDA for Q3/11 decreased by 20.3% to $40.8 million, down from $51.2 million last year (down 17.8% on a local currency basis). Excluding insurance reserve provisions and the negative impact of currency, EBITDA increased by 15.5% to $72.2 million. Overall Q3/11 EBITDA margin was 7.7% for the quarter, down from 9.8% a year ago (or 13.6% excluding insurance provisions versus 12.4% last year).

GT Canada Medical Properties REIT

As of December 31, 2009, the Company's business was to identify and evaluate businesses or assets with a view to completing a qualifying transaction. In October 2009, the Company entered into an agreement to acquire the Hamilton Property. The Hamilton property is a three-storey medical office building located on the north side of Queenston Road, west of Nash Road, in east-central Hamilton. The building is 100% leased and is managed by CMD Management Limited. In September 2011, the Company acquired Huronia Medical Centre. In December 2011, the Company acquired Orillia Medical Office Building.

For the three months ended September 30, 2011 FFO increased to $250,315 or $0.02 per unit from a loss of ($209,968) or ($0.11) per unit for the same period in 2010. For the nine months ended September 30, 2011, FFO increased to $638,999 or $0.04 per unit from a loss of ($771,364) or ($0.57) per unit for the same period in 2010. Net income for the three months ended September 30, 2011 increased to $2,529,368 or $0.17 per unit from a loss of ($209,968) or ($0.11) per unit for the three months ended September 30, 2010. For the nine months ended September 30, 2011, net income increased to $9,279,445 or $0.60 per unit from a loss of ($771,364) or ($0.57) per unit for the nine months ended September 30, 2010.

Medical Facilities Corp. (OTCPK:MFCSF)

Medical Facilities Corporation owns indirect controlling interests in six limited liability entities (the Centers), each of which owns a specialty hospital or an ambulatory surgical center. Its Centers include Sioux Falls Surgical Hospital, LLP located in Sioux Falls, South Dakota; Dakota Plains Surgical Center, LLP located in Aberdeen, South Dakota; Black Hills Surgical Hospital, LLP located in Rapid City, South Dakota; Oklahoma Spine Hospital, LLC located in Oklahoma City, Oklahoma; Barranca Surgery Center, LLC located in Irvine, California, and The Surgery Center of Newport Coast, LLC located in Newport Beach, California. The Centers provide facilities, including staff, surgical materials and supplies, and other support necessary for scheduled surgical, pain management, imaging, and diagnostic procedures. The Centers mainly focus on a limited number of clinical specialties, such as orthopedic, neurosurgery, pain management and other non-emergency elective procedures.

Q3/2011 financial information N/A

NorthWest Healthcare Properties REIT

The REIT has focused its real estate investment and management activities in the healthcare sector and has built a portfolio comprised of medical office buildings and healthcare focused real estate in Canada. The objective of the REIT is to provide unit-holders with cash distributions from investments focused on healthcare real estate in Canada. As of December 31, 2010, it held a portfolio of 56 income-producing properties, with a focus on leasing space to doctors, dentists, other medical professionals, and related healthcare service providers, such as pharmacies, laboratories and diagnostic imaging clinics. On January 25, 2011, it acquired The Dundas-Edward Centre. On February 1, 2011, it acquired Hys Centre. On April 1, 2011, it acquired the Malvern Medical Arts Building. On May 31, 2011, it acquired Tawa Centre. On July 22, 2011, it acquired Polyclinique Val-Belair.

Recently bought properties in Quebec, Nova Scotia, and Alberta. Q3/2011 results: Q3/11 fully diluted (FD) funds from operations (FFO) were $0.23/unit compared to $0.24/unit last year and modestly below our $0.24/unit estimate. Q3/11 FFO/unit were impacted by a 0.7% decline in same-property NOI, and the drag of $17.5 million of cash (Q3/11 cash balance), which offset acquisition growth. Occupancy was 91.8% at Q3/11, down modestly from 91.9% at Q2/11, but up from 90.4% at Q3/10. Q3/11 occupancy was impacted by the bankruptcy of Blockbuster Video (leased space at one of the REIT's Toronto properties), a tenant vacancy in Halifax, and the REIT taking back space at one Toronto property from a non-medical tenant to accommodate a new medical tenant. Management expects to achieve an overall occupancy rate of approximately ~94%-95% over the longer term.

Source: Analyzing Canadian REITs, Part VII: Retirement, Nursing Homes, Healthcare And Cemeteries

Additional disclosure: Long CWSRF.PK,EXETF.PK,MFCSF.PK,NWHUF.PK