Chartwell Acquires Retirement Community in Thunder Bay, Ontario & Completes Reorganization of Relationship With Horizon Bay

Chartwell Seniors Housing Real Estate Investment Trust (TSX:CSH.UN) announced last month that it acquired from Spectrum Seniors Housing Development LP 100% of Chartwell Select Thunder Bay, an independent living community comprised of a 102-suite main residence and seven townhouses. The current occupancy is approximately 71% and management expects occupancies will stabilize at approximately 95% within one year. There is also the opportunity to construct an additional nine townhouses on excess land included with the property The total purchase price is approximately $23.2 million, which subject to normal working capital adjustments, will be settled by the assumption of the existing construction debt of $17.2 million, settlement of mezzanine loans of approximately $3.0 million and settlement of approximately $3.0 million of other amounts owing to Chartwell by Spectrum.

Chartwell announced last month that it had amended the terms governing the relationships between Horizon Bay Realty, L.L.C. ("HB Realty"), Horizon Bay Chartwell L.L.C. ("HBC") and Horizon Bay Chartwell II, LLC ("HBCII"). The amendments, and the changes to Chartwell’s arrangements with Horizon Bay Management LLC ("HBM"), include the following:

  • HB Realty distributed to CSH Master Care a portion of its interest in HBCII and CSH Master Care sold its 49% interest in HB Realty to HB Partners, LLC ("HBP") for nominal consideration, with the result that Chartwell’s effective ownership interest in HBC decreased from 74.5% to 50% and its effective ownership interest in HBCII increased from 74.5% to 80%;
  • Chartwell no longer has exposure to the 25 seniors housing facilities leased by subsidiaries of HB Realty and managed by HBM.
  • The management agreements relating to facilities managed by HBC and HBCII will be amended to provide more favourable termination rights to Chartwell and its joint venture partners and to amend certain noncompetition covenants granted by HB Partners, LLC in favour of each of HBC and HBCII; and
  • Chartwell Master Care Corporation and HBM or HB Realty will no longer have an obligation to bring to the attention of each other any opportunities to acquire stabilized seniors housing facilities; however, HB Realty and its affiliates will be subject to certain non-competition covenants in favour of each of HBC and HBCII while HBR has any interest in HBC or HBCII.

"These amendments simplify our corporate structure, eliminate exposure to negative cash flows and future obligations under the lease agreements and, with the increased ownership in HBCII, improve cash flow from our U.S. platform," commented Brent Binions, Chartwell’s President and Chief Executive Officer.