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Chartwell teams up with U.S. REIT in $850-million venture

A Chartwell REIT-owned retirement residence in Toronto's west end.

Fred Lum/Fred Lum/The Globe and Mail

Chartwell Seniors Housing Real Estate Investment Trust has struck a deal with U.S.-based Health Care REIT Inc. that will make it the largest owner and operator of retirement residences in Canada.

Under the deal, the two real estate trusts will jointly buy 39 properties for $850-million, while Health Care will buy three others for $81-million.

Chartwell will manage all 42 seniors' residences.

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"It adds significant economies of scale and purchasing power to us and that will benefit not only the properties we're acquiring but our existing portfolio," said Chartwell chief financial officer Vlad Volodarski, who noted the REIT already owns about 17,000 units in Canada.

The 42 properties are located in Quebec, Ontario, British Columbia and Alberta, the Toronto-area company said Wednesday.

The more than 8,100 suites are 88 per cent occupied and Chartwell said there's potential to increase that to 90 per cent over time.

"Our primary focus for growth will be Canada," Mr. Volodarski said in an interview from Mississauga.

Chartwell and Health Care REIT said they expect the acquisition to close in early May subject to regulatory approvals. The retirement homes are being purchased from Maestro Retirement Residences Fund.

Mr. Volodarski said it's Health Care REIT's first foray into Canada. Health Care REIT is the third-largest real estate investment trust in health care in the United States, he said.

It's hoped the partnership will attract the owners of other seniors' residences in Canada who want to put their units up for sale, he added.

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"The Canadian market is very fragmented, and the U.S. market is also fragmented for that matter. The top three operators in Canada own about five or 10 per cent of the total market. So 90 per cent of the market is owned by either smaller operators or by small chains."

The seniors housing market is expected to grow rapidly in the coming years as baby boomers retire and people live longer.

"The demand picture is generally very positive. The average growth over the next 20 to 25 years will be three to four times growth of the average population growth in Canada," Mr. Volodarski said.

Health Care REIT chief executive officer George Chapman said the Toledo, Ohio-based company "is pleased to make this investment in Canadian seniors housing."

"The Canadian economy is strong and this investment with Chartwell provides our company with the opportunity to work with the premier seniors housing operator in Canada," Mr. Chapman said in a statement.

"Chartwell has a reputation for delivering excellent quality care and service to their residents and strong financial results to their investors. We have great confidence in their ability to successfully manage the communities."

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