01.12
Chartwell Seniors Housing REIT (CSH.UN) – $7.34 – Two Great Deals With Regency & Meridian Portfolios; Target Increased to $7.50
Sector Perform, Above Average Risk, Price Target: $7.50 (prev $6.25)
In early Dec-09, Chartwell agreed to acquire its partner’s 50% interests in the Regency Care and Meridian portfolios. The purchase prices ($79.5MM, less $68.9MM of assumed debt for the Regency stake; and, US$110.5MM, less US$75.2MM of assumed debt for Meridian) appear favourable. RBC CM estimates going in NOI yields of 10.5%-11% on Regency and 9.6% on Meridian. Chartwell issued 13MM units priced at $6.20/unit to raise gross proceeds of $80.6MM in Dec-09. The equity represents ~40% of the combined transaction value of ~$200MM. Thus, the pro-forma balance sheet will be modestly de-levered vis-a-vis the Q3/09 D/GBV ratio of 62% and RBC CM’ LTV estimate of ~70%. RBC CM’ 2009-2011 FFO/unit and AFFO/unit estimates have been trimmed slightly. RBC CM has increased its target price to $7.50 From $6.25; RBC CM reiterates its Sector Perform, Above Average Risk Rating.
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