Borrower Perspectives Revisited: Jonathan Wen, Chartwell Retirement Residences
Jonathan Wen is the VP Real Estate Finance and Investments at Chartwell Retirement Residences, the largest owner/operator of seniors housing in Canada. Chartwell has 190 properties across Ontario, Quebec, Alberta and British Columbia, and offers a full continuum of care from independent living and independent supported living to assisted living and long-term care.
We first spoke with Jonathan in 2017 about the seniors housing industry, Chartwell’s opportunities and vision for growth and the experience of working with First National. Two years later, Jonathan shares what has evolved in his industry, business and relationship with First National.
What has changed most in your industry and business since we last spoke in 2017?
JW: There has been significant change in the industry during the past few years. Attention on seniors housing seems to be greater than ever. We are seeing new entrants, new developers and private equity funds all trying to stake a claim in the space. Everyone knows that a spike in demand has been on the horizon for a while, but I think the momentum has accelerated more quickly than expected. Previously, seniors housing was a niche product. Many people didn’t understand it or care to as a result of the complexity and operational intensity. But we are seeing more foreign interests coming here to learn about Canadian seniors housing operating and funding models. Canada is definitely seen as a natural expansion opportunity.
The developments in our business have been equally as interesting. In 2017, we received a credit rating from DBRS, creating a new source of financing that we didn’t have before. With these new financing options, we need to maintain an unencumbered asset pool, which certainly affects how we manage the debt on the overall portfolio. The diversification of our financing opportunities in the past two years is testament to the lending and broader investment industries’ positive view on seniors housing. While we have more robust financing options now, I still see CMHC as the most cost-effective source of capital and ideal source of financing.
What are your business goals and what types of opportunities are you pursuing?
JW: Our growth strategy has remained consistent. We are always looking to grow in our current markets of Ontario, Quebec, Alberta and British Columbia. Our growth comes from acquisition of existing homes, ground up developments or partnerships with developers or land owners that want to add seniors housing. The increase in our Alberta exposure has certainly been noteworthy and in line with our strategic push to grow out West. We purchased a group of four homes, which increased our exposure from three to six per cent.
When we spoke in 2017, we were in the process of developing The Sumach by Chartwell in Regent Park in Toronto. Patterned on the Quebec seniors housing model, residents join the community at a younger age, live in units with full kitchens, and services are fewer at first and are added as required. We think it is a very viable and valuable model and we wanted to bring that alternative to Ontario and Western Canada. The Sumach opened in April 2019, with exceptionally positive response and feedback. In fact, Brian Kimmel, one of our most trusted financing partners at First National and his family have chosen The Sumach for his mother-in-law. For us, there is no greater endorsement for the model and for the quality of our development. Brian knows the industry inside and out and has seen everything. We feel honoured and privileged to be the company and community that Brian trusts for such an important milestone for his mother-in-law.
How is First National supporting you in your goals beyond financing?
JW: First National, and Brian in particular, are experts in seniors housing. We discuss industry developments all of the time, and Brian shares his market knowledge openly. We are equally as passionate about the long-term health, vitality and evolution of the industry, so we often advocate collaboratively for issues that we care about. CMHC’s moratorium on providing insurance on the financing of long-term care homes in Ontario is a hot topic for both companies. We’ve talked to CMHC, along with Brian and Moray, to highlight the importance of insuring long-term care homes. Reciprocal networking is also a vital part of our relationship. In a small industry, connecting with buyers, sellers or new market entrants is vital to helping the industry grow within itself.
What do you value most about your relationship with Brian?
JW: Definitely consistency. Whether we’ve just completed a deal or it’s been a while since we’ve done a deal, Brian is there. We chat and share ideas – financing and otherwise. When I need to get in touch with Brian, it’s easy, and he’s always available. I never feel pressured in our relationship. Brian makes sure that we know he’s around, that we are aware of what he can offer and that we can rely on him no matter what. In this business, anyone can do good deals. But a true partner like Brian is always there for you and shows up consistently.
I also really like the way that we explore financing options collaboratively. When we’re investigating what’s possible for a deal, especially in unique situations, there is a lot of back and forth. We share our ideas, and Brian either validates our thinking or provides potential alternatives. From that process, we usually discover other potential solutions that fit the unique parameters of most of our deals.
What do you believe motivates First National within your relationship?
JW: Brian takes a long-term perspective. His consistency ties back to that. He’s never out to win every single deal at all costs. He focuses more on being there for us consistently. My confidence in how Brian shows up for us has contributed to an extremely positive and successful relationship, both personally and professionally.