Mr. Vlad Volodarski reports

CHARTWELL ANNOUNCES FIRST QUARTER 2023 RESULTS

Chartwell Retirement Residences Real Estate Investment Trust has released its results for the first quarter ended March 31, 2023.

Highlights

• Net loss was $9.2-million compared with $3.3-million in Q1 2022.
• Same property adjusted net operating income (NOI) up 7.7 per cent in Q1 2023 from Q1 2022, or 11.7 per cent excluding $1.6-million of prior-period expense recoveries in Q1 2022.
• Funds from operations (FFO) for continuing operations up 3.3 per cent in Q1 2023 from Q1 2022, or 14.1 per cent excluding $2.2-million of prior-period expense recoveries in Q1 2022.
• Weighted average same property occupancy increased 1.4 percentage points compared with Q1 2022, with all platforms achieving growth.

"I am encouraged by the progress our teams are making driving occupancy recovery and reducing reliance on agency staffing -- our key priorities for 2023. Our focus on growing resident, family, and business referrals, property-specific marketing and sales strategies, now supported by new technology solutions, are generating positive results in increasing initial contacts, personalized tours and new leases. We have also begun to see a meaningful reduction in utilization of staffing agencies resulting from our recruitment and retention efforts. With the upcoming rollout of our new website and marketing automation system, the continuing implementation of electronic health records system and completion of our staffing optimization project across our portfolio, our teams will have even better tools to accelerate occupancy recovery and cash flow growth for the remainder of this year," commented Vlad Volodarski, chief executive officer. "There is significant embedded potential value in our portfolio. We are committed to realizing it through our operating initiatives and numerous portfolio optimization strategies under way."

Operating performance trends

• In Q1 2023 compared with Q1 2022, same property adjusted NOI increased $3.6-million or 7.7 per cent on higher revenue from both rental and service rate increases and increased occupancy. Q1 2022 included recoveries of pandemic expenses for preceding years of $1.6-million for which there was not a comparable amount in Q1 2023.
• In Q1 2023, weighted average occupancy in the trust's same property portfolio was 78.5 per cent compared with 77.1 per cent in Q1 2022, an increase of 1.4 percentage points. All platforms achieved occupancy gains in Q1 2023 compared with Q1 2022.

Financial results

The attached table summarizes select financial and operating performance measures.

For Q1 2023 net loss was $9.2-million compared with $3.3-million in Q1 2022 primarily due to:

• Negative changes in fair values of financial instruments;
• Lower net income from LTC discontinued operations (as defined herein);
• Higher direct operating expenses;
• Higher finance costs;
• Higher depreciation of property, plant and equipment (PP&E);
• Higher net loss from joint ventures;
• Higher G&A (general and administrative) expenses.

Partially offset by:

• Higher resident revenue;
• Deferred tax benefit in Q1 2023 as compared with a deferred tax expense in Q1 2022;
• Higher gain on disposal of assets.

For Q1 2023, resident revenue increased $8.2-million or 5.2 per cent primarily due to revenue growth in the trust's same property portfolio and contributions from the trust's acquisitions and development portfolio partially offset by its dispositions and repositioning portfolio.

For Q1 2023, direct property operating expense increased $4.1-million or 3.6 per cent primarily due to higher expenses in the trust's same property portfolio and its acquisitions and development portfolio partially offset by lower expenses in its dispositions and repositioning portfolio.

For Q1 2023, FFO (funds from operations) from continuing operations was $20.9-million or nine cents per unit compared with $20.3-million or nine cents per unit for Q1 2022. Q1 2022 included recoveries of pandemic expenses for preceding years of $2.2-million for which there was not a comparable amount in Q1 2023. Excluding these recoveries, FFO from continuing operations increased 14.1 per cent. The change in FFO from continuing operations was primarily due to:

• Higher adjusted NOI from continuing operations of $5.4-million which comprises changes as follows:
• Higher adjusted NOI of $3.9-million from the trust's acquisitions and development portfolio.
• Higher same property adjusted NOI of $3.6-million or 7.7 per cent. Q1 2022 included recoveries of pandemic expenses for preceding years of $1.6-million as described herein. The increase in same property adjusted NOI is due to higher revenue from rental and service rate increases and increased occupancy and lower pandemic expenses partially offset by higher overall staffing net of declining agency staffing, repairs and maintenance, supplies, food, and utilities expenses.
• Lower NOI of $2.0-million from the trust's dispositions and repositioning portfolio.
• Partially offset by:
• Higher finance costs of $3.5-million.
• Higher G&A expenses of $1.6-million, primarily timing related.

FFO from continuing operations for Q1 2023 includes $800,000 of lease-up-losses and imputed cost of debt related to Chartwell's development projects (Q1 2022 -- $1.0-million).

Total FFO for Q1 2023 was $24.3-million or 10 cents per unit, compared with $31.3-million or 13 cents per unit in Q1 2022. Total FFO per unit for Q1 2023 includes one cent per unit compared with four cents per unit in Q1 2022, from the 16 long-term care homes in Ontario, one of which has an adjacent retirement residence, which have been reclassified as discontinued operations (LTC discontinued operations) as the trust has entered into definitive agreements to substantially exit its long-term care operations in Ontario. Q1 2022 LTC discontinued operations included recoveries of pandemic and other expenses for preceding years of $7.2-million or three cents per unit for which there was not a comparable amount in Q1 2023.

Financial position

As at March 31, 2023, liquidity amounted to $155.6-million, which included $13.8-million of cash and cash equivalents, and $141.8-million of available borrowing capacity on the trust's credit facilities.

The interest coverage ratio on a rolling-12-month basis was 2.3 at March 31, 2023, compared with 2.6 at March 31, 2022. The net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) ratio at March 31, 2023, was 11.5 compared with 10.4 at March 31, 2022.

2023 outlook

An updated discussion of our business outlook can be found in the 2023 outlook section of the trust's management's discussion and analysis for the three months ended March 31, 2023 (the Q1 2023 MD&A). The following provides an update on the trust's near-term outlook for its same property occupancy and staffing costs.

Same property occupancy update

The chart in the original news release provides an update in respect of the trust's same property retirement occupancy.

Due to seasonally lower move-in activity, the trust normally experiences declines in occupancy from December to April. The three-year average for 2017, 2018 and 2019 (prepandemic average) decline in Chartwell's same property portfolio occupancy from December to April was 180 basis points (bps). For the same four months in 2023, the decline in occupancy was 40 basis points, significantly lower than the prepandemic average. Occupancy and leasing trends are also outperforming the same months of 2022.

As at April 30, 2023, the trust's same property weighted average occupancy is expected to increase 30 basis points in May, 2023, and a further 50 basis points in June, 2023.

The trust's marketing and sales initiatives produced improvements in personalized tours, sales closing ratios, leasing and permanent move-ins. Chartwell expects to see continued occupancy growth in 2023 and beyond, supported by accelerating demographic growth, shortages of long-term care beds and fewer senior housing construction starts.

Staffing costs increased in Q1 2023 due to higher compensation offset by a decrease in agency staffing costs. The trust expects agency staffing costs to continue to decline gradually through 2023.

Taxation

Chartwell estimates the taxable capital gain resulting from the LTC transactions will attract SIFT taxes of approximately $34.0-million in 2023. In addition, the majority of the trust's 2023 distributions are expected to be classified as eligible dividends as a result of the taxable capital gain. The trust expects to have sufficient deductions and losses carried forward to offset any other SIFT taxes in 2023 and 2024.

Liquidity and financing update

As at May 4, 2023, liquidity amounted to $184.7-million, which included $27.9-million of cash and cash equivalents, and $156.8-million of available borrowing capacity on the trust's credit facilities.

As of the date of this MD&A, for the remainder of 2023 the trust has $121.5-million of mortgage debt maturing at the weighted average interest rate of 3.68 per cent, of which $39.6-million is CMHC insured and bears a weighted average interest rate of 3.92 per cent. At the date of this MD&A, 10-year CMHC insured mortgage rates are estimated at approximately 3.8 per cent and five-year conventional mortgage financing is available at 5.0 per cent.

On April 19, 2023, the trust entered into amending agreements to extend the maturity date of its credit facilities with a combined maximum potential capacity of $400.0-million from May 29, 2024, to May 29, 2025, with substantially the same terms.

The LTC transactions are expected to generate net proceeds of approximately $269.2-million, which are expected to be used, subject to market conditions, to pay down the trust's credit facilities. On closing of the LTC transactions, the trust's unencumbered asset pool and available capacity on its secured credit facilities are expected to decline by approximately $49.9-million and $27.1-million, respectively.

In December, 2023, Chartwell's senior unsecured debentures with a face value of $200.0-million will mature. The trust expects to refinance these debentures with new senior unsecured debentures, other unsecured or secured debt instruments or equity financing, subject to market conditions.

Quarterly investor materials and conference call

Chartwell invites you to review its Q1 2023 investor materials on its website.

A conference call hosted by Chartwell's senior management team will be held Friday, May 5, 2023, at 10 a.m. ET. The telephone numbers for the conference call are: local: 416-340-2217 or toll-free: 1-800-806-5484. The pass code for the conference call is: 7852181 followed by the pound key. The conference call can also be heard over the Internet by accessing the Chartwell website, clicking on investor relations and following the link at the top of the page. A slide presentation to accompany management's comments during the conference call will be available on the website. Please log on at least 15 minutes before the call commences.

The telephone numbers to listen to the call after it is completed (instant replay) are: local 905-694-9451 or toll-free: 1-800-408-3053. The pass code for the instant replay is 6077836 followed by the pound key. These numbers will be available for 30 days following the call. An audio file recording of the call, along with the accompanying slides, will also be archived on the Chartwell website.

About Chartwell Retirement Residences Real Estate Investment Trust

Chartwell is an unincorporated, open-ended real estate trust that indirectly owns and operates a complete range of senior housing residences, from independent supportive living through assisted living to long-term care. It is the largest operator in the Canadian senior living sector with nearly 200 properties in four provinces, including properties under development. Chartwell is committed to its vision of making people's lives better and to providing a happier, healthier and more fulfilling life experience for its residents.

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