Investor Presentation - Q1 2017 - Chartwell Retirement Residences
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Investor Presentation
Q1 2017
Cautionary Statements This presentation contains forward-looking information that reflects the current expectations, estimates and projections of management about the future performance and opportunities for Chartwell and the seniors housing industry. The words “plans,” “expects,” “scheduled,” “estimates,” “intends,” “anticipates,” “projects,” “believes” or variations of such words and phrases or statements to the effect that certain actions, events or results “may,” “will,” “could,” “might” occur and other similar expressions identify forward-looking statements. Forward-looking statements are based upon a number of assumptions and are subject to a number of known and unknown risks and uncertainties, many of which are beyond our control, and that could cause actual results to differ materially from those that are disclosed in or implied by such forward- looking statements. While we anticipate that subsequent events and developments may cause our views to change, we do not intend to update this forward-looking information, except as required by applicable securities laws. This forward-looking information represents our views as of the date of this presentation and such information should not be relied upon as representing our views as of any date subsequent to the date of this document. We have attempted to identify important factors that could cause actual results, performance or achievements to vary from those current expectations or estimates expressed or implied by the forward-looking information. However, there may be other factors that cause results, performance or achievements not to be as expected or estimated and that could cause actual results, performance or achievements to differ materially from current expectations. There can be no assurance that forward-looking information will prove to be accurate. Accordingly, readers should not place undue reliance on forward- looking information. See the "Risks and Uncertainties" section in our 2016 MD&A and risk factors highlighted in materials filed with the securities regulatory authorities in Canada from time to time, including but not limited to our most recent Annual Information Form. Non-GAAP Measures In this document we use a number of performance measures that are not defined in generally accepted accounting principles (“GAAP”) such as Funds from Operations (“FFO”), Adjusted Funds from Operations (“AFFO”), Net Operating Income (“NOI”), “Same Property NOI,” “Same Property Revenue,” “Same Property Direct Operating Expenses,” “G&A Expenses as a percentage of Revenue,” “Interest Coverage Ratio,” “Indebtedness Ratio,” “Net Debt to Adjusted EBITDA Ratio,” “Chartwell’s Interest”, “Adjusted EBITDA” and any related per unit amounts to measure, compare and explain the operating results and financial performance of the Trust (collectively, the “Non-GAAP Measures”). These Non-GAAP Measures do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and, therefore, may not be comparable to similar measures presented by other publicly-traded entities. All financial information in this presentation is presented at Chartwell’s Interest. Please refer to the “Non-GAAP Measures” section of our Q1 2017 MD&A for details. making people’s lives BETTER® 2
Why Chartwell? Guided by our Vision, Mission and Values of Respect we focus on providing quality care and services to our residents which we believe will translate in sustainable earnings growth and long term value creation for our unitholders. making people’s lives BETTER® 3
Why Chartwell?
1. Unmatched national operating platform
2. Well-located and well-maintained real estate portfolio
3. Significant long-term growth potential
Demographic trends = more demand
Government fiscal constraints = more private pay demand
Fragmented industry = consolidation opportunities
4. Strong earnings growth potential
1% growth in occupancy or rate = 2 cents growth in FFO
Third consecutive annual increase in distributions effective
March 31, 2017
5. Improving financial position and lower interest
costs on refinancing = reduced portfolio risk
making people’s lives BETTER® 4
Profile - Corporate
Member of S&P/TSX Largest Canadian Significant Employer
Composite Index Retirement Community
since 2005 Owner/ Operator
$3.0 Billion (1) 190 / 26,607 13,500
Market Capitalization Communities / Suites & Beds
Employees
Revenue Adjusted EBITDA High Occupancy Rates
$852.4 Million (2) $250.4 Million (2) 93.0%
Average Occupancy
Interest Coverage Net Debt/ Debt to
Ratio Adjusted EBITDA Capitalization
(Market)
3.5x 7.5 39.8% (1)
Strong Investment Grade Conservative Leverage Conservative Leverage
Coverage
As at March 31, 2017
(1) Trust Unit price $15.63 at March 31, 2017
(2) 12 months ended March 31, 2017
making people’s lives BETTER® 5
Profile – Property Portfolio
• Majority owned, well-maintained, well-located properties
• Diversified geographically and by service offering
By Ownership (1)
Managed
5%
Joint
Venture (2) 100% Owned
24% 71%
By Geographic Location (3) By Level of Care (3)
British
Columbia Independent
Living 5% Long Term
10%
Alberta 3% Care
17%
Independent Memory
Supportive Living
Living 1%
Ontario
Quebec 72% Assisted
53%
34% Living
5%
Leader in each of its markets:
Province Share of Market (4)
Ontario 16%
Quebec 9%
British Columbia 7%
Alberta 6%
1) Based on number of properties.
2) Minimum ownership of JV properties is 50%.
3) Based on number of suites as of March 31, 2017.
4) Ratio of Chartwell operated suites to total retirement suites inventory as reported by CMHC in their Seniors’ Housing Report –
Canada Highlights (2016).
making people’s lives BETTER® 6
Profile - Industry
Independent Assisted Living (AL) Long Term Care (LTC)
Supportive Living & Memory Living
(ISL) & Independent (ML)
Living (IL)
Level of Care: Low to medium Medium to high Very high
Target More active, healthy seniors Seniors with some Seniors with acute cognitive
Resident: cognitive and/or physical and/or physical impairments
impairments requiring higher levels of daily
personal care
Service Activities, transportation, IS/IL services + Care 24-hour registered nursing
Offering: security services and specific ML care or supervision
Availability of meals, programming included
housekeeping, basic
assistance with daily living
Funding: Predominantly private pay Mostly private pay Predominantly government
funded
Regulations: Mostly consumer protection Mostly consumer Heavily regulated
protection
17%
Chartwell’s Portfolio LTC
by Level of Care
83%
ISL/IL/AL/ML
83%
ISL/IL/AL/ML
making people’s lives BETTER® 7
Profile - Industry
Significant Future Demand in Canada
Projected Aged 75 and over Population, 2015-2036, Canada
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-
2015 2016 2021 2026 2031 2036
2015 2016 2021 2026 2031 2036
Projected 75+ Population 2,495,700 2,563,400 3,024,000 3,766,200 4,614,900 5,457,400
Cumulative 75+ Growth from 2014 56,000 123,700 584,300 1,326,500 2,175,200 3,017,700
Average Annual Increase 56,000 67,700 92,120 148,440 169,740 168,500
Source: Statistics Canada, Population Projections for Canada, Provinces, and Territories, 2009 to 2036, Catalogue no. 91-520-X, 2010
• The size of our market more than doubles in the next 20 years
• Current supply is ~ 425,000 suites
• ~ 600,000 new suites are required by 2036
Total Supply Required Annual Supply
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
2015 2016 2021 2026 2031 2036
Long Term Care Retirement
Retirement demand is estimated by applying the current national capture rate of 8.0% (CMHC Seniors Housing Report Canada Highlights, 2014) to 75+ population as reported by Statistics Canada.
LTC demand is estimated based on 97.8 beds per 1,000 people aged 75 and over. This estimate represents the 2005-2010 average LTC Beds/Population ratios reported by Statistics Canada in their
Residential Care Facilities reports.
making people’s lives BETTER® 8
Profile - Industry
Canadian Supply Concentration
Largest Retirement Operators No. of Properties No. of Suites Largest Long Term Care Operators No. of Properties No. of Suites
Operated (1) Operated (2) Operated (1) Operated (2)
1 Chartwell Retirement Residences 176 25,791 1 Extendicare Inc. 101 13,562
2 Revera Inc. 100 12,175 2 Revera Inc. 75 10,099
3 BayBridge Senior Living 69 8,694 3 Sienna Senior Living 42 6,738
4 Réseau Sélection 33 8,550 4 Chartwell Retirement Residences 28 3,741
5 Cogir 34 7,603 5 Schlegel Villages 15 2,301
6 Le Groupe Maurice 27 7,579 6 Retirement Concepts 17 1,918
7 Groupe Savoie 14 5,331 7 Group Champlain 14 1,746
8 Verve Senior Living 36 4,475 8 Park Place Seniors Living 15 1,692
9 All Seniors Care 29 4,383 9 Shannex Inc. 14 1,648
10 Atria Senior Living 29 3,354 10 Rykka Care Centres 9 1,520
11 Shannex Inc. 12 2,142 11 Jarlette Health Care 14 1,486
12 Retirement Concepts 19 2,031 12 Omni Health Care 18 1,475
13 Schlegel Villages 8 1,820 13 Caressant Care 15 1,247
14 Good Samaritan Society 25 1,713 14 Good Samaritan Society 13 1,228
15 Sienna Senior Living 15 1,502 15 Steeves & Rozema 7 928
Total 626 97,143 Total 397 51,329
15 Largest Operators’ Share of Total Suites 43% 15 Largest Operators’ Share of Total Suites 26%
(1) Includes properties under development; Includes managed properties for third parties (1) Includes properties under development; Includes managed properties for third parties
(2) Includes only IL, AL and MC suites within the above-noted properties (2) Includes only LTC units within the above-noted properties
Source: CBRE Limited and Chartwell Source: CBRE Limited and Chartwell
making people’s lives BETTER® 9
Profile – Historical Performance
Resident Revenue ($ millions) EBITDA ($ millions)
$927.8
$922.7
$256.9 $260.1
$250.7
$874.5 $246.4
$834.7
$202.3 $206.51
$750.6 $750.11
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
EBITDA 27% 28% 28% 28% 28% 30%
Margin:
Proven track record of profitable growth
Source: Company disclosure based at Chartwell’s interest.
1 Note: In 2015 Chartwell sold its U.S portfolio of 35 properties.
3
9
making people’s lives BETTER® 10Profile – Historical Performance
FFO ($ millions)
Same property portfolio performance
94.0% 7.0%
92.0% 6.0% NOI (YOY % Growth)
90.0% 5.0%
Occupancy %
88.0% 4.0%
86.0% 3.0%
84.0% 2.0%
82.0% 1.0%
80.0% 0.0%
2017
2011 2012 2013 2014 2015 2016
YTD
Occupancy % 90.3% 90.3% 89.8% 90.3% 91.9% 93.6% 93.0%
NOI (YOY % growth) 1.8% 3.7% 1.2% 1.8% 1.9% 6.6% 3.5%
• Same property portfolio as defined in each year
making people’s lives BETTER® 11Profile – Credit Metrics
EBITDA / Interest Debt / EBITDA
9.3x
3.5x 3.5x 8.6x
8.7x
8.4x
2.8x
2.5x
2.2x 7.6x 7.5x
2.0x 7.2x
1.9x
2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017
YTD YTD
Total Debt /GBV Total Debt / Capitalization (1)
59.3%
57.9% 56.6% 55.0% 62.1%
49.7% 48.9% 50.1% 55.9%
54.0% 50.4%
43.1%
40.3% 39.3%
2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017
YTD YTD
(1) At market value of Trust Units
Demonstrated ability to rationalize capital structure
making people’s lives BETTER® 12Building Sustainable Value
Strategic Priorities
Grow core Maintain
property a strong
portfolio financial
contribution position
Exceptional
services and
quality care
Improve
quality and Build value
efficiency of of our
our corporate real estate
support portfolio
services
making people’s lives BETTER® 13Building Sustainable Value
Grow Core Property
Portfolio Contribution
Maintain and
Grow revenue Control costs
grow occupancy
Quality resident care Occupancy Labour relations
and services
Rate management Centralized
Branding and suite turnover purchasing
making people’s lives BETTER®
Ancillary services Energy management
Sales program
Improved training programs
Performance-based
compensation
0.5pp 2.0% 1.2%
in Q1 2017* in Q1 2017* in Q1 2017*
NOI 3.5% in Q1 2017*
* Same property for three months ended March 31, 2017 compared to the same period of 2016
making people’s lives BETTER® 14Building Sustainable Value
Improve Quality and Efficiency of
our Corporate Support Services
2011 - Budgeting and forecasting system
2012 - Consolidation and reporting system
Continuing 2013 - Core financial system
- Prospect management system
investments - Standardized IT infrastructure rollout
in IT - Capital budget system
initiatives 2014 - Procurement and payment system
- Capital asset management and reporting system
2015 - Internalized business support centre “At your
Service”
2016/2017 - Implementation of Human Capital Management
system
Blog
Website
Online
presence Social Media
strategy
Search Engine Optimization and Marketing
Chartwell Contact Centre
making people’s lives BETTER® 15Building Sustainable Value
Mortgage Maturities
* 10% of total mortgage debt = $175.1 million
At March 31, 2017 At December 31, 2016
Fixed Rate Variable Rate Total Total
Amount ($millions)
1,707.8 42.8 1,750.6 1,722.7
Weighted average rate
3.83% 2.87% 3.81% 3.84%
Average term to maturity (years) 6.9 3.4 6.8 6.9
• Well-staggered mortgage maturities reduce refinancing and
interest rate risks
making people’s lives BETTER® 16Building Sustainable Value
Build Value of our Real Estate Portfolio
Portfolio and Development Acquisitions
Asset Management
Market and Risk
Industry Research Management
2
Q1 2017
Completed two acquisitions for a total of $28.9 million.
Work continues on our development pipeline of 2,925 suites with nine
projects in construction and five projects in pre-development.
making people’s lives BETTER® 17Building Sustainable Value
• Chartwell has continuously improved its portfolio by selling older
assets and buying/building newer, high-quality assets.
• Since 2013, the average age of suites acquired/developed is 7.8 years.
• Since 2013, the average age of suites sold is 22.6 years.
Average Age of Assets Acquired/Developed vs. Sold
Acquisitions/Developments
Dispositions
50
45
Average Age (years)
40
35
30
25
20
15
10
5
0
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
Suites 718 539 1,637 461 173
Acquired/Developed
Suites Sold 1,381 1,957 5,537 400 250
1
8
making people’s lives BETTER® 18Building Sustainable Value
Highlights of Development Pipeline
Costs
incurred
Estimated as at Actual/
Development Mar. 31, Expected Expected Expected
Suites Suite Current Project Costs (1) 2017 (2) Completion Stabilization Unlevered
Project Location / Beds Type Status ($ millions) ($millions) Date Date Yield (3) )
Chartwell Waterford
Retirement Residence Oakville, ON 128 ISL / MC Construction 40.3 14.9 Q3 2017 Q3 2019 8.3%
Chartwell Carlton Gardens
Retirement Residence Burnaby, BC 105 IL Construction 38.4 9.9 Q4 2017 Q4 2019 7.7%
Chartwell Malaspina
Gardens Care Residence Nanaimo, BC 136 LTC Construction 27.5 20.6 Q2 2017 Q2 2017 8.8%
Chartwell Bankside
Retirement Apartments Kitchener, ON 58 IL Construction 18.6 2.5 Q2 2018 Q3 2019 7.3%
The Sumach by
Chartwell (4) Toronto, ON 332 IL Construction 45.4 10.6 Q2 2018 Q2 2020 6.9%
Chartwell Meadowbrook Pre-
Village Lively, ON 55 IL / ISL development 17.4 0.2 Q2 2018 Q2 2019 8.9%
Chartwell Wescott Pre-
Retirement Residence Edmonton, AB 137 ISL / MC development 45.4 5.2 Q3 2018 Q4 2020 7.2%
Chartwell Guildwood Scarborough, Pre-
Retirement Residence (5) ON 170 ISL / MC development 56.0 0.3 Q2 2019 Q4 2020 8.4%
1,121 289.0 64.2
Projects by Batimo (6)
Chartwell Le Prescott Vaudreuil, QC 290 ISL Construction N/A N/A Q2 2017 Q4 2018 N/A
Chartwell Le Montcalm Candiac, QC 283 ISL Construction N/A N/A Q4 2017 Q2 2019 N/A
Chartwell St. Gabriel St. Hubert, QC 310 ISL / AL Construction N/A N/A Q2 2018 Q3 2019 N/A
Pre-
Chartwell Greenfield Park Longueuil, QC 346 ISL / AL development N/A N/A Q4 2018 Q2 2020 N/A
Quebec City, Pre-
Chartwell Charlesbourg QC 410 ISL / AL development N/A N/A Q1 2019 Q1 2021 N/A
1,639
Project by Signature Living
Kingston Project (7) Kingston, ON 165 ISL / AL Construction 33.0 6.8 Q2 2018 Q3 2021 7.0%
2,925 322.0 71.0
(1) Non-GAAP; refer to the “Non-GAAP Measures – Estimated Development Costs” section of this MD&A.
(2) Non-GAAP; reported at Chartwell’s Interest.
(3) Non-GAAP; refer to the “Non-GAAP Measures – Expected Unlevered Yield” section of this MD&A.
(4) Chartwell owns a 45% interest in this project and manages pre-opening and lease-up.
(5) Redevelopment of the existing 83-suite residence to a 170-suite residence. Chartwell owns a 50% interest in this project.
(6) Chartwell manages pre-opening and lease-up of these Batimo projects and has rights and obligations to acquire an 85%
interest in these projects upon stabilization. N/A = not applicable to Chartwell as these projects are being developed by Batimo.
(7) The site includes excess land for potential development of 84 additional suites. Chartwell owns a 60% interest in this project
and Signature Living and its affiliates own the remaining 40% interest and provide development and operations management
services. Chartwell expects to acquire the remaining 40% interest upon stabilization.
making people’s lives BETTER® 19Building Sustainable Value
Development Case Studies
Chartwell Deerview Retirement Residence – ISL/ML
• 119 suites
• Opened February 2014
• Unlevered cash yield 10.5%
• $27.2 million development cost
Chartwell Georgian Traditions – Memory Living
• 30 beds
• Opened March 2015
• Unlevered cash yield 10.8%
• $7.7 million development cost
Chartwell Tranquility Place - Apartments
• 30 suites
• Opened November 2015
• Unlevered cash yield 8.3%
• $7.7 million development cost
Chartwell Le Teasdale Retirement Residence
• 343 suites
• Opened May 1, 2016
• Mezzanine loan $5.9 million
• Development by Batimo Inc.
• 78% leased
making people’s lives BETTER® 20Building Sustainable Value
2017 Acquisitions
The Orchards Retirement Residence, Vineland, ON
107 suites
$22.0 million purchase price
Hilldale Retirement Residence, Thunder Bay, ON
66 suites
$6.95 million purchase price
2016 Acquisitions
Tiffin House, Lord Lansdowne, Ottawa, ON
Midland, ON • 127 suites
• $68.4 million
• 121 suites
• $31.5 million
Wedgewood,
Brockville, ON
• 109 suites Duke of Devonshire, Ottawa, ON
• $37.1 million • 105 suites
• $63.6 million
Kamloops,
Kamloops, B.C. (1)
• 97 suites
• $11.1 million
(1) Acquired the remaining 50% interest from JV partner
making people’s lives BETTER® 21Financial Performance
Q1 2017 Highlights
• Same property NOI up $2.2M or 3.5%
• Same property occupancy remained strong at 93.0%
• FFO up 4.4% and AFFO up 0.9%
Increase/
Q1 2017 Q1 2016
(Decrease)
Average occupancy – same
93.0% 93.5% (0.5pp)
property
NOI – same property ($ millions) $63.2 $61.0 $2.2
FFO ($ millions) 42.1 40.3 $1.8
FFO per unit diluted 0.22 0.22 -
AFFO ($ millions) $38.8 $38.5 $0.3
AFFO per unit diluted $0.20 $0.21 ($0.01)
Distributions declared $27.5 $24.9 $2.6
Distributions declared per unit 0.14 0.14 -
making people’s lives BETTER® 22Financial Performance
Ontario Retirement Platform
Q1 2017 Q1 2016 Increase/(Decrease)
$ %
Same property statistics:
NOI ($ millions) $29.9 $28.7 $1.2 4.1%
Occupancy 89.6% 89.8% N/A (0.2pp)
• Strong NOI growth driven by rate growth in line with competitive
market conditions.
• Growing demand drives new construction activity in select markets.
100% Occupancy
95%
89.8% 89.6% 90.0% 89.6%
90% 89.2% 89.2%
86.9% 87.4%
86.3%
85%
80%
75%
70%
Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
making people’s lives BETTER® 23Financial Performance
Western Canada Platform
Q1 2017 Q1 2016 Increase/(Decrease)
$ %
Same property statistics:
NOI ($ millions) $11.9 $11.3 $0.6 5.5%
Occupancy 96.2% 94.8% N/A 1.4pp
• Favourable conditions in most of our markets and strong leasing
activity.
• Expect to maintain high occupancy and rental rate growth in line with
competitive market conditions.
Occupancy
100%
96.9% 96.2%
95.0% 95.8%
94.7% 94.8%
95% 93.4%
92.1% 92.4%
90%
85%
80%
75%
70%
Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
making people’s lives BETTER® 24Financial Performance
Quebec Platform
Q1 2017 Q1 2016 Increase/(Decrease)
$ %
Same property statistics:
NOI ($ millions) $15.1 $14.6 $0.5 3.1%
Occupancy 93.3% 94.5% N/A (1.2pp)
• Strong NOI growth driven primarily by rate growth in line with
competitive market conditions.
• New construction activity to meet accelerated demand growth.
Occupancy
100%
94.7% 94.5% 94.4% 94.6% 94.5%
95% 92.9% 93.7% 93.3%
92.6%
90%
85%
80%
75%
70%
Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
making people’s lives BETTER® 25Financial Performance
Ontario LTC Platform
Q1 2017 Q1 2016 Increase/(Decrease)
$ %
Same property statistics:
NOI ($ millions) $6.3 $6.4 ($0.1) (1.3%)
Occupancy 98.0% 98.7% N/A (0.7pp)
• NOI lower on lower ancillary revenues, operating performance
continues to be strong.
• Experienced and dedicated team delivers consistent results.
Occupancy
100% 98.9% 99.1% 98.9% 98.7% 98.9% 99.0% 98.6%
98.0% 98.0%
95%
90%
85%
80%
75%
70%
Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
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