Brent Binions - President and Chief Executive Officer Vlad Volodarski - Chief Financial Officer Karen Sullivan - Chief Operating Officer

Jonathan Kelcher - TD Securities Yash Sankpal - Dundee Capital Markets Jimmy Shan - GMP Securities

Good morning, ladies and gentlemen. Welcome to the Chartwell Retirement Residences' second quarter 2014 call. Following the formal comments, we will hold a question-and-answer session. Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Brent Binions, President and Chief Executive Officer of Chartwell Retirement Residences. Please go ahead, sir.

Thank you. Good morning. And thank you for joining us today. There is a slide presentation to accompany this conference call available on our website at chartwell.com, under the Investor Relations tab. Joining me, Vlad Volodarski, Chief Financial Officer; and Karen Sullivan, Chief Operating Officer. Let me remind everyone that during this call, we may make statements containing forward-looking information. I direct you to our MD&A and other Securities filings for information about the assumptions, risks and uncertainties inherent in such forward-looking information. These documents can be found on our website or at sedar.com. With our objective of building lasting value for our investors, I am pleased with the progress we are making in 2014 on our strategic priorities as shown on Slide 3. Despite significant competitive pressures in some of our markets and increases in utilities and real estate taxes, our same-property portfolio NOI in the first six months of 2014 was $0.6 million or 0.5% higher than in the same period of 2013. Our rebranding process for the Canadian communities is substantially complete and our investments and online presence, our Chartwell call center, and other innovative sales and marketing initiatives are generating increased levels of prospect enquiries, tours and move-ins. We believe the internal reorganization that we completed in early 2014 will continue to enhance the delivery of support services to our operating platforms and support improving operating results in the future. At June 30, 2014, we had cash on hand of $20.6 million and $39 million of available borrowing capacity under our credit facility. The interest coverage ratio was 2.21 in Q2 2014 compared to 2.26 in Q2 2013. However, excluding a number of one-time items that impacted our adjusted EBITDA and interest expense in Q2 2014, our interest coverage ratio would have been 2.27x, slightly better than the interest coverage ratio in Q2 2013. Our net debt to adjusted EBITDA ratio was 8.6 at June 30, 2014. And indebtedness ratio was 56.2% at June 30, 2014, compared to 56.6% at December 31, 2013. In Q2 '14, we completed the implementation of our procurement and payment system at a fixed asset management reporting system. The completion of our telephone systems to route off our calls, sales calls from the properties to Chartwell's call center has resulted in over 3,400 total new sales enquiries reported to sales consultant in its opening in August of '13. We also just launched our completely redesigned website, including a new layout, new sections and new interactive tools, such as budget assistance, readiness survey and supporting a loved one in moving to our retirement home white paper. So far in 2014, we completed acquisitions of interest in four retirement residence and a medical office building in Quebec, a total of $87.4 million. We also completed divestiture of 19 non-core properties in Ontario and the U.S. for $225 million, with funds being used to fund acquisitions and development activities and to reduce our debt levels. We also completed development of one retirement residence in Ontario with two other projects in progress for completion in 2014 and 2015. Now, I'd like to turn it over to Karen Sullivan, our Chief Operating Officer, to talk about some operational initiatives that she and her team are working on. Karen?

Thanks, Brent. Turning to Slide 4, Brent mentioned that many of our new marketing and sales initiatives, including our new website, call center and the new telephone system to reroute sales calls, the result has been a significant increase in the number of sales leads that our property consultants have to pursue. To augment this, we hosted sales training sessions across Canada, focused on never losing a lead, by ensuring purposeful follow-up with potential residents in orders to increase the number of leads, who become permanent residents. Our new phone system also allows our Directors of Regional Sales to listen to calls between our sales consultant and perspective residents in order to assist them and improving our sales goals. This along with a new approach to hiring in performance management for sales consultants is already resulting in increased move-ins. On the marketing side, we have entered into a number of affinity programs with organizations that have both age and income-qualified member, who maybe considering retirement home living. We hosted a Partners Day in July and invited members of these various organizations to visit their local Chartwell home. These events attracted at approximately 1,800 visitors. We've also launched a national resident referral program, knowing that our best pipeline for new residents are our current residents, who are very satisfied with the services they're receiving. Other marketing initiatives include enhancing our brand and social media presence. As shown on Slide 5, we continue our efforts to increase our care revenue by enhancing the assessment skills of our health and wellness manager, rebranding our care offerings and improving our marketing and communication strategies to both prospects as well as local community healthcare influencers. We are also finalizing arrangements with a national provider of physiotherapy and foot care services, and we'll continue to look into other arrangements to provide on-site services to our residents to meet their needs and keep them healthy. In addition, we are in varying stages of negotiations with suppliers on national contracts, and expect to see savings based on these arrangements beginning in Q3. As I have denoted before, resident satisfaction is a vital component of ensuring high occupancy, and we are working with a well-known researcher from the U.S., who has developed a new resident and family satisfaction survey for Chartwell. ProMatura, the group that collects and analyzes the NIC data in the U.S. will be providing us with an analysis of our results as well as benchmarks using their U.S. data, which will be extremely informative. In addition, the last pieces of the operational reorganization are now in place with the final new member of the Ontario senior operations team joining Chartwell later this month. We believe that with these key positions in place, we will see improvements in our results in the coming months. Finally, on the long-term care side of the business, the Ontario Ministry of Health announced increases to preferred accommodation rates that will take effect on September 1. And our provincial association is continuing to work with the new majority of liberal government to address the need for an improved capital renewal program. I'll now turn it over to Vlad, to discuss our Q2 2014 financial performance.

Thanks, Karen. As shown on Slide 7, in the second quarter of 2014, AFFO was $31.9 million or $0.18 per unit diluted compared to AFFO of $32.3 million or $0.18 per unit in Q2 2013. AFFO in Q2 2014 included a number of non-recurring items, such as the proceeds from the settlement of litigation in the U.S. of $3.4 million and proceeds from the settlement of certain commodity tax issues of $0.8 million. Defeasance cost of $2.4 million incurred as a result of early debt repayments in Q2 2014 and legal cost related to settled litigation of $0.4 million in Q2 2014 and $0.8 million year-to-date. In addition our AFFO in the quarter reflected positive impact of foreign exchange rates on our U.S. source income and interest cost savings from mortgage refinancing program, offset by asset sales in 2013 and 2014, and lower same-property NOI in Q2 2014. As shown on Slide 8, our Ontario retirement same-property portfolio NOI decreased $1 million or 5.1%. We continue to experience competitive pressures in some of our Ontario markets largely as a result of increased government investments in homecare. We believe that these competitive pressures will subside in future due to slower pace of new supply growth, timing of government investments in homecare and growth in seniors' population. In addition, our Ontario results in Q2 2014 and year-to-date were impacted by significant increases in non-controllable costs such as utility and real estate taxes. We expect that our Ontario retirement platform will deliver improving operational results in the second half of 2014, driven by increasing occupancy and the benefits of new national supply contract. Our Western Canada platform delivered healthy same-property NIO growth of 4.3% as shown on Slide 9, driven by regular annual rent increases in line with competitive market conditions, higher ancillary revenue from enhanced services provided to our residents and higher occupancies. These were partially offset by higher staffing and food expenses. Conditions in most of our Western Canada markets remain positive and we expect continuing strong performance in the remainder of the year. On Slide 10, you'll see the results of our Quebec platform. Q2 2014 same-property NOI decreased $0.2 million or 1.4%, primarily due to higher utilities, property taxes and food expenses, partially offset by regular rental rate increases in line with competitive market conditions, higher ancillary revenues from enhanced services provided to our residents and lower short-term move-in incentives. With a significantly improved leasing activity in the summer, we expect our Quebec platform to deliver improving results in the remainder of the year. Our Ontario long-term care platform same-property NOI increased $0.1 million or 1.3% in Q2 2014, primarily due to higher government funding, higher preferred accommodation rates and strong expense controls, partially offset by higher utility expenses as shown on Slide 11. Our U.S. platform results are shown on Slide 12. Same-property NOI decreased $0.2 million or 1.2% as a result of lower occupancies and higher move-in incentives. While our Colorado portfolio continues to perform well, certain properties in the competitive markets in Florida and Texas have underperformed. In order to better compete in these markets, we completed or in some cases are in the process of completing a number of property improvements and repositioning projects. These properties are expected to deliver a growing contribution to our results in the remainder of 2014 and beyond. As outlined on Slide 13, our G&A expenses increased $0.5 million or 5.9% in Q2 2014 and $2.5 million or 16.1% in 2014 year-to-date. Included in our G&A cost in Q2 2014 and in 2014 year-to-date, our legal cost related to the settled litigation in the U.S. of $0.4 million in Q2 2014 and $0.8 million year-to-date, and severance cost related to corporate reorganization of $1.2 million. I will now turn the call back to Brent to wrap up.

Thanks, Vlad. As shown on Slide 15, our key priority remains growing the contribution to AFFO from our core property portfolio. We expect that our strong brand and new and innovative marketing and sales strategies will contribute to furthering occupancy growth in our portfolio. We continue to develop programs to provide new services to our residents at our properties, including assisted living options and generating additional revenue streams. A number of our properties are still in lease-up and we will see a growing contribution from these properties over the near term. Our focus on process improvements is resulting in better support for our operating teams and we expect measurable expense savings over time. We will continue to improve our information management systems to gain efficiencies and information processing and speed and decision making throughout the country and expect to begin the development of care assessment and billing and human resource management systems later this year. We expect to continue to invest in our development program, prioritizing projects on sites adjacent to our existing properties where we can drive operating synergies by adding new capacity. We are working on a number of interesting new development opportunities and expect to commence several new projects in 2014 and in 2015. We will continue to optimize our portfolio replacing over time older non-strategic assets with newer product. We will also continue to evaluate a number of acquisition opportunities to add to our portfolio pursuant to our growth strategies. Finally, our focus remains on maintaining a strong balance sheet and a flexible liquidity position. We continue to access low cost, longer-term fixed rate debt and short-term variable rate construction financing on flexible terms and manage our interest rate risk by spreading our debt maturities over time. We remain committed to our target of reducing our debt ratios over time. Thank you for your time and attention this morning and we would now be pleased to answer any questions you may have.

(Operator Instructions) Our first question is from Jonathan Kelcher from TD Securities. Jonathan Kelcher - TD Securities: First just on the Ontario results. I think, Vlad, you said that you're expecting improved result over the remainder of the year. Could you maybe quantify that for us a little bit? Is that something where you'd expect positive same-property NOI over the back half?

Yes. We do expect that for the full year, we will deliver a positive same-property NOI growth as we originally expected, probably be lower than originally expected, but its still be positive. Jonathan Kelcher - TD Securities: And that's Ontario specifically or overall?

Yes, Ontario specifically. Jonathan Kelcher - TD Securities: And I guess, overall then as well?

Yes. Jonathan Kelcher - TD Securities: And just on the occupancy front in Ontario. It has been drifting down. Is there a few properties or one or two regions that's really dragging that down? And secondly, if it is a few properties is that something where you may look at investing some capital or something along those lines to reposition the properties similar to what you're doing in Florida and Texas.

Sure. I mean on a kind of higher level basis, the more competitive markets remain to be Ottawa, GTA and Windsor markets. Within these markets, and in some others, we do have some properties that are underperforming. And as part of our ongoing asset management program, we always look at the opportunities for repositioning, reinvestments in the properties and we do this ongoingly. We are also looking at in some cases in terms of the repositioning, figuring out what kind of model we should be offering in individual homes and maybe moving for a more all-inclusive model to more a la carte in some cases, and in some cases the other way. So that is ongoing. Jonathan Kelcher - TD Securities: What would be a sort of a medium-term goal for occupancy for you guys, staying with the Ontario portfolio, would you hope to get it closer to 90 or over 90 over the next one or two years?

I think we are certainly looking to get it to over 90 over the next couple of years.

Our next question is from Yash Sankpal from Dundee Capital Markets. Yash Sankpal - Dundee Capital Markets: Just on your U.S. portfolio, it seems your same-store NOI growth has been flat or declining over the last three quarters. So I'm just wondering what you think in terms of your long-term occupancy for that portfolio and your same-store NOI growth?

Yash, the occupancy and same-property NOI growth, we should remember that the U.S. base is now a lot higher than it once was. We've been posting pretty exemplary same-property NOI growth a couple of years back around transition of the management to Brookdale. And obviously, now there is less low-hanging fruit to gather there. We still think that the portfolio can deliver same-property NOI growth in the short and medium term. There is still opportunities in terms of the occupancy growth in certain of our properties. As I mentioned we are investing capital selectively in more competitive markets to make sure that our properties are more competitive over the long period of time with newer entrants there. The good news though is where the construction generally in the U.S. activity has picked up, in our markets it's not always the case. There are some that are hit with new supply, but not across the board. So we are still very well-positioned to compete in the markets that we are in. So we continue our efforts on asset management and an oversight of Brookdale's management of our properties, and we think that this will continue to bear fruit over the short-and-medium term. Yash Sankpal - Dundee Capital Markets: And you talked about some new development projects that you have been looking at. So maybe you could provide some color on that?

The two that we have in progress are projects in Collinwood and in Tamarac, Florida. We're adding units to the existing buildings, in both cases creating memory care areas in these buildings. These are not large products. In one case, it's 30 units and in the other case it's 24 units. We have a few projects that have been internally approved. We're not ready to announce them yet, but we certainly expect to continue with our internal development program and start two to three, maybe four new projects every year. Yash Sankpal - Dundee Capital Markets: And just lastly, if you could provide some color on the transaction market, like do you see a lot of product in the market? And in terms of cap rates like where they are headed?

You obviously saw some of the acquisitions that we completed in Q2 or shortly thereafter, those are newer properties in great markets. We think that they have very good potential. Cap rates were disclosed on one acquisition, it was between 7% to 7.5%. Those are the cap rates that we are normally seeing in the marketplace now. Obviously, with the exception of the holiday transaction that was done at a lot lower cap rate, but on one-off properties those are the cap rates that we expect to see and will be prepared to pay. In terms of the pipeline, we have a steady flow product that we're looking at. As I am saying every time we speak, we are very selective about what we are buying and what we are looking. So although we look at a large number of these projects, there is no guarantee that we'll do any of those. So generally the pipeline is a little bit better now than it used to be in the spring, where we had seen some slowdown. But again, it's no guarantee that we'll be doing any of these deals.

Our next question is from Jimmy Shan from GMP Securities. Jimmy Shan - GMP Securities: So just a follow-up on Jonathan Kelcher's question on the Ontario. So to dig a little bit more, the occupancy for those three, Ottawa, GTA and Windsor, what would the occupancy be relative to the other parts of the portfolio? And then two, would those two markets, is it just a function of competition and new supply or are there other issues at play here?

Jimmy, the occupancy will be certainly lower than the average. It will be probably in the low 80s, if we add all these properties together. The reasons for that is absolutely supply. The Ottawa market is probably the only one that's continued seeing some supply. The rest of them are not at the present time, but they've seen a lot of new supply coming in the market in the last three, four years. And even though these markets are deep, it's just taking a long period of time for third quarter supply to be absorbed. And so we think that with no new supply coming, and a slowdown in Ottawa market, this absorption should accelerate now, but it has been taking a long time. Jimmy Shan - GMP Securities: But would there be any other specific trends that you could point to with respect to the Ontario portfolio, whether it'd be age of property or age of residence or asset type, like is there anything else that you could point to other than those two?

The other factor would be investments in home care in Ontario over the last number of years. And the government has in the last, at least three or maybe four budgets increased their home care spending, so that will certainly have an effect overall in this sector. Jimmy Shan - GMP Securities: And then just switching to that holiday portfolio, I was just curious, I don't know if you guys mentioned it before or not, but wondered if you guys bid on that asset or that portfolio?

Which portfolio?

Do we bid on the holiday portfolio?

No, we did not. Jimmy Shan - GMP Securities: And that was just essentially, any further insight on that for not bidding?

Not really. Jimmy Shan - GMP Securities: And another question for you. HCN on their last call sort of talked about their portfolio and their view being into the below six cap. I kind of wondered if you guys would offer your view on where you think your portfolio should trade in the marketplace in the context to the holiday portfolio trade.

It's not really, Jimmy, up to us to draw these kind of conclusions. I mean the holiday portfolio trade is kind of public information. Everybody you calculate what the cap rate was on that portfolio. The quality of assets we think on average is probably better. So it's for you guys to figure out, what our portfolio should be trading in.

Thank you. Mr. Binions, we have no further questions at this time.

Well, then that wraps up today's conference call. Thanks again to everybody for joining us. As always, if you have any further questions, don't hesitate to give us a call. Good bye.

Thank you. The conference call has now ended. Pleased disconnect your lines at this time. And we thank all who participated.