Brent Binions - President and CEO Karen Sullivan - COO Vlad Volodarski - CFO

Yashwant Sankpal - CIBC World Markets

Good morning, ladies and gentlemen. Welcome to the Q3 2015 Financial Result Conference Call. I would now like to turn the meeting over to Mr. Brent Binions. Please go ahead.

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 are Vlad Volodarski, Chief Financial Officer and Chief Investment Officer; and Karen Sullivan, Chief Operating Officer. Let me remind everyone that during this call, we may make statements containing forward-looking information and non-GAAP measures 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 and details of such non-GAAP measures. These documents can be found on our website or at sedar.com. With our objective of building lasting value for our investors I'm pleased with the progress we made in Q3 2015 on our strategic priorities, as shown on slide three. Same-property portfolio occupancy improved to 92% in Q3 ‘15 compared to 90.7% in Q3 ‘14 with all operating platforms posting strong occupancy gains. Same property NOI increased $1 million or 2% in Q3 and $2.1 million or 1.4% in ‘15 year-to-date. Improved brand awareness and online and social media strategies have generated a 5.2% increase in initial contacts and a 4.2% increase in the personal visits in 2015 year-to-date. Ongoing updates to our website have generated significant improvements to several key online metrics with our web traffic increasing by 27% in 2015 year-to-date since Q4 of 2014. Our focus on gradual improvements in our financial position through earnings growth, debt refinancing to non-core asset sales continue to show positive results as shown on slide four. Our interest coverage ratio improved to 2.72 times in 2015 year-to-date compared to 2.26 times in 2014 and reached 3.12 times in Q3 of ‘15. Our net debt-to-adjusted EBITDA ratio improved to 7.1 at September 30, 2015 compared to 8.6 at September 30, 2014. And at September 30, 2015, we had cash on hand of $13.1 million and $141.4 million of available borrowing capacity under our secured revolving operating credit facility. While our main focus remains on building and improving our management platform and our own property portfolio, we continue to actively manage our portfolio properties and to seek opportunities for accretive growth as shown on slide five. We completed the sale of our U.S. portfolio for US$847 million on June 30, 2015. Net proceeds from the sale amounted to approximately $416 million. To-date we have completed acquisitions of interest in 13 properties in Canada for $587.3 million. We also completed two developing projects totaling 60 suites with an additional eight projects totaling 1,255 suites being in various stages of development. Together with our partners we continue to evaluate a number of other development opportunities in our markets across the country. On another note as shown on slide six Chartwell recently announced its new corporate giving partnership with Wish of a Lifetime Canada, a charity that grants wishes to deserving seniors in Canada. In appreciation of Remembrance Day this week our first wish recipients are Canadian veterans, in honor of their service and sacrifice to helped maintain our democratic way of life. I’d now 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 seven, the operations team has been busy integrating our newly acquired properties in Q3 including Grenadier, Oxford Gardens, Montgomery Village and Harwood place in Ontario as well as the expansion of our Chartwell unique property in Saint-Eustache, Quebec. We also recently started integration of our three newest properties in Ontario namely St. Clair Beach, Hollandview Trail, The Rockcliffe where meetings with managers, staff and residents were held earlier this week. We have developed a comprehensive approach to due diligence and integration that draws on our significant and growing experience with respect to acquisitions, while continuing to remain focused on our current portfolio of homes. Turning to slide eight, our marketing focus in Q3 included a national open house in late September that attracted over 4,500 visitors in our retirement homes across Canada. This was followed by an intensive sale split the following week to ensure that we were following up with our hot prospects. Leasing activity in all of our platforms throughout Q3 has been very positive. In addition in an attempt to mitigate turnover during the upcoming flu season and to reduce the number of days in outbreak we have focused on our infection control program including enhancing education and awareness activities and launching our national influenza prevention campaign. Finally, we received the results of our resident satisfaction survey, an increase of percentage of very satisfied residence by close to 10% year-over-year. This is the second year we have utilized the services of Margaret Wylde from ProMatura Research, provides our homes with a detailed analysis to assist them to focus on what truly matters to their residents. This data along with our focus on customer experience and making our residents feel at home has led to this very positive improvement. I’ll now turn it over to Vlad to discuss our financial performance for Q3.

Thanks, Karen. As shown on slide 10 for Q3 2015 AFFO from continuing operations was $33 million or $0.18 per unit diluted, an 18.4% increase from $27.9 million or $0.16 per unit diluted in Q3 2014. This increase is primarily driven by higher NOI contributions from our same property and acquisitions portfolios, net of the impact of property sales, higher NOI guarantees and lower interest expenses, partially offset by higher G&A expenses, primarily due to higher staffing cost and timing of certain expenses. In Q3 2015 combined same property occupancy was 92% compared to 90.7% in Q3 2014 and same property NOI increasing $1 million or 2%. Turning to our operating platform results as shown on slide 11, our Ontario retirement same property NOI increased 1.5%, primarily due to higher occupancies regular rental rate increases in line with the competitive market conditions and lower marketing expenses, partially offset by higher staffing, repairs and maintenance, utilities and insurance expenses. In Q3 2015 occupancies in our Ontario retirement same property portfolio were 87.6%, a 1.7 percentages points increase from Q3 2014. Ontario leasing activity continues to be strong, which is expected to support improving occupancy and NOI growth in Q4 2015 and beyond. Our Western Canada platform same property NOI increased 1.6% in Q3 2015 as shown on slide 12. This NOI growth was primarily due to higher occupancies and rents, partially offset by higher staffing, utilities, insurance and property tax expenses. Our Western Canada platform posted a strong 1.9 percentage points growth and reached 93.3% occupancy in Q3 2015. Market conditions remain positive for most of our Western Canada properties and leasing activity continues to be strong. On slide 13 you’ll see our Quebec platform same property NOI increased 4.9% in Q3 2015, primarily due to higher occupancies and rents and lower marketing expenses. These were partially offset by higher staffing, supplies and insurance expenses. Our Quebec platform reached 91.9% occupancy in Q3 2015, a 1.4 percentage points increase from Q3 2014. We continue to experience positive market conditions in many of our Quebec markets and leasing activity remains strong. As shown on slide 14, our Canadian long-term care platform same property NOI decreased 2.1% in Q3 2015, primarily due to higher utilities and timing of certain other expenses. These were partially offset by increased funding and preferred accommodation rates. Weighted average occupancies in the same property portfolio increased to 99.1% in Q3 2015 compared to 98.8% in Q3 2014. I will now turn the call back to Brent to wrap up.

Thanks, Vlad. As shown on slide 16, our key priority remains growing the contribution to AFFO from our core property portfolio. We believe that the projected growth in seniors population, stable economic conditions in housing market and a moderate pace of new supply growth provide continued support for occupancy and NOI growth in our portfolio for the rest of ‘15 and beyond. We believe that our investments in branding, marketing and sales initiatives have allowed us to increase awareness of Chartwell’s name, increased prospect traffic to our residence and increased our occupancies. We expect to continue to grow our revenue from additional care and services offered to our residents. We will also continue to focus on managing controllable operating and capital costs to ongoing operations efficiency reviews and centralized purchasing. We will continue to invest in our people, recruitment, training and development. It is only through having the right people with the right skills and providing clear direction that we can deliver an excellent customer experience to our residence and their families in each of our communities. We will continue to improve existing service levels and to implement new information technology solutions to better understand our customers, communicate with our employees and reduce administrative time commitment in the field. We have completed a number of acquisitions and developments in 2015 and are off to a great start integrating these properties into Chartwell. We expect to commence a number of development projects on balance sheet and with our partners in Q4 2015 and ‘16 and continue to evaluate other acquisitions and development opportunities. This is a company that is now hitting on all cylinders. Thank you for your time and attention this morning and we’d now be pleased to answer any questions you may have.

Thank you. We will now take questions from the telephone lines. [Operator Instructions]. The first question is from Yash Sankpal from CIBC. Please go ahead.

Good morning.

Good morning.

Your retirement home NOI margins were very strong this quarter almost 38%; do you think you can produce similar margins in coming quarters?

This is Vlad, Yash. We pointed out before we do not really focus on the margins when we review the results of our operations we focus on NOI per occupied unit or year-over-year NOI growth on the same property basis. And that is because of the differences in the service levels that we might provide at our different homes at different times period. The more services we provide to our residence the lower overall margin for a particular community may be because the service components carries lower margin than fewer rent. And so from that perspective we are not focused on the margins. We are though focused on the same property NOI growth that we expect to continue to deliver that in Q4 and going forward.

Okay. And how is your retirement home occupancy trending now in Q4?

As we pointed out the in our prepared remarks we had continue to see pretty strong leasing activities across all of our platforms and the occupancies are trading up.

And on the long-term care side, I noticed that in your revenue line there was a 3% jump from just from the last quarter, but your NOI or margins moved in the opposite direction, was there anything abnormal?

Other than the timing of expenses and envelop related balancing there is nothing special this quarter.

Okay. And just one more question if I may, given that you have a number of development projects currently going on would you be able to give us some color around your CapEx budget for Q4 and 2016 and if possible ‘17?

Sure we will continue to invest in our existing properties to make sure that they are competitive in the marketplace. It applies to newly acquired properties to some degree to the extent that those are not new properties we under-wrote a significant amount of capital to be invested in some of the older acquisitions or properties that we acquire this year. And in our existing portfolio we’ll continue investments both in the upgrades of the suites and the upgrades of common areas in addition to regular maintenance related expenditures and we expect that the overall volume of capital investments will be at the similar levels that they are in 2015, in 2016.

And I was hoping in terms of your development expenditure, how much do you expect to spend in 2016 on those eight projects?

Well you’ve seen our MD&A we disclosed the projects that we have announced that are approved and are going on the ground between now and early 2016 you’ll see the total estimated development cost of these projects that’s at the present time the current expectation of expenditures for 2016.

Okay, thank you.

Thank you. [Operator Instructions] The next question is from Tony Delfio [ph]. Please state your company and proceed with your question.

Hi thank you for taking my question, I am an investor. I heard you talk about Q3 specifically on Ontario being affected by higher utility rates, are there any ongoing initiatives to lower operating cost within each of the homes when it comes to utilities or general operating cost in the homes across Ontario?

I’ll try to answer as relates to utilities and maybe pass it over to others to talk about other items. On the utilities side Tony we continue to looking at our consumption patterns. We have ongoing programs, energy awareness that we’re implementing in our homes making sure that everybody at the home level is aware of the energy conservation, processes and programs and as an example, we have been investing in the past and continue investing in this year in programs such as LED lamping in some of our properties to reduce the electricity consumption cost, that would be one example.

Although you should know that one of the issues on utilities, which will impact us into next year is Ontario has removed the credit we’ve been receiving I think it’s called an OCEB credit. And that will have further impact on us in the New Year although we are looking at ways to continue to mitigate that. But if you’re looking at other areas we have -- we continue to expand our central buying, purchasing and we keep negotiating different new contracts across the company to look at ways to reduce our expenses and we monitor that on a daily basis.

Thank you for answering the questions.

Welcome.

Thank you. [Operator Instructions]. There are no further questions registered at this time. I would like to turn the meeting back over to Mr. Binions.

Okay, thank you. That wraps up today’s conference call. Thanks again for joining us. As always, if you have any further questions, please do not hesitate to give us a call. Goodbye…

Thank you. The conference is now ended. Please disconnect your lines at this time and we thank you for your participation.