Mr. Vlad Volodarski reports

CHARTWELL ANNOUNCES SECOND QUARTER 2020 RESULTS

Chartwell Retirement Residences Real Estate Investment Trust has released its results for the second quarter ended June 30, 2020.

Highlights:

• Maintaining strong financial position with Aug. 6, 2020, liquidity of $408.8-million, including $82.8-million of cash and cash equivalents;
• As leasing activities resume, occupancy declines slowing down with July, 2020, occupancy in the same-property retirement portfolio declining 0.6 percentage point, lower than May and June declines of 1.2 and 1.1 percentage points, respectively;
• Focus on resident and staff safety resulted in additional $7.0-million of unfunded pandemic-related costs, combined with occupancy decline resulting in a same-property adjusted net operating income (NOI) decline of 9.7 per cent in Q2 2020 and funds from operations (FFO) down 17.1 per cent in Q2 2020.

"While our Q2 2020 results have been significantly impacted by the COVID-19 pandemic, both in occupancy declines and additional expenses incurred in order to keep our residents and staff safe, it is encouraging to see a much reduced number of properties in outbreak and the beginning of leasing activities in our properties. In July, 2020, same-property retirement leasing activity represented 70 per cent of July, 2019," commented Vlad Volodarski, chief executive officer. "Our residents, their families and our employees are an invaluable source of insight. Through our 'listening to serve you better' program, which includes internal process reviews, electronic surveys and video conferences, we are receiving important input that will allow us to continue to improve and better prepare for a potential second wave of the pandemic. I am grateful to the families and residents who have provided us with excellent feedback and praise for our staff, who truly go above and beyond to care for our residents."

                                              FINANCIAL PERFORMANCE
                             (in thousands of dollars, except per-unit amounts)                             

                                                      Three months ended June 30,   Six months ended June 30, 
                                                              2020          2019          2020          2019

Resident revenue                                       $   216,398   $   213,848   $   435,282   $   423,732  
Direct property operating expense                      $   154,917   $   146,555   $   305,636   $   290,719  
Net income (loss)                                      $    (1,931)  $    (1,583)  $     9,463   $    13,368   
FFO                                                    $    39,043   $    47,106   $    84,368   $    94,189   
FFO per unit                                           $      0.18   $      0.22   $      0.39   $      0.44     

Resident revenue increased $2.6-million or 1.2 per cent in Q2 2020, due to revenue recognized for funding provided to partially defray additional expenses incurred related to COVID-19, and revenue growth from acquisitions and developments, partially offset by reduced revenue due to lower occupancy in the REIT's existing property portfolio and lower revenue related to the disposition of properties.

Direct property operating expenses increased $8.4-million or 5.7 per cent in Q2 2020, due to COVID-19-related expenses, acquisitions and developments, including preleasing and initial operating costs, and increased expenses in the REIT's existing property portfolio, partially offset by lower repairs and maintenance and marketing expenses. COVID-19-related direct property operating expenses include investments in additional staffing, including screening, personal protective equipment (PPE), employee recognition, compensation to front line and management staff in the REIT's residences, and supplies to reduce and prevent the spread of the disease.

In Q2 2020, net loss was $1.9-million, compared with $1.6-million in Q2 2019. The increase in net loss was primarily due to higher direct property operating expenses and finance costs, partially offset by higher revenues and deferred tax benefit.

In Q2 2020, FFO decreased $8.1-million primarily due to lower adjusted NOI, higher finance costs, and depreciation of property, plant and equipment, and amortization of intangible assets used for administrative purposes, partially offset by higher management fees, and lower general administrative and trust (G&A) expenses.

For 2020 year to date (YTD), resident revenue increased $11.6-million or 2.7 per cent, due to acquisitions and developments, and revenue growth in the REIT's existing property portfolio revenue, including revenue recognized for financing provided to partially defray additional expenses incurred related to COVID-19 and lower revenue related to the disposition of properties.

For 2020 YTD, direct property operating expenses increased $14.9-million or 5.1 per cent due to acquisitions and developments, increased expenses in the REIT's existing property portfolio, and additional expenses incurred related to COVID-19, partially offset by lower repairs and maintenance and marketing expenses.

For 2020 YTD, net income was $9.5-million, compared with $13.4-million in 2019 YTD. The decrease in net income was primarily due to higher direct property operating expenses, finance costs, depreciation and amortization expenses, absence of remeasurement gain recorded in Q1 2019, and impairment losses, partially offset by deferred income tax benefit, higher revenues and gain on disposal of assets.

For 2020 YTD, FFO decreased $9.8-million, primarily due to lower adjusted NOI, higher finance costs, depreciation of property, plant and equipment, and amortization of intangible assets used for administrative purposes, and G&A expenses, partially offset by higher management fees.

                                            OPERATING PERFORMANCE
                                 (in thousands of dollars, except occupancy)                                 

                                                      Three months ended June 30,   Six months ended June 30, 
                                                              2020          2019          2020          2019

Same-property occupancy                                      85.6%         89.9%         87.4%         90.3%
Same-property adjusted NOI                               $  66,535     $  73,696     $ 140,162     $ 147,212
G&A expenses                                             $  12,374     $  12,459     $  25,502     $  25,208

In Q2 2020, same-property occupancy declined 4.3 percentage points, primarily due to reduced move-in activity by approximately 67 per cent, partially offset by reduced moveout activity by approximately 28 per cent, each as a result of the COVID-19 pandemic.

In Q2 2020, same-property adjusted NOI decreased $7.2-million or 9.7 per cent, primarily due to pandemic-related expenses in excess of revenues or expense recoveries of $6.4-million, including $1.8-million related to compensation to recognize the REIT's front line management teams' extraordinary efforts during the pandemic and reduced revenue related to lower occupancy, partially offset by increased rental rates in line with competitive market conditions, and reduced marketing and repairs and maintenance expenses

In Q2 2020, G&A expenses decreased $100,000, primarily due to lower lease and travel expenses, partially offset by higher staffing costs and a $500,000 contribution to provide start-up financing to support the Senior Living CaRES Fund initiated by the founding members Chartwell Retirement Residences, Revera Inc., Extendicare and Sienna Senior Living.

For 2020 YTD, same-property occupancy declined 2.9 percentage points, primarily due to competitive pressures from new developments in certain markets and reduced move-in and moveout activity since the latter half of March, 2020, as a result of the COVID-19 pandemic.

For 2020 YTD, same-property adjusted NOI decreased $7.1-million or 4.8 per cent, driven primarily pandemic-related expenses in excess of revenues or expense recoveries of $7.0-million, including $1.8-million related to compensation to recognize the REIT's front line management teams' extraordinary efforts during the pandemic and reduced revenue related to lower occupancy primarily as a result of COVID-19-related measures. These were partially offset by increased rental rates in line with competitive market conditions and expenses incurred due to an additional day in Q1 2020 of $800,000, partially offset by reduced marketing and repairs and maintenance expenses.

For 2020 YTD, G&A expenses increased $300,000, primarily due to the contribution to the CaRES fund, regular inflation in staffing costs, and a contractually determined payment on the retirement to the former president and CEO, partially offset by the timing of expenses, lower non-cash compensation costs as a result of changes in value of the trust units, and lower lease and travel expenses.

Financial position

At June 30, 2020, liquidity amounted to $346.1-million, which included $48.9-million of cash and cash equivalents, and $297.3-million of available borrowing capacity on the REIT's credit facilities. In addition, Chartwell's share of cash and cash equivalents held in its equity-accounted joint ventures was $7.5-million.

The interest coverage ratio on a rolling-12-month basis remained strong at 3.1 at June 30, 2020, compared with 3.1 at Dec. 31, 2019. The net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) ratio at June 30, 2020, was 8.7, compared with 8.3 at Dec. 31, 2019.

Recent developments

The REIT believes that occupancy in its retirement residences will be temporarily affected as a result of reduced move-in activity. Moveout activity is below prior-year levels at this time, primarily due to reduced departures to long-term care. The attached table provides an update in respect of the REIT's same-property retirement occupancy.

                                         SAME-PROPERTY RETIREMENT OCCUPANCY                                         

                              One month ended        One month ended         One month ended          One month ended
                               April 30, 2020           May 31, 2020           June 30, 2020            July 31, 2020

Same-property 
retirement occupancy                    85.7%                  84.5%                   83.4%                    82.8%
Change from the previous month                (1.2 percentage points) (1.1 percentage points)   (0.6 percentage point)

The pace of the decline in occupancy has slowed since the onset of the pandemic in mid-March, with move-in activity steadily increasing and in July representing approximately 65 per cent of previous-year volumes, and moveout activity continuing to be below previous-year levels, though slightly higher in July than in previous months at approximately 80 per cent of previous-year volumes. It remains too early in the reopening process to identify any trends related to pent-up demand, particularly as the July and August period typically has a lower volume of initial contacts due to seasonality.

On July 15, 2020, the Ontario government announced a redesigned capital funding subsidy (CFS) program for long-term care. The program includes a $1.75-billion investment to redevelop 12,000 beds and adds an additional 8,000 beds over the next five years. This is an important step to address the aging infrastructure with long-term care for which the industry has been advocating for more than a decade. The REIT continues to work closely with its industry partners and the government to finalize the details of the new CFS program and the related approval and licensing process to expedite projects that are feasible within this new program. The REIT has 577 Class B and C beds that are eligible for this redevelopment program.

At Aug. 6, 2020, the REIT has $68.7-million of mortgage maturities remaining in 2020, of which $26.3-million are CMHC insured and includes $40.7-million related to mortgages on two properties acquired from Batimo Inc. in the first half of 2020, which the REIT expects to replace with CMHC-insured mortgages. The REIT has $243.3-million of mortgage maturities in 2021, of which $37.5-million are CMHC insured. It has strong lending relationships and expects to refinance mortgage maturities as they come due.

At Aug. 6, 2020, liquidity amounted to $408.8-million, which included $82.8-million of cash and cash equivalents, and $326-million of available borrowing capacity on the REIT's credit facilities. In addition, Chartwell's share of cash and cash equivalents held in its equity-accounted joint ventures was $14.4-million. The REIT expects to be able to meet all of its obligations as they become due utilizing primarily the following sources of liquidity: (i) cash flow generated from its operations; (ii) property-specific mortgages; and (iii) secured and unsecured credit facilities. The COVID-19 pandemic has introduced significant uncertainties and the REIT continues to monitor the situation closely.

Investor conference call

A conference call hosted by Chartwell's senior management team will be held Friday, Aug. 7, 2020, at 10 a.m. ET. The telephone numbers for the conference call are local 416-406-0743 and toll-free 800-806-5484. The passcode for the conference call is 1605435 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 and toll-free 1-800-408-3053. The passcode for the instant replay is 1365519 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 seniors housing communities, from independent supportive living through assisted living to long-term care. It is the largest operator in the Canadian seniors living sector with over 200 quality retirement communities 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.

We seek Safe Harbor.