Chartwell Retirement Residences (CSHUN) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Investors of Chartwell Retirement Residences. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Huw Thomas. Mr. Thomas, the floor is yours.

Thank you, and good afternoon, and welcome to the Annual Meeting of the Unitholders of Chartwell Retirement Residences. My name is Huw Thomas, and I'm Chair of the Board. It's hard to believe that this is the first AGM since 2019, where we have gathered in person for this event. And it is a pleasure to see a number of unitholders with us today at our head office in Mississauga. Since our last in-person meeting, we've learned about the benefits of online participation at our meetings, and we're pleased to continue to offer a virtual option for those of you who weren't able to join us here in person. The virtual format allows all unitholders and proxy holders from any location to attend, participate and vote at the meeting. Guests are also welcome to attend listen to our meeting and ask questions. For purposes of the live webcast and for those attending in person today, I will set out a few rules for the orderly conduct of the meeting. For virtual attendees questions in respect of a motion can be submitted by any registered unitholder or duly appointed proxy holder using the instant messaging feature of the virtual interface. When sending a question please provide your name. If you are representing an entity, which is a unitholder, please provide the name of the entity you represent, and please confirm that you are or that entity is a registered unitholder or a duly appointed proxy holder. General questions will be addressed during the question period at the end of the meeting, which the operator on the call will facilitate. And I request that you hold any general questions concerning the general operation of Chartwell until that time. Questions regarding procedural matters or directly related to the motions before the meeting will be addressed at the appropriate time. For those of you attending in person, unitholders or proxy holders in attendance in person may speak with respect to each matter before the meeting. and general questions will be addressed during the question period at the end of the meeting and questions regarding procedural matters or directly related to the motions before the meeting will be addressed at the appropriate time. With respect to voting, all votes today will be conducted by ballot. As is normal practice, a number of registered unitholders or proxy holders have provided their voting instructions in advance of the meeting. If you are a registered unitholder or proxy holder attending in person, you will have received ballots when you arrived at the meeting and registered with Computershare. Most of you will have turned in your ballots at that time. If you are a proxy holder and [Technical Difficulty]

We are experiencing technical difficulties and will resume momentarily.

Are we live again operator?

Yes, we're able to hear you, sir.

Okay. I'll -- so I'll continue. You will be able to see on the screen all motions being brought forth at this meeting and can vote online by clicking as appropriate at the top of the screen and completing the ballot. Please note, if you already voted by proxy before the meeting, you do not vote again during the online voting unless you wish to change your vote. Voting online will revoke your previously submitted proxy. Once voting is closed, your online ballot will automatically be submitted. Voting on all matters is now open and will remain open until I close voting shortly before the end of the formal part of the meeting. We will now proceed with the formal portion of today's meeting. I will now call the meeting to order. I will act as Chair of this meeting, and Jonathan Boulakia, will act as Secretary of the meeting and Computershare Trust Company of Canada, through its representative, Louise Waltenbury, will act as scrutineer to compute the votes of any polls taken at this meeting and to report the results to me. The purposes of today's meeting are set out in the Management Information Circular of Chartwell dated March 28, 2024. Notice management information circular and proxy form were provided on or around April 26, 2024, to each unitholder of record as of April 12, 2024. Our -- our transfer agent, Computershare Trust Company of Canada has attested to the proper mailing of the notice calling this meeting, proof of which will be annexed to the minutes of this meeting as a schedule. With the consent of the meeting, we will now dispense with the reading of the minutes of the last Annual Meeting of Unitholders. The agenda for today's meeting will be as follows: Firstly, the presentation of the financial statements of Chartwell for the year ended December 31, 2023; secondly, the election of the trustees of Chartwell, the nomination of trustees for CHS Trust (sic) [ CSH Trust ] and the nomination of directors for Chartwell Master Care Corporation; three, the appointment of auditors for Chartwell or a resolution reconfirming and ratifying Chartwell's deferred unit plan adopted on July 1, 2008; five, a resolution reconfirming and ratifying Chartwell's unitholder rights agreement; sixth, an advisory resolution on Chartwell's approach to executive compensation; seven, 1 unitholder proposal; and finally, management's presentation to unit holders followed by a question period. I would like to take this opportunity to introduce the other trustees and directors and senior officers of Chartwell and its subsidiaries who are in attendance today in the room Firstly, Brent Binions, Director; Ann Davis, Director; Valérie Pisano, Director; Sharon Sallows, Director; James Scarlett, Director; Gary Whitelaw, Director; Vlad Volodarski, Director and Chief Executive Officer; Karen Sullivan, President and Chief Operating Officer; Jonathan Boulakia, Chief Investment Officer, Chief Legal Officer and Secretary; and Jeff Brown, our Chief Financial Officer. Notice of this meeting and for those who requested it, the management information circular were mailed to unitholders and the transfer agent has provided us with proof of mailing. The scrutineer has reported on the number of units represented at this meeting and has computed and recorded the votes received to date on the matters submitted for consideration at this meeting. I am advised that a quorum of unitholders is present today. I declare the meeting to be duly called and properly constituted for the transaction of business. So moving to the actual business to be transacted. Financial statement. I wish to present to the meeting the financial statements of Chartwell for the year ended December 31, 2023, and the report of the auditors on those statements. Copies of these financial statements were mailed to those unitholders of Chartwell who requested them and are available on our website at www.chartwell.com. I do not propose to read the financial statements for the meeting nor is the approval by the unitholders required. The election of trustees of Chartwell, the next group of related items of business is the election of trustees for Chartwell. The approval of directions regarding the election of trustees for CHS Trust (sic) [ CSH Trust ] and directions regarding the election of directors of Chartwell Master Care Corporation. Chartwell has a policy that entitles unitholders to vote for each nominee on an individual basis. We will proceed first with the election of the trustees of Chartwell. The number of trustees of Chartwell has been fixed at 3. And I will now ask Jonathan Boulakia, to nominate the 3 trustees.

I nominate Ann Davis, James Scarlett and Huw Thomas to serve as trustees of Chartwell Retirement Residences.

Thank you, Jonathan. As no other nominations were submitted within the required time frame set out in Chartwell's Declaration of Trust, I declare the nominations closed. Unitholders of Chartwell are also entitled to direct the trustees of Chartwell to elect nominees who will serve as the 3 trustees of CHS (sic) [ CSH ]. I will now ask Jonathan to move a motion in favor of the election of nominees as the 3 trustees of CH -- CSH Trust.

I move that the trustees of Chartwell be directed to vote the units of CSH Trust held by Chartwell in favor of the election of Valerie Pisano, Sharon Sallows; and Gary Whitelaw as trustees of CSH Trust.

Thank you, Jonathan. I would ask someone to second the motion.

I Second the motion.

As no other nominations were submitted within the required time frame, I declare the nominations closed. Unitholders of Chartwell are also entitled to direct the trustees of Chartwell to elect nominees who will serve as the 8 directors of Chartwell Master Care Corporation. I will now ask Karen Sullivan to move a motion in favor of the election of nominees as the 8 directors of Chartwell Master care Corporation. .

I move that the trustees of Chartwell be directed to both the common shares Chartwell Master Care Corporation held by Chartwell in favor of the election of Brent Binions, Ann Davis, Valerie Pisano, Sharon Sallows, James Scarlett, Thomas, Vlad Volodarski and Gary Whitelaw. As Directors of Chartwell Master Care Corporation.

I second the motion.

As no other nominations were submitted within the required time frame set out in Chartwell's declaration of trust, I declare the nominations close. Appointment of auditors for Chartwell. The next item of business is the reappointment of auditors for Chartwell. I will now ask Jeff Brown to please move a motion in this regard.

I move that KPMG LLP be reappointed auditors of Chartwell until the next annual meeting or until a successor is appointed that their remuneration as such be fixed by the directors of Chartwell Master Care Corporation.

I second motion.

The next item of business is to consider, and if thought advisable, to pass the resolution reconfirming and ratifying Chartwell's deferred unit plan adopted on July 1, 2008, as set out on Appendix A of the Management Information Circular. In order to be effective, this resolution must be passed by a majority of votes cast by the unitholders who vote on this resolution. I will now ask Jonathan to make a motion in this regard.

I move that the resolution as set out on Appendix A of the Management Information Circular be approved.

Can I have a seconder?

I second the motion.

Thank you, Jeff. Are there any questions on this motion? The next item of business is to consider, and if thought advisable to pass the resolution reconfirming and ratifying Chartwell's unitholder rights agreement as set out on Appendix B of Management Information Circular. To be effective, this resolution must be passed by a majority of votes cast by the unitholders who vote on this resolution. I will now ask Jeff to move a motion in favor of the resolution.

I move that the resolution as set out on Appendix B of the Management Information Circular to be approved.

Can I have a seconder?

I second the motion.

Thank you, Jonathan. Are there any questions on this motion? The next item of business is to consider and if thought advisable to approve the advisory resolution on the approach to executive compensation set out on Page 28 of the Management Information Circular. I will now ask Karen Sullivan to move a motion in favor of the resolution.

I move that the resolution as set out on Page 28 [indiscernible] to be approved.

Can I have a seconder?

I second the motion.

Jonathan, are there any questions on this motion? The last item of business is -- to consider is the unitholder proposal set out on Schedule B of the Management Information Circular. The unitholder that put forward this proposal, B.C. General Employees’ Union or BCGEU for short, is represented today by Emma Pullman who will read BCGEU's introductory remarks and proposals. Pullman, please.

Thank you, Mr. Thomas, and good evening, fellow unitholders. As was just mentioned, my name is Emma and I represent the B.C. General Employees' Union. We been a shareholder since 2019. And also, we represent some Chartwell workers [indiscernible] union. I really appreciate the opportunity to engage with Chartwell on the matters of this proposal. So according to a union that represents workers at 20 Chartwell homes in Ontario, the trust has an average worker turnover rate of 67%. Some Chartwell homes, however, have turnover rates over 80% or 90%. [indiscernible] behalf of these Chartwell workers have left their jobs since January of 2023, and the average work or tenure at Chartwell is 1.8 years. In contrast, one of Chartwell's European peers has an average tenure of 7.5 years. If you are wondering what these rates and metrics are across all of Chartwell's 135 properties, we are as well. Is Chartwell effectively delivering on its commitment to provide exceptional resident experiences and make people's lives better? Chartwell has lowered its overall usage of staffing agencies, which we welcome. It says that its disclosure of occupancy rates and satisfaction surveys provide adequate information to unitholders. We respectfully disagree. The absence of clear disclosures is impeding investors' ability to gauge operational risks accurately and undermines the trust claim of prioritizing resident satisfaction and employee engagement. This unitholder proposal asks the Board to report annual metrics critical to understanding and evaluating our staffing effectiveness. This is a straightforward cost-effective request that emits proprietary information. Without a full picture of stock turnover rates, training and recruitment metrics and more information relating to staffing and acuity levels, plus the ongoing staffing agency usage in some markets, we believe that Chartwell human capital management framework, fall short of best practices and the best interest of unitholders. There is robust evidence that demonstrates the positive impacts of human capital management disclosure, include -- well, the risks are failing to provide these impact service quality, employee retention and legal compliance. In the circular, we are pleased to see that Chartwell's response says that it is open to exploring meaning [Technical Difficulty]

We are experiencing technical difficulties and will resume momentarily.

I don't think we're...

We are able to hear you, sir.

Okay. We're alive again. So would you like to finish your remarks, Emma?

I so move the resolution set out on Schedule B and for shareholders...

I was going to ask you a little later on to do that, if you don't mind. So is that the end of your remarks?

That's the end of my remarks. Thank you.

Perfect. Thank you very much, Emma. So Jonathan, would you like to provide Chartwell's response to...

Yes. Thank you, Emma. I'll try to go quickly to avoid getting cut off. Chartwell's response is as follows: Chartwell's biggest asset is our people, and human capital management is a key priority for us. Our employees play a crucial role in delivering exceptional services to our residents and we maintain a continuous focus on recruitment, onboarding, development and career advancement opportunities, all through a lens of diversity and inclusion. We understand the significance of employee engagement and to quantify our efforts, we use a third party to conduct employee engagement surveys every year. We grade ourselves based on our top box strongly agree scores, indicating high engagement levels. In 2023, our employee engagement score rose to 54%, up from 49% in 2022, marking a historic high and reflecting our commitment to cultivating a positive work environment. When including agree scores, our score was 85% in 2023, up from 81% in 2022. Chartwell is committed to reducing the use of employment agencies. In our 2022 filings, we disclosed the cost of agency usage as a percentage of total revenue and outlined various initiatives to reduce reliance on those agencies. In our Q4 2023 management discussion and analysis, we disclosed that agency cost as a percentage of total staffing costs declined from 13% in 2022 to 7% in 2023. And that in Q4 2023 agency costs as a percentage of total staffing costs declined to 5% from 14% in Q4 2022, which is below pre-pandemic levels. Notably, in 2023, travel exited the Ontario Long Term Care business, thus leaving the business of Chartwell almost totally comprised of private pay retirement residences. Private pay retirement residences have varying staffing levels given that the diverse service offerings and occupancy levels. Accordingly, closing staffing levels and ratios becomes much less meaningful. Further, due to the 24/7 nature of our operations, we have no choice but to employ many part-time and casual employees. These employees are more transient and contribute to higher turnover ratio. To address this, we have invested significantly in recruitment, onboarding, training and retention programs. We remain open to exploring meaningful turnover disclosure for the benefit of our investors. Most of our frontline employees are unionized. We maintain good relations with the unions and rarely experienced labor disputes. Employee compensation for unionized employees is negotiated freely in the collective agreement bargaining process. We believe our ongoing efforts and the positive trajectory of our employee engagement metrics demonstrates our commitment to the well-being of our workforce and the sustained success of Chartwell.

Thank you, Jonathan. Ms. Pullman, would you like to move your motion now?

Sure. Is it sufficient to just say some of the shareholder resolution set forth in the management information circular.

Perfect. Thank you. Are there any questions at all? Okay. So we'll move to voting. As mentioned earlier, virtual voting will be conducted by electronic ballot, which has been opened since the start of the meeting for registered holders and appointed proxy holders. Voting is still open. Please register your votes by accessing the voting page and selecting the for or withhold buttons next to the name of each proposed trustee and Director and next to the resolution with respect to the appointment of KPMG as Chartwell's auditor. Please register your votes by selecting for or against next to the resolutions with respect to the deferred unit plan, the unitholder rights agreement, the advisory resolution on executive compensation and the unitholder proposal. So we'll provide registered unitholders and duly appointed proxy holders approximately one more minute to complete their ballot. [Voting]

So I now direct that voting be closed. And if there are any paper ballots in the room that should be collected? Seeing none, then I'd ask that the scrutineer tabulate the results of voting on all business matters, and we will disclose the official voting results shortly after this meeting on sedar+.ca. However, based on the proxies we have received to date, I have a preliminary report from the scrutineer with respect to each of the motions voted upon at the meeting and can now confirm the results of your votes today either in person or virtually by duly appointed proxy holders. On the first motion, the election of trustees of Chartwell the scrutineer reports that each of the 3 nominees has been elected. Therefore, I declare Ann Davis, James Scarlett, and myself, Huw Thomas, to be duly elected as trustees of Chartwell Retirement Residences. On the second motion, the nomination of trustees of CSH Trust, the scrutineer reports that the nomination of all 3 nominees has been approved. Therefore, I declare the trustees of Chartwell are hereby directed to vote the units of CSH Trust held by Chartwell in favor of the election of Valerie Pizano, Sharon Sallows and Gary Whitelaw as trustees of CHS -- CSH Trust. On the third motion, the nomination of directors of Chartwell Master Care Corporation, the scrutineer reports that the nomination of all 8 nominees has been approved. Therefore, I declare the trustees of Chartwell are directed to vote the common shares of Chartwell Master Care Corporation held by Chartwell in favor of the election of Brent Binions, Ann Davis, Valerie Pizano, Sharon Sallows, James Scarlett, myself, Huw Thomas, Vlad Volodarski and Gary Whitelaw as Directors of Chartwell Master Care Corporation. On the motion to appoint auditors, I declare KPMG LLP have been appointed auditors of Chartwell in accordance with the motion and that the Directors of Chartwell Master Care Corporation are authorized to fix their remuneration. On the motion to approve a resolution to reconfirm and ratify the deferred unit plan, the scrutineer reports that the resolution has been approved by a majority of votes cast by unitholders represented at this meeting. Accordingly, I declare the resolution carried. On the motion to approve a resolution to reconfirm and ratify the unitholder rights agreement, the scrutineer reports that the resolution has been approved by a majority of votes cast by the unitholders represented at this meeting. And accordingly, I declare the resolution carried. On the advisory resolution on executive compensation, scrutineer reports that the resolution has been approved by a majority of votes cast by the unitholders represented at this meeting. And accordingly, I declare the resolution carried. On the unitholder proposal, the scrutineer reports that a majority of votes cast by the unitholders represented at this meeting, has been cast against the resolution. And accordingly, I declare the resolution. The formal business of the meeting is now concluded. As there is no further business, with the consent of the meeting, I now terminate the meeting and hand it over to Vlad Volodarski for management's presentation for unitholders. On behalf of the Board, and Chartwell, I'd like to thank you all for attending today.

Thank you, Huw. I will now make some remarks about Chartwell, which will be followed by a general question period. For those in the room, if you have a question, please raise your hand, and the microphone will be brought to you. For virtual attendees who would like to ask a question, please use the instant messaging feature of the virtual interface to do so. When submitting your questions, please state your name and the entity you represent, if any, and confirm if you are a registered unitholder or a duly appointed proxy holder. We'll answer as many questions as time permits. For each question answer, we will summarize the question and read out loud the name of the person to ask question. And if applicable, the entity such person represents. If questions were already answered or that are redundant repetitive or inappropriate will not be answered published. During this presentation, we may make statements containing forward-looking information and non-GAAP measures and ratios. 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 and ratios. More specifically, I direct you to the disclosures in our 2023 MD&A under the heading 2024 outlook, risks and uncertainties and forward-looking information. These documents can be found on our website or at sedar+.ca. 2023 was an unprecedented year of learning change and growth for our company. We've been learning new ways of driving results faster through empowerment of people in our residences and offices. We have become more agile in how we market, sell and operate our properties. And we have made progress in repositioning our portfolio towards high-quality, high-growth properties and strong marketing. What is not changing is our dedication to our vision of making people's lives better and our focus on delivering personalized, memorable experiences to our residents. 2023, our teams delivered exceptional increases in employee engagement and resident satisfaction course, record occupancy growth, several significant technology system implementations and completed transformational portfolio optimization transactions. These achievements, combined with the reimagining of our corporate support service models will serve as a strong foundation for profitable growth of our business in years to come. Thank you to all Chartwell employees for your commitment to our residents, their families and each other and for your deep and personal connection to our shared values and goals. Last year was an important one in repositioning our portfolio towards high-growth well located and competitive mid-market and upscale residences. 2023, we completed the sale of our Ontario Long Term Care business, become a pure-play owner and operator of predominantly private pay portfolio of high-quality assets. We also announced the wind up of our joint arrangement with Welltower, which when completed will result in Chartwell obtaining full ownership of high quality, high growth residences, strong markets. We completed sales of several noncore assets, further improving overall composition of our portfolio. With improved financial performance and proceeds from these transactions, we are now ready to capitalize on acquisition opportunities, newer assets. To date, in 2023, we completed the acquisition of 2 residences from Batimo and are working on several other exciting growth opportunities. Our teams successfully carried the strong momentum of occupancy and cash flow growth in Q1 2024. The occupancy increasing 610 basis points year-over-year, same-property NOI growing by 24.7%, generating FFO increase of 61.2% and we continue seeing positive trends in our leading sales indicators, initial contact, personalized tours and lease signings and expect this occupancy growth momentum to continue. Our teams continue to methodically execute our operational sales and marketing strategies, focusing as always on delivering personalized memorable experiences to our residents, peace of mind to their loved ones and supporting each other. As I meet with our residents and team members across the country, I feel firsthand kindness, warmth and dedication to the residents well being that are the key components of the Chartwell experience. It makes me proud to be part of this great team. In 2023, we once again were recognized as one of the best governed companies in Canada by Globe and Mail, their annual Board Games publication. Globe and Mail also recognized our successes in advancing gender diversity in their Women Lead Here publication. In our second year working with GRESB, we were ranked second within our peer group in environmental [Technical Difficulty]

We are experiencing technical difficulties and will resume as soon as possible.

Can people on the line hear us?

We can hear you again. Please proceed.

Thank you. So back in March, we published our fourth environmental social governance report, where we discuss our progress in this journey. I encourage you to read the report, which you can find on our website and if we provide insights into Chartwell sustainability, corporate responsibility initiatives as well as statistics targets and key performance indicators. You will also discover there are many real stories about our residents and employees across the country. These stories deserve to be told and celebrated. Since launching in October 2022, the Chartwell Foundation has reunited loved ones, celebrated lifelong passions and paid tribute as legacy. Foundation's wish granting mission is open to all Canadian seniors. And together, we are providing -- proving that people are never too old to pursue their passion, reach for their goals and to fulfill their dreams. Over the past 2 years, together with our partners, we've raised over $750,000 for the foundation. 2023 alone, we fulfilled 18 lifetime wishes of some exceptional seniors. Helping the foundation to deliver on its mission is the labor of law for many Chartwell employees who generously donate their time to support it. My heartfelt thanks to all these exceptional individuals. There's never been a better time to be in the senior living business in Canada. Strong demand for our services, driven by the demographic growth of the senior population, lower pace of construction activity, continuing shortages of long-term care beds and the obsolescence of some of the existing inventory, our sector is poised for sustainable long-term growth. Our teams are hard at work to position Chartwell to be at the forefront of it. We focus on 3 key areas to accelerate this growth. First is resident experience. We are in the business of providing seniors with a great place to live, drive to provide our residents with personalized, memorable experiences because we believe that these experiences will result in high resident satisfaction rates. Very satisfied residents are 4x more likely to refer their friends to Chartwell. With over 50% of our move-ins coming from referrals, increasing that volume of referrals will drive and sustain high occupancy rates will, in turn, improve profitability. We believe that only highly engaged caring and dedicating employees can deliver these personalized memorable experiences to their residents. That is why we focus most of our time and investments on employee engagement, resident satisfaction and [indiscernible] growth. We're also in the process of transitioning our management operations to a more agile and scalable platform. Over the last 4 years and especially in 2023, we learned that we could do great things faster. We are doing more to empower those closest to the customer to make decisions, take action and experiment. We're leveraging our platform to provide them with necessary tools, including various technology solutions, training and targeted support to help them outperform. We're reviewing all our corporate support processes and eliminating low value-add work, implementing technology solutions to enhance efficiency of our support services, reimagining our corporate support functions to align with this new way of working. We continue driving our portfolio optimization and growth initiatives, investing in our existing properties to ensure their long-term competitiveness. Pursuing acquisitions of newer, high-growth properties, strong markets and divesting noncore residents. We believe active portfolio management, including the addition of newer properties critical to our ability to stay competitive in the changing world and to deliver long-term sustainable returns to our investors. We continue building our investment platform and strengthening our investment team to deliver on this important mission. In closing, to our residents and their loved ones, thank you for trusting us to serve you. We are honored to have that trust and committed to delivering exceptional personalized experiences to you. My partners on the senior executive committee every day, I feel privileged to be working alongside such dedicated and talented leaders. Thank you for our debate, for your support and inspiration. My fellow directors, thank you for your wise counsel, challenge and support. Thank you for caring and for your commitment to our vision. To our investors, can only deliver on our vision of making people's lives better if we have access to your capital in good times and especially in challenging times. Thank you for being there for us. We will continue to treat our investments with utmost care and respect they deserve. Most importantly to the Chartwell people from our residences teams to our regional and corporate support staff. Thank you for what you do every day for your residents, your families, for each other and for your community. Now to answer questions. No questions coming on the line or here in the audience. So that will wrap up today's meeting. Thanks again, everybody, for joining us. As always, if anybody has any questions, please do not hesitate to give us a call. Bye.

Thank you. This concludes the meeting. You may now disconnect.