Chartwell Retirement Residences ($CSHUN)

Hello, everyone. Thank you for joining us, and welcome to the Chartwell First Quarter 2026 Results Conference Call. This call is being recorded. [Operator Instructions] I will now hand the call over to Mr. Vlad Volodarski, Chief Executive Officer of Chartwell Retirement Residences. Please go ahead.

Thank you, Lucas. 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 staff. Joining me are Karen Sullivan, President and Chief Operating Officer; Jeffrey Brown, Chief Financial Officer; Jonathan Boulakia, Chief Investment Officer and Chief Legal Officer; and Gordon Chiu, Chief Technology Officer. Before we begin, I direct you to the cautionary statements on Slide 2 because during this call, we will make statements containing forward-looking information and non-GAAP and other financial measures. Our MD&A and other securities filings contain information about assumptions, risks and uncertainties inherent in such forward-looking statements and details of such non-GAAP and other financial measures. More specifically, I direct you to the disclosures in our Q1 2026 MD&A under the headings Risks and uncertainties and forward-looking information. for a discussion of risks and uncertainties. These documents can be found on our website or on the Cedars website. Turning to Slide 3. On the heels of a record year 2025, Chartwell delivered exceptionally strong operating and financial results in the first quarter in 2026. This performance is a direct result of the great work of our residences teams who serve residents every day and of their corporate support teams who enable that work the [indiscernible]. Together, they continue to execute with dedication and with the mindset of innovation and continuous improvement. So far, this year, [indiscernible] 35 retirement living communities, including visits to over a dozen Chartwell Residences across the country. What stands out immediately is the energy in our homes, driven by the teams that are proud of their achievements, optimistic about what's ahead and constantly focused on improving the experience for residents. In virtually every interaction I have with our residents, they expressed their gratitude to the people who serve them and their appreciation of the environment of kindness, care and engagement that our teams create. Our residents are special people, bringing with them tremendous live stories and memories and the desire to create new stories and memories with Chartwell. Their positivity in the termination to live life fully is generally inspiring. Our Q1 results reflect continuing strong operating momentum. Weighted average same-property occupancy increased 400 basis points to 94.7%. That drove solid financial performance with the same property adjusted NOI up 15.6% and FFO per unit increasing 35% compared to Q1 last year. Q1 2026 marked the first period of our new 3-year strategy. In addition to the solid operating results, we made strong progress in our investment and portfolio optimization strategy. We invested $435 million in high-quality acquisitions and announced $425 million in future acquisitions, including a new strategic partnership with Fengate Asset Management, a leading investment management and real estate developer. A partnership, which we expect to grow in the future, including through joint development opportunities. We also closed on a $49 million disposition of a noncore property and announced dispositions of 10 other noncore properties for approximately [ $186 ] million. These results reflect consistent institution in all aspects of our business and many of thoughtful decisions made every day. More importantly, they reflect the dedication and professionalism of our people. Their successes make me proud and I'm deeply grateful to them for their exceptional work. With that, I'll pass the mic to my partners. Karen will walk you through the operational initiatives. Jeff will cover our financial performance, and Jonathan will update you on our growth and portfolio optimization initiatives. Karen?

Thanks, Vlad. Moving on to Slide 4. We had another strong quarter of leasing activity with a positive net permanent move into permanent in the bare 110 units, led by Quebec in Western Canada with a slight [indiscernible] in Ontario. Our marketing strategies continue to be very effective with a 6% increase in personalized tours from marketing sources in Q1 compared to the same period in 2025. The website generated a 15% increase in personalized tours compared to last year. In April, we held a very successful 2-day open house, which generated close to 1,500 initial contacts. With occupancy at an all-time high, we are also focused on effectively managing our waitlist through Chartwell's Insider's program, which includes opportunities to keep prospects engaged while they wait for a suite to become available. We have also made improvements to add KPIs and functionality to our CRM that allows our retirement living consultants to view internal and external waitlists for improved inventory management as part of our high occupancy strategy. Also in Q1, we introduced a new sales commission structure to incentivize our sales team to maintain budget budgeted market rates, reinforcing our focus on value-based selling. We also introduced a brand experience assessment, which evaluates the ROC's overall compliance with our sales program, processes and performance expectations. During our leadership conference in January, we recognized our general managers and ROCs who delivered exceptional results in 2025 by presenting Circle of Excellence and President's Club awards to our top performers. Turning to Slide 5. In terms of expense control, we reduced our staffing agency costs by 59% in Q1 2026 compared to Q1 2025 through our continued focus on recruitment and retention activities. This quarter, we also started the rollout of our Oracle time and labor and workforce scheduling, project in 5 pilot homes. This project is centered on automating complex scheduling and payroll processes to reduce administrative workload improve accuracy and ensure compliance with our numerous collective marketing agreements. The pilot has gone very well, and we're in the process of configuring the next group of properties to come onto this new system. The system where we rolled out the phases in all of our residents over the next 18 months. As we continue to execute on our acquisition and development strategies, my team has very clearly defined the processes necessary to effectively integrate new properties, including a set of day 1 nonnegotiables and then milestones at 30, 60, 90 and 120 days post closing. This approach is already serving us well with the integration of the homes previously owned by Sifton and will be used as we plan for the integration of the seasons phones that Jonathan will be speaking about shortly. Finally, I want to take a moment to commend the team from Charbel Carrington House in Mission B.C. as well as the local first responders who all worked heroically, together on March 9 to ensure that all 142 residents were safely evacuated on a fire workout. Feedback from the local fire department with respect to the preparedness of the [indiscernible] House team and their actions that evening was extremely positive. Within a week, we had welcomed 54 residents back to the adjacent building that was not damaged by fire. And within weeks, we were able to find places for the remaining residents, including 25 we're living in other Chartwell Retirement Residences in the area. We are working with our insurance adjusters on site security, demolition and rebuilding. I'll now turn it over to Jeff to take you through our financial results.

Great. Thank you, Karen. As shown on Slide 6, in Q1 2026, net income was $8 million compared to $33.2 million in Q1 2025 and that included the gain on sale of $60.3 million due to the completed Welltower transaction. FFO grew to $85.6 million in Q1 2026, an increase of 52.4% compared to Q1 2025, and our FFO per unit grew $0.07 or 35% to $0.27 in Q1 2026 compared to Q1 2025. Our reported FFO does not include $3.3 million or $0.01 per unit of income guarantees related to recently acquired properties. Q1 2026 FFO growth benefited from higher adjusted NOI of $27.8 million and lower G&A expenses of $2.4 million, partially offset by lower management fees of $1 million. In Q1 2026 our same-property occupancy increased 400 basis points to 94.7%, and our same property adjusted NOI increased $11.6 million or 15.6%. We also had a 10.7% increase in our NOI per occupied suite. Slide 7 summarizes our same property operating results for each platform. All of our platforms posted occupancy gains in Q1 2026 compared to Q1 2025 and all are operating above 90% occupancy, which positively impacted our results. Our Western Canada platform same-property adjusted NOI increased $4.9 million or 22.7%. Our Ontario platform same property adjusted NOI increased $4.1 million or 10.7%, and our Quebec platform same-property adjusted NOI increased $2.6 million or 18.1%. Turning to Slide 8. At May 7, 2026, liquidity amounted to approximately $581.6 million, which included $186.7 million of cash and cash equivalents and $394.9 million of borrowing capacity on our credit facilities. During the 3 months ended March 31, 2026, we raised total gross proceeds of $142.4 million of equity through our ATM program at an average price of $21.08 and on May 7, 2026, we filed a new base shelf prospectus and a new [indiscernible] supplement for our ATM program to allow us to issue up to an additional $500 million of trust units, which will further support our transaction activity. The ATM proceeds along with $91 million of CMHC insured mortgage financing closed since quarter end and $86 million of CMHC insured mortgage financings planned for May, supported the acquisition of the recently closed Sifton portfolio and provide the financing required for both the Seasons portfolio acquisition and for Palermo that are both expected to close later this quarter. We also continue to improve our leverage metrics with interest coverage ratio growing to 3.7x, and our net debt to adjusted EBITDA ratio declined to 6.3x. And we continue to improve our financing flexibility having grown our unencumbered asset base to $2.2 billion. As a reflection of the strengthening balance sheet, we are upgraded today by Morningstar DBRS to BBB with a stable outlook. For the remainder of 2026, our debt maturities include $209.6 million of mortgages with a weighted average interest rate of 2.99% and $250 million debenture with a 6% coupon. As of May 7, 2026, we estimate the 10-year CMHC insured mortgage rate to be approximately 4.13% and the 5-year unsecured depenture rate to be approximately 4.44%. I will now turn the call to Jonathan to discuss our recent acquisitions and portfolio optimization activities.

Thank you, Jeff. We continue to execute on our portfolio strategy of enhancing our asset base to generate increased quality NOI. I'll highlight some of the deals that we completed and subsequent to Q1 2026 as pictured on Slide 9. On March 2, 2026, we acquired the remaining 15% ownership interest in Chartwell unique a 421 suite retirement residents located in the Century cash suburb of Montreal, Quebec from [ Batimore ] for $18.8 million before working capital adjustments and closing costs. The purchase price was partially settled through the proportionate assumption of the $6.5 million mortgage in place with the balance settled in cash. We now have a 100% ownership interest in this residence. On March 24, 2026, we completed the sale of 1 noncore property in Ottawa, Ontario for $49 million. On April 2, 2026, we completed the acquisition of 6 senior housing communities comprising 1,024 suites located in London, Waterloo and Mississauga for a total purchase price of $416.2 million. The purchase price at closing was partially settled through the assumption of $229.2 million of mortgages, the majority of which are CMHC insured, with the weighted average interest rate of 4.5% and weighted average remaining term to 18.9 years. The remainder of the purchase price subject to normal working capital and other closing adjustments was settled in cash. In addition, we entered into a forward purchase agreement to acquire 29 town homes currently under development in London, Ontario for a purchase price of $15.8 million, subject to normal working capital adjustments. These town homes will be acquired upon construction completion expected in Q1 2027. On April 15, 2026, we entered into a definitive agreement to acquire 100% ownership interest in [indiscernible] Village, a 116-suite retirement residence in [indiscernible] Ontario for $43 million. This transaction is expected to close in Q2 2026. On April 25, 2026, we entered into a definitive agreement to sell 9 noncore properties with 635 suites in Ontario for $117.9 million. Net proceeds after debt repayment of $33.7 million in transaction costs are expected to be $82.1 million. The transaction is expected to close in Q2 2026. On May 1, 2026, we entered into a definitive agreement to sell a long-term care residence in Ontario for $68.3 million. The transaction is subject to regulatory and other required approvals and is expected to close in Q4 2026. On May 7, 2026, we entered into a definitive agreement to acquire a 30% ownership interest in the Seasons retirement communities portfolio through a joint arrangement with [indiscernible] Asset Management, a leading alternative investment manager and real estate developers. The portfolio includes 23 seniors housing communities comprising 2,943 suites in Ontario, British Columbia and Alberta. Current occupancy stands at approximately 85%. Chartwell will manage the operations of these residences. The purchase price for Chartwell's interest is $382.5 million, and will partially -- will be partially satisfied by the proportion of assumption of approximately $195.8 million of in-place mortgages with the remainder to be settled in cash. The transaction is expected to close in Q2 of 2026. Chartwell will have the ability to acquire another 20% interest in the portfolio 12 months after closing this transaction. [indiscernible] will continue its role as a long-term owner and asset manager. This transaction represents a significant milestone in Chartwell's strategy to grow its platform with high-quality assets through partnerships with institutional capital. As part of the ongoing strategic partnership, Travel will have the option to participate in [indiscernible] future development of retirement residences in Ontario. Chartwell will elect to participate in any such development, Chartwell will provide operations management services and the parties will have certain put and call rights once the residence is stabilized. The partnership brings together 2 experienced organizations with a shared commitment to high-quality senior housing and long-term stewardship of retirement businesses. In 2026, we continue to grow our portfolio with over $860 million of completed and announced acquisitions. We're doing so prudently shifting capital from the noncore assets to strategic core residences, while taking advantage of our strong access to capital. We continue to evaluate several interesting opportunities to grow and enhance the quality of our real estate portfolio. We remain disciplined in how we approach under diligence and integration of our new acquisitions to deliver enhanced services to residents, mitigate disruption to operations and achieve our required investment returns. We are also engaged in discussions with local and national developers across the country and have restarted our development program with a meaningful pipeline of state-of-the-art assets to bring into our portfolio. we pursue such developments in a prudent manner with a preference for off-balance sheet development similar to our arrangement in Quebec. We intend to continue on this path of optimizing our portfolio through strategic acquisitions, prudent off-balance sheet development with sophisticated partners, the diversification of our sources of capital and the divestiture of noncore assets. I'll turn the call back to Vlad to wrap up.

Thank you, Jonathan. Turning to Slide 10. I remain confident in the strong positive momentum in our business. Demand continues to grow. New supply remains limited which should continue to support medium-term occupancy NOI and earnings growth. Our investment team led by Jonathan continues to pursue numerous acquisition opportunities across the country. and we have been making solid strides in building out our development pipeline with various partners and moving a number of projects through design and entitlement processes. We expect to start several of these later this year. Our Board continues to be proactive in its succession planning and renewal process at our upcoming Annual General Meeting, 2 new directors, [indiscernible] Dimond, who was appointed to the Board on January 1, 2026, and and Douglas McClatchy will be standing for their first election. Doug brings more than 30 years of leadership experience across senior living, real estate and financial services. He has built and last several senior housing platforms. Most recently, he cofounded and acted as the CEO and Vice Chair of the Board of Amika. Doug understands operations, development and capital allocation deeply and knows our sector exceptionally well. Our Board and executive team are excited to have to joining us. This addition to the Board is especially important now as we execute our strategic objectives grow and optimize our property portfolio and continue exploring ways to innovate and enhance services we deliver to our residents. What gives me the most confidence isn't just the results. It is what's happening inside our residences every day engaged and dedicated teams who see it as a privilege to be able to serve those who choose to live at Chartwell. Teams who, despite their successes did not rest on their warrants. They drive to innovate and improve, enhancing experiences for our residents, making their services even more personalized and memorable. That's the foundation we're building on. I will now close our prepared remarks with a story from 1 of our residents pictured on Slide 11. This story speaks to how we build our organization through a defers approach. Karen Kim, one of our general managers came to Canada in 2018 as a nurse and joined Chartwell [indiscernible] while working towards our Canadian license. Like many newcomers, she was starting over, taking on the frontline role, getting to no residents and understanding day-to-day realities of senior living. She was so passionate about her work at Chartwell that she helped to recruit several of her friends to join Chartwell in Ottawa where she was working at the time. Over time, with the support of leaders who recognized our potential, she progressed into various leadership roles and today leads Chartwell [indiscernible] in Ottawa, a premium residence in the market. What stands out is not just our individual journey, but what it represents our ability to develop talent from within to create pathways for growth and to foster a culture where people are empowered to contribute and lead in purpose. This is how we build strength in the organization over the long term by investing in people and in doing so, strengthening the experience we deliver to our residents. Thank you for your attention this morning. We will now be pleased to answer your questions.

[Operator Instructions] Your first question comes from the line of Lorne Kalmar with Desjardins.

Congrats on all of the acquisition activity. Sticking with that theme, I just wanted to get an idea, given the challenges of the Competition Bureau and the Sifton portfolio closing, the end of quarter closing timeline feels a little ambitious. I was just wondering, based on what you know of the updated or the Competition Bureau's updated criteria, are there any residences that might be at risk? Or is that being mitigated by the fact that you're only acquiring a 30% interest?

Yes. So thanks for the question. We're aware of the accomplishment [indiscernible] evolving approach and focus on market share by property type in each local market. But this transaction is only subject to retirement regulatory approval. So lender consent. So we're confident in the end of Q2 closing date.

Sorry. So just to confirm, the competition bureau is not going to be evaluating this?

That would be our expectation.

Okay. And then -- you mentioned that the 20%, the additional 20% you can acquire thing within 12 months. Could you maybe give us an idea of what milestones need to be achieved? How do you really -- what is the timing -- sorry, expected timing on acquiring this and how would you determine pricing?

Yes. The pricing will be consistent with the pricing that we went in at on the 30%. The milestone is the 12-month the passing of the 12 months and then the acquisition will be contingent on either parties desire to proceed.

Okay. And then maybe just the last 1 because I think you guys are on a management fees on the portfolio. Can you maybe help us understand maybe from a modeling perspective how to think about that?

How to think about the management of the portfolio?

The management fee that you earn on the portfolio.

We will be earning 5% management revenue -- 5% of revenue as management fee as operations manager for this portfolio, a standard market management team.

Your next question comes from the line of Brad Sturges Raymond James. Sorry, Jonathan Kelcher from TD Cowen.

It's nice to put on Brad. Just sticking with the joint venture, what's the going in yield on the 30%.

It would be in the high 5s.

Okay. And that's with the 85% occupancy. And on that occupancy, is that a function of some of the assets still being in lease-up?

Yes. There are assets that are still in lease-up in the portfolio.

Okay. And how long do you think it will take -- how long do you think it will take to get the portfolio up to a stabilized level?

We think we can get there within 12 months period. There is one residence that are still in lease-up that was recently opened. So that one may take longer than on average, we should get to stabilize the occupancy levels within 12 months.

And Jonathan, there's also a few assets going through accretive capital projects that should help support the lease-up.

Okay. That's helpful. And then just, I guess, looking ahead on acquisitions, you talked about several interesting opportunities. Are you looking at all that markets that are outside of ones where you currently own assets?

Not aggressively. We do see some opportunities in some Canadian markets outside of our current markets. And so we look at opportunities when they are presented, but right now, our focus is on our core markets.

Your next question comes from the line of Brad Sturges from Raymond James.

John [indiscernible] all my questions. Just on the -- I guess, on the lease-up aspect of going in high 5% yield, I guess, how should we think about as occupancy reaches stabilization, I guess, margins stabilized what that stabilized yield could look like in the next 12 to 24 months?

That will go into the low 6% range at stabilized.

And I guess you have the opportunity to participate in future development with Fengate. How should we think about that opportunity set today and whether you can kind of comment on what the what could be in the pipeline from an existing opportunity perspective?

Yes. So [indiscernible] is an established developer of mature and sophisticated [indiscernible] So we're very excited to have this partnership with them. We would expect it to be similar to the partnership we have with time in terms of structure and our ability to opt in or out of their developments and our option will give us, as I mentioned, those rights to acquire on stabilization and our obligation to manage the property. I would expect it to be a a modest amount in the province of Ontario, so probably 1 to 2 developments at any given time.

Your next question comes from the line of Himanshu Gupta from Scotiabank.

So on the Seasons portfolio, will there be a rebranding of these assets to Chartwell or you're going to stick to Seasons brand? And then the next question is, can you spell out the upside on margins here as you move up the occupancy?

We will rebrand the portfolio as Chartwell in due course, of course. And the margin opportunity will be similar to what we would normally describe to as margin opportunities as the occupancies grow from 6% today to hopefully 95% in the future. A lot of the additional revenue that will be generated will fall down to the bottom line, and we'll continue to improve margins in this portfolio.

The I mean, if I look at the Alberta portion of the Seasons portfolio, it's a heavier mix of AL. Is that like the continuum care part there? And -- and then there was a recent government funding increase in Alberta, do you benefit from that?

Yes, it's a portion of the portfolio of 6 properties out of 7 have government funding in them, and the funding increases will help with the revenue in that portfolio as well.

Okay. Moving on to the dispositions, the 9 properties you kind of disclosed. Have they been sold to one buyer? Or is it a collection of them? I mean just trying to sense -- get a sense of is the capital available for these kind of older noncore assets?

They're being sold to one buyer.

Okay. They've been so the 1 buyer. Okay. Okay. Good to know that. Okay. Moving on maybe a couple of housekeeping here. On income guarantees. How's the Vista and Edgewater ramping up? I mean do you see this income guarantees burning off? Or when do you see that burning. I see that no IFFO was disclosed this quarter.

Yes. Himanshu. Yes, we did have $3.3 million of income guarantees in the quarter, and those do burn off and convert to NOI as we successfully lease up the properties, and we're seeing. I think you ask about Vista? If you did, I think we're seeing good lease-up activity there. So those will tail off during the balance of this year and may continue a bit into 2027 and then subject to us doing potentially new acquisitions that may involve income guarantees in the future.

Got it. Okay. And maybe just one last question here on the balance sheet. So system is already closed now. You spoke about some CMS get financing post quarter. How much cash do we have here for the Seasons portfolio?

So sit in close on April 2. So it wasn't captured in the margin [indiscernible] 31st balance sheet. So we are carrying $187 million of cash on hand now. So that included $91 million of CMHC financing that we did over the last week. In addition, we have another $86 million financing that should close in the next 2 to 3 weeks. So that would more than cover the Seasons acquisition requirements and then that, in addition to future CMAC financings and asset sale proceeds that supports future acquisition activity, including potentially the additional 20% if that is exercised.

Got it. And you will receive that 9 asset property sale in Q2 itself. So that funding is coming through and the [indiscernible] cliff is coming as well.

Yes, Valley Cliff later in the year, likely because it requires some regulatory approvals, but the Ontario 9 portfolio sale will be this quarter as well as expected to be this quarter.

Your next question comes from the line of Tal Woolley from CIBC Capital Markets.

Just on the Fengate joint venture, it seemed like a natural size that this would grow to. I think you'd measure that $1.3 billion and you'll be adding developments over time. Is there like a sort of land bank in there already that you kind of have an idea of like exactly how many assets this could be in the future. And then would this JV ever look at acquiring existing properties, too?

Our expectation, as Jonathan pointed out, that hopefully will be 1 or 2 developments a year that could be added to this joint venture arrangement. We just negotiated the deal to acquire 30% interest in that. So we may acquire properties in this joint venture or may not. This is not decided at this point in time.

Okay. And then one of your peers mentioned on a quarterly conference call, you sort of talked about the evolution of their care platform and that unsurprising not surprisingly, like during COVID and in the immediate years following COVID that there was barely any profitability from delivering care, if not meaningful losses in that -- this is sort of the first year where they're sort of seeing meaningful profit per care hour. Does that track with what your experience has been? And how do you guys measure sort of the profitability of that going forward? And is margin growth really a function of that hair profitability improving?

Some of it is -- so if you look at our additional care services, they have been growing by double digits now for 3 or 4 years in a row. We expect that trend to continue because there is -- continues to be additional need in the people who are staying with us. So we expect that, that line item will continue to grow. You should realize the care services obviously come with cost. Our target is to get 25% to 30% margin on those services. And so we think we're achieving those margins on the services. But overall, if you look at our overall margins being in low 40s, the more services that we provide, the margins can go lower, but the profitability of the business will go higher. So it's a trade-off in that sense, but there is certainly an opportunity to continue to improve and deliver more and better services to the customers and generate additional profitability. And overall, just in terms of the scale for tool of this opportunity, our care services -- additional care services are about 50%, $50 million on $1 billion of revenue. So it's not a huge opportunity, but it is an important opportunity for us to make sure that we are set to deliver services that are required by our residents.

And then just finally, staying on this topic. You're growing in scale pretty rapidly here. Are you able to extract like better pricing from vendors in recent years as you guys have grown like whether it's food distribution or supplies, that kind of stuff. Do those vendor contracts come up for renewal and you expect to see more gains there?

Yes. Tal, I mean the short answer is yes. We are seeing good skill benefits including on food and repair and maintenance. So that is helping drive some margin improvement.

And our supply team has been doing phenomenal work for many, many years now, and they -- this is an ongoing process. not just a function of we've grown. So let's go and talk to our vendors. They do this on an ongoing basis every time the contracts come up for renewals. And we treat our vendors as partners. And so we want to make sure that there's fair distribution of profits and risk and deliver quality product to Chartwell. So that always comes into consideration as well.

Okay. And then finally, Jeff, just on -- congratulate from a credit rating upgrade. Any material interest rate savings you expect to see from the upgrade?

Nothing imminent. We're not using our credit facility right now. So there would be a benefit in pricing there. And we may ultimately come back to the unsecured market later in the year, but that's still to be determined. But if we do, we would expect to see, again, some benefit from that market.

Your next question comes from the line of Juliano Thornhill from National Bank.

I was just turning back to the seasoned portfolio. I'm wondering if you could just kind of explain the geographic exposure and why you think that fits the chart? Well, just as well as kind of long-term rental growth rate in that portfolio?

The majority of the portfolio is in Ontario. There are 2 properties in Bridge Colombia and 7 in Alberta. The rest of them are in Ontario, mostly Southwestern Ontario. And -- your second question was on rental rate growth opportunities. We see them being similar to what they are in the thermal overall portfolio. Our expectation is that as demand continues to grow, there is an opportunity to increase market rates that we're asking our new residents to pay and the philosophy on the rent increases for the existing residents will be consistent with our philosophy, which will be similar to an inflation plus 1% or 2% to address cost escalations in the business.

And I'm just wondering, would it be right to view the kind of low occupancy in the portfolio as kind of the reason why you guys were brought in because your sales are a better operator share and that you can't possibly operate the portfolio better than before and keep it fully more longer?

Absolutely not. Seasons is a great operator and they've done a very good job running this portfolio. There are a few properties that are in lease-up that are leasing up over time, and we'll drive overall average occupancy up. We certainly think that we can improve on certain things. as operators and operators at scale and we certainly will put these processes in place to drive those improvements. But -- this is since been doing a very good job building and operating this portfolio over many years.

And then just in terms of the management fee there, will that be partially offset by kind of associated G&A? Or do you think you can scale the platform going forward?

We think we certainly at a scale where every time we add more properties to our portfolio. The management fees that these properties generate or notional management fees, if we look at our 100% owned properties, are higher than the cost that we need to incur to support these properties. That's certainly the benefits of the scale and a lot of the technologies implementations that we put in place and process improvements that we put in place over the last number of years that now help us to grow and scale the business profitably.

Okay. And then just lastly, on the disposition of the noncore, the 9 home portfolio, were you guys able to disclose the cap rate for that?

Yes, we're actually seeing strength in cap rates for this asset class and a deeper buyer pool. So the cap rate is about 100 to 150 basis points higher than what we're buying Class A assets for. So mid-7s.

There are no further questions at this time. I will now turn the call back to Vlad Volodarski, Chief Executive Officer of Chartwell for closing remarks.

Thank you, Lucas, that wraps up our today's conference call. A reminder that our AGM will be held in a hybrid format on Thursday, June 18, at 4:30 p.m. Details will be posted on our website next week. We are looking forward to you joining us then. Thanks again to everybody for joining us. If you have any further questions, please do not hesitate to give us a call. Goodbye.

This concludes today's call. Thank you for attending. You may now disconnect.