Chartwell Retirement Residences : Q4 2023 MD&A

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MANAGEMENT'S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

For the Year Ended December 31, 2023

Contents
BUSINESS OVERVIEW	3
BUSINESS STRATEGY	6
2024 OUTLOOK	9
SIGNIFICANT EVENTS	12
JOINT ARRANGEMENTS	16
CONSOLIDATED RESULTS OF
OPERATIONS	18
Net Income/(Loss)	18
FFO	19
Adjusted Resident Revenue, Adjusted Direct
Property Operating Expense,
Adjusted Operating Margin, and
Adjusted NOI	20
Results of Retirement Operations	22
Interest Income	25
General, Administrative and Trust Expenses...	26
Finance Costs	26
Other Income/(Expense)	27
Other Items	28
CASH FLOW ANALYSIS	29

LIQUIDITY AND CAPITAL RESOURCES	30
Liquidity	30
Debt	30
Financial Covenants	34
Credit Facilities and Term Loans	36
Debentures	38
Supporting Covenant Calculations	40
Total Equity	43
Distributions	43
CAPITAL INVESTMENTS	45
BALANCE SHEET ANALYSIS	46
COMMITMENTS AND CONTINGENCIES	47
SUMMARY OF SELECT FINANCIAL
INFORMATION	48
ADDITIONAL INFORMATION ON
NON-GAAP MEASURES	50
LTC DISCONTINUED OPERATIONS	56
CRITICAL ACCOUNTING POLICIES AND
ESTIMATES	58
RELATED PARTY TRANSACTIONS	60
CONTROLS AND PROCEDURES	60
RISKS AND UNCERTAINTIES AND
FORWARD-LOOKING INFORMATION	61
SUPPLEMENTAL INFORMATION	72

About this Management's Discussion and Analysis

Chartwell Retirement Residences ("Chartwell" or the "Trust") has prepared the following management's discussion and analysis (the "MD&A") to provide information to assist its current and prospective investors' understanding of the financial results of Chartwell for the year ended December 31, 2023. This MD&A should be read in conjunction with Chartwell's audited consolidated financial statements for the years ended December 31, 2023 and 2022, and the notes thereto (the "Financial Statements"). This material is available on Chartwell's website at www.investors.chartwell.com. Additional information about Chartwell, including our Annual Information Form for the year ended December 31, 2023, dated March 7, 2024 (the "AIF"), can be found on SEDAR+ atwww.sedarplus.com.

The discussion and analysis in this MD&A is based on information available to management as of March 7, 2024.

All references to "Chartwell," "we," "our," "us," or the "Trust" refer to Chartwell Retirement Residences and its subsidiaries, unless the context indicates otherwise. For ease of reference, "Chartwell" and the "Trust" are used in reference to the ownership and the operation of retirement and long term care residences and the third-party management business of Chartwell. The direct ownership of such residences and operation of such business is conducted by subsidiaries of the Trust.

In this document we refer to joint ventures as defined by IFRS Accounting Standards in 'IFRS 11 - Joint Arrangements' and that are accounted for using the equity method as "Equity-Accounted JVs".

In this document, "Q1" refers to the three-month period ended March 31; "Q2" refers to the three-month period ended June 30; "Q3" refers to the three-month period ended September 30; "Q4" refers to the three- month period ended December 31; "2023" refers to the calendar year 2023; "2022" refers to the calendar year 2022, "2021" refers to the calendar year 2021; "2020" refers to the calendar year 2020.

Unless otherwise indicated, all comparisons of results for 2023 and Q4 2023 are in comparison to results from 2022 and Q4 2022, respectively.

All dollar references, unless otherwise stated, are in Canadian dollars.

In this document we use a number of performance measures that are not defined in generally accepted accounting principles ("GAAP") which follow the disclosure requirements established by National Instrument 52-112Non-GAAP and Other Financial Measures Disclosures (effectively, the "Non-GAAP Measures"), to measure, compare and explain the operating results and financial performance of the Trust.

These Non-GAAP Measures do not have standardized meanings prescribed by GAAP and, therefore, may not be comparable to similar measures used by other issuers. The Real Property Association of Canada ("REALPAC") issued white papers with recommendations for calculations of Funds from Operations ("FFO"), and Adjusted Funds from Operations ("AFFO"), the "REALPAC Guidance". Our FFO definition is substantially consistent with the definition adopted by REALPAC. Refer to the "Additional Information on Non-GAAP Measures" section of this MD&A for details. As part of our financial covenants reporting, we present AFFO in accordance with the definitions used in our credit agreements. This definition differs from the definition in the REALPAC Guidance.

In this document we use various financial metrics and ratios in our disclosure of financial covenants. These metrics are calculated in accordance with the definitions contained in our credit agreements and the trust indenture governing our outstanding debentures and may be described using terms which differ from standardized meanings prescribed by GAAP. These metrics may not be comparable to similar metrics used by other issuers.

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Specified financial measures are categorized as non-GAAP financial measures, non-GAAP ratios, supplementary financial measures and capital management measures as follows:

Non-GAAP Financial Measures

FFO, FFO for continuing operations, Total FFO, FFO from LTC Discontinued Operations, FFO for Equity- Accounted JVs, and Internal Funds from Operations, ("IFFO"), IFFO for continuing operations, Total IFFO, IFFO from LTC Discontinued Operations, Adjusted Funds from operations ("AFFO") including per unit amounts ("PU"), Earnings before interest, tax, depreciation and amortization ("consolidated EBITDA" or "EBITDA"), Adjusted Resident Revenue, Adjusted Direct Property Operating Expense, Adjusted Operating Margin, Consolidated Interest Expense, Adjusted Consolidated Gross Book Value of Assets, Book value of assets, Gross book value adjustment on IFRS transition, Adjustment for accumulated depreciation and amortization, Aggregate Adjusted Assets, Payment of cash distributions and Amortization of finance costs and fair value adjustments on assumed mortgages, Finance cost reserve, and Proforma adjustments.

Non-GAAP Ratios

Debt Service Coverage Ratio, Interest Coverage Ratio, Total Leverage Ratio, Adjusted Consolidated Unitholders' Equity Ratio, Secured Indebtedness Ratio, Unencumbered Property Asset Ratio, Consolidated EBITDA to Consolidated Interest Expense Ratio, Indebtedness Percentage, Net Debt to Adjusted EBITDA Ratio, Payment of Cash Distributions, Expected Unlevered Yield, and Coverage Ratio.

Supplementary Financial Measures

Net Operating Income ("NOI"), Adjusted NOI, Adjusted Development Costs, Lease-up-Losses, Estimated Stabilized NOI, Unencumbered Property Asset Value and Unencumbered Aggregate Adjusted Assets.

Capital Management Measures

Liquidity, Imputed Cost of Debt, Total Equity, Regularly Scheduled Debt Principal Payments, Consolidated Indebtedness, Secured Indebtedness, Unsecured Indebtedness, and Investment Restrictions.

Refer to the "Additional Information on Non-GAAP Measures", "Consolidated Results of Operations - FFO", "Significant Events - Development - Expected Unlevered Yield, Development Lease-up-Losses and Imputed Cost of Debt", "Consolidated Results of Operations - Adjusted Resident Revenue, Adjusted Property Operating Expense, Adjusted Operating Margin, and Adjusted NOI" and "Liquidity and Capital Resources - Financial Covenants" sections of this MD&A for details on these measures.

Risks and Uncertainties

Refer to the "Risks and Uncertainties" section of this MD&A, and our AIF, for detailed discussions of risk factors and uncertainties facing Chartwell.

Forward-Looking Information

This document contains forward-looking information that reflects management's current expectations, estimates, forecasts and projections about the future results, performance, achievements, prospects or opportunities for Chartwell and the seniors housing industry as of the date of this MD&A. Refer to the "Forward-Looking Information" section on page 70 of this MD&A.

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Business Overview

Chartwell is in the business of serving and caring for Canada's seniors. We are passionate about what we do because we know we are positively impacting the lives of many people.

Our Vision	Making People's Lives BETTER
Our Mission	To provide a happier, healthier and more fulfilled life experience for seniors
	To provide peace of mind for our residents' loved ones
	To attract and retain employees who care about making a difference in our
	residents' lives, and
	To provide an investment opportunity that benefits society with reasonable and
	growing returns to the unitholders.
Our Values	Respect - We honour and celebrate seniors
	Empathy - We believe compassion is contagious
	Service Excellence - We believe in providing excellence in customer service
	Performance - We believe in delivering and rewarding results
	Education - We believe in lifelong learning
	Commitment - We value commitment to the Chartwell family
	Trust - We believe in keeping our promises and doing the right thing
Our Portfolio	Chartwell is an open-ended real estate trust governed by the laws of the
	Province of Ontario. We indirectly own and operate a portfolio of seniors housing
	residences across the continuum of care, all of which are located in Canada.

We provide resident services and care in the following settings:

Independent	Apartments / townhouses/ bungalows/ with full kitchens, availability of dining, life
Living Apartments	enrichment and housekeeping services.
("IL")
Independent	Apartments/ townhouses/ bungalows/ with full kitchens, with availability of dining,
Supportive Living	life enrichment, housekeeping, personal assistance, and care services.
- Apartments
("ISLA")
Independent	Suites with availability of dining, life enrichment, housekeeping, personal
Supportive Living	assistance, and care services.
- Suites ("ISLS")
Assisted Living	Suites with a base level of personal assistance services and/or personal care
("AL")	services for persons with Alzheimer's disease or other forms of dementia
	included in the base fee, located in a separate/secure wing, floor or building.
	Additional care services may be added on top of base fee.
Long Term Care	Access to 24-hour nursing care or supervision in a secure setting, assistance
("LTC")	with daily living activities and high levels of personal care. Admission and
	funding are overseen by local government agencies in each province.

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Composition of Our Portfolio

The following presents the composition of our owned and managed portfolio of residences in our Retirement Operations at December 31, 2023:

		Owned			Managed
								Total
	100% Owned	Partially Owned (1)(2)	Total Owned	Total Managed (3)
Residences	111	49	160		9			169
Suites/Beds	14,434	9,496	23,930		2,471			26,401

Level of Care(4)(5)			Geographic Location(5)
Long Term Care			British Columbia
3%	Independent			10%
Assisted Living	Living Apartments
7%	6%			Alberta
				9%
			Quebec
	Independent	34%
Independent		Supportive
	Living
Supportive		Apartments
Living Suites		32%
52%				Ontario
				47%
Ownership Interest(2)		Adjusted NOI by Operating Segment(4)(5)(6)
				Long Term Care
Partially Owned				Operations
			6%
36%			Retirement

Operations 94%

100% Owned

55%

Managed

9%

1. Includes 39 residences (8,074 suites) that are part of the Welltower Transaction agreement. Refer to the "Significant Events - Portfolio Optimization" section on page 15 of this MD&A.
2. We have a 42.5% ownership interest in three residences (909 suites), a 45% ownership interest in one residence (332 suites), a 50% ownership interest in 41 residences (7,669 suites), a 60% ownership interest in one residence (165 suites) and an 85% ownership interest in three residences (421 suites).
3. Includes two residences (314 suites) that are managed for Welltower. Refer to the "Significant Events - Portfolio Optimization" section on page 15 of this MD&A.
4. On September 6, 2023, we closed on the previously announced sale of our Long Term Care Operations in Ontario. Refer to the "Significant Events - Portfolio Optimization" section on page 15 of this MD&A.
5. Based on Chartwell's share of ownership interest at December 31, 2023.
6. Adjusted NOI % represents Chartwell's share of ownership interest for the 12 months ended December 31, 2023.

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Property Portfolio Groupings

We use groupings of our properties to evaluate and monitor our financial and operating performance. Our portfolio groupings are: same property, growth, and repositioning.

The supplemental disclosures of these portfolio groupings are Non-GAAP Measures that do not have standardized meanings prescribed by GAAP and, therefore, may not be comparable to similar measures used by other issuers. In addition to the definition for these portfolio groupings, the following includes the composition of each portfolio for the current reporting period.

Same Property Portfolio

Our same property portfolio includes properties that have been owned continuously since the beginning of the previous fiscal year. To improve comparability, our same property portfolio excludes development properties that have not yet achieved 90% occupancy by January 1 of the preceding fiscal year, properties that are expected to be sold in the current or next fiscal year, and properties that are undergoing a significant redevelopment or repositioning.

The following table summarizes the composition of our same property portfolio as at December 31, 2023:

			Suites/Beds at Chartwell's
	Properties	Suites/Beds	Share of Ownership
Retirement Operations (1)	101	12,866	12,551

1. Excludes 38 properties (7,902 suites) that are part of the Welltower Transaction agreement; refer to the "Significant Events - Portfolio Optimization" section on page 15 of this MD&A.

Growth Portfolio

Our growth portfolio, previously acquisitions and development portfolio, includes properties that were acquired subsequent to January 1 of the preceding fiscal year and development properties that have not yet achieved 90% occupancy by January 1 of the preceding fiscal year. Consequently, the previous fiscal year's results are not fully comparable for these properties. Additionally, our growth portfolio includes properties for which we will acquire incremental ownership interest in the current or next fiscal year.

The following table summarizes the composition of our growth portfolio as at December 31, 2023:

	Properties	Suites/Beds	Suites/Beds at Chartwell's
	Share of Ownership
Retirement Operations (1)	29	5,508	3,519

1. Includes 16 properties (3,480 suites) in which we will acquire Welltower's interests, and excludes one property (172 suites) moved to the repositioning portfolio under the terms of the Welltower Transaction agreement; refer to the "Significant Events - Portfolio Optimization" section on page 15 of this MD&A.

Repositioning Portfolio

Our repositioning portfolio, previously dispositions and repositioning portfolio, includes properties that we expect to sell in the current or next fiscal year, and properties that are undergoing a significant redevelopment or repositioning, including in some cases changes in capacity or use.

The following table summarizes the composition of our repositioning portfolio as at December 31, 2023:

			Suites/Beds at Chartwell's
	Properties	Suites/Beds	Share of Ownership
Retirement Operations (1)(2)	30	5,556	3,191

1. Includes three properties (358 beds) which were previously reported in Long Term Care Operations that are now monitored and reported with our Retirement Operations, and one property (61 suites) which we have subsequently sold on February 1, 2024; the suites of which were removed from our available capacity effective January 1, 2023 and accordingly are not included in the suite count.
2. Includes 23 properties (4,594 suites) in which we will sell our interests to Welltower under the terms of the Welltower Transaction agreement; refer to the "Significant Events - Portfolio Optimization" section on page 15 of this MD&A.

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Business Strategy

Our Strategy Statement

"In 2025, we will achieve in our retirement residences, Employee Engagement of 55% (highly engaged), Resident Satisfaction of 67% (very satisfied) and Same Property Occupancy of 95% to drive strong IFFOPU growth by providing exceptional resident experiences through personalized services in our upscale and mid-market residences in urban and suburban locations."

Objectives:

We believe that only highly engaged employees will deliver the exceptional resident experiences fulfilling our vision of Making People's Lives Better and driving high resident satisfaction scores. We know that very satisfied residents are much more likely to recommend their residence to their friends and be Chartwell ambassadors in their local communities. We know that the majority of our new resident move-ins are based on such recommendations. Therefore, by focusing our efforts and investments in the areas of employee engagement and resident satisfaction, we expect to generate high occupancy rates which, in turn, should drive strong growth in earnings. We elected to measure this earnings growth by utilizing an Internal Funds from Operations ("IFFO") metric on a per unit basis ("IFFOPU"). IFFO is calculated by adding to FFO the following: (a) lease-up-losses and imputed financing costs related to our development properties, (b) current income taxes, and (c) income guarantees due from vendors of certain acquired properties. IFFO is a non- GAAP measure. The reconciliation of IFFO to net income/(loss) and FFO, explanations and rationale for adjustments can be found in the "Additional Information on Non-GAAP Financial Measures" section on page 50 of this MD&A.

Scope and Competitive Advantage:

Exceptional resident experience - Our customer is our resident. Our Unique Value Proposition is an exceptional resident experience, and we achieve it by providing personalized services. Our service standards are 'Safety, Respect, Efficiency and WOW'.

Personalized services - We treat each resident as a unique individual. We get to know them well before they come to reside with us and we tailor our service offering to their individual preferences and needs.

Our residences - We own, operate and develop our residences. With a few specific exceptions we do not manage residences for third parties, nor do we invest in residences managed by others.

Upscale to Mid-market - We target the upscale and mid retirement market. We do not operate residences with base-level services and a limited staff complement due to high operating risks. We do not operate residences with premium upscale services due to the small size and narrow focus of this niche market.

Urban and suburban - We target residences in urban and suburban areas and will not operate in markets with populations less than 25,000 within a 10 km radius of our residences. In addition, to achieve management efficiencies we will not operate residences that generate less than $1 million of NOI at stabilized occupancy. We expect to continue to operate in the four most populous provinces of Canada (Ontario, Quebec, British Columbia, and Alberta) where we strive to be market leaders.

The following highlights the progress made in 2023 on the key components of our business strategy:

Employee Engagement

Our annual employee engagement survey includes 25 core engagement statements. In addition, for the second year we added specific statements with respect to diversity of our employees and their perception of inclusivity at Chartwell.

In 2023, in our retirement residences we achieved a score of 54% of employees indicating high engagement ('Strongly Agree' responses). Our combined 'Agree' and 'Strongly Agree' score was 84% in 2023 compared to 81% in 2022.

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The following chart summarizes historical employee engagement survey results for our retirement residences:

	60%		42%	44%	49%	50%		44%	49%	54%
Engaged
40%
Highly	20%
0%
	2016	2017	2018	2019	2020 (1)	2021	2022	2023

1. In 2020, a modified survey was conducted; therefore, the 2020 result is not comparable to prior periods and it has not

presented.

55%

2025 Target

been

Resident Satisfaction

Our annual resident satisfaction survey includes 38 statements covering various aspects of resident experience at Chartwell with the overall score determined by the average of 'Strongly Agree' responses to the following three statements:

• I am satisfied with Chartwell as a place to live.
• It rarely crosses my mind to leave Chartwell for another retirement residence.
• When asked, I would recommend Chartwell as a place to live.

In 2023, 61% of the survey respondents indicated their high satisfaction ('Strongly Agree' responses), surpassing our 2022 results by seven percentage points. Our combined score of residents who 'Agree' and 'Strongly Agree' with the survey statements was 87% in 2023 compared to 84% in 2022.

The following chart summarizes historical resident satisfaction survey results for our retirement residences:

Very Satisfied	80%	51%	53%	58%	63%		55%	54%	61%	67%
60%
40%									2025 Target
20%
	0%	2016	2017	2018	2019	2020 (1)	2021	2022	2023

1. In 2020, a modified survey was conducted; therefore, the 2020 result is not comparable to prior periods and it has not been presented.

Occupancy

The following chart summarizes our same property occupancy for our Retirement Operations:

	100%	92.6%	91.9%	90.5%	88.6%	84.1%	77.1%	77.5%	81.1%	84.9%	95.0%
(1)
75%
Occupancy										2025 Target
50%
25%
	0%	2016	2017	2018	2019	2020	2021	2022	2023	Dec-23

1. The same property occupancy numbers are as reported, and the composition of the same property portfolio is not the same year-over-year.

In 2023, we achieved strong occupancy growth from 79.7% in December 2022 to 84.9% in December 2023. Refer to the "2024 Outlook - Retirement Operations" section on page 9 of this MD&A for details.

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Agile, Scalable Management Platform

We are building on the strength of our management platform to become a more agile and scalable organization to support growth of our portfolio successfully and profitably in the future. We believe this will be achieved through further empowerment of our residences' leaders and front-line employees and the streamlining of our corporate support functions to provide more targeted and timely assistance to our residences' teams. In 2023, we continued with the implementation of the re-aligned corporate support functions to better support the needs of our residences. We streamlined many of our corporate processes and invested in our technology platforms to enable faster information sharing, decision making, and improved focus. New technology introduced in 2023 included: enhanced business intelligence capabilities, the roll-out of an electronic health records platform, an integrated recruitment system, a workforce management tool, a new website, and marketing automation systems, among others. We also focused our sales and marketing to support local and targeted strategies for each of our residences. In addition, we implemented new operating programs for smaller residences to enhance personalization of services to the residents in these homes in a more cost-effective manner.

Portfolio Optimization and Asset Management

We accelerated the execution of our portfolio optimization strategy to become a focused operator of mid- market and upscale residences in urban and suburban areas. In 2023, we completed the sale of our Ontario LTC portfolio, and the divestiture of three non-core properties with another non-core property sold in February 2024. In addition, we announced the wind-up of our joint arrangements with Welltower Inc ("Welltower"). Refer to the "Significant Events - Portfolio Optimization" section on page 15 of this MD&A.

As we continue to improve our portfolio, several other residences are currently under review for the development and execution of property-specific strategies which may include service model changes, capital upgrades, asset class repositioning, or dispositions. Our operations team has been reorganized to create a specialized team charged with oversight of certain properties which require more complex operating strategies.

Growth

The rise in both construction costs and our cost of capital has resulted in a slowdown in our development and acquisition activities in recent years. As these costs moderate, we expect to pursue growth opportunities in new developments and through acquisitions. We believe that our national management platform will continue to be our competitive advantage in pursuing these growth opportunities. We also have a number of potential acquisition opportunities of newly developed residences through our partnership with Batimo, Inc ("Batimo") in Quebec and continue to evaluate a number of development opportunities on lands we control. We are also working to build new relationships with reputable developers and investors to avail ourselves of future growth opportunities that are complementary to our portfolio.

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