Q3 2019 Earnings Call

November 8, 2019

Good morning, ladies and gentlemen, welcome to the chart golf retirement residences Q3, 2019 financial results Conference call.

Operator: Good morning, ladies and gentlemen. Welcome to the Chartwell Retirement Residences Q3 2019 Financial Results Conference Call. Following the formal comments, we will hold a question-and-answer session. Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Brent Binions, President and Chief Executive Officer of Chartwell Retirement Residences. Please go ahead, Mr. Binions.

Following the formal comments, we will hold the question and answer session.

Please be advised that this call is being recorded.

Now I'd like to turn the meeting over to Mr., Brent opinions, President and Chief Executive Officer of Chartwell retirement residences. Please go ahead mr. opinions.

Brent Binions: Thank you. Good morning, and thank you for joining us today. There's a slide presentation to accompany this conference call available on our website at chartwell.com under the Investor Relations tab. Joining me are Vlad Volodarski, Chief Financial Officer and Chief Investment Officer, and Karen Sullivan, Chief Operating Officer. Let me remind everyone that during this call, we may make statements containing forward-looking information and non-GAAP measures. I direct you to our MD&A and other securities filings for information about the assumptions, risks, and uncertainties inherent in such forward-looking information and details of such non-GAAP measures. These documents can be found on our website or at sedar.com. Our results in Q3 2019 have been impacted by new competition, particularly in certain Ontario and Quebec markets.

Good morning, Thank you for joining us today, there's a slide presentation to accompany this conference call available on our website at Chartwell Dot com under the Investor Relations to.

Joining me are black bullet Norske, Chief Financial Officer, and Chief Investment Officer, and Karen Sullivan, Chief operating officer.

Let me remind everyone that during this call we may make statements containing forward looking information to non-GAAP measures regulatory mdna at other securities filings for information about the assumptions risks and uncertainties inherent in such forward looking information and details of such non-GAAP measures. These documents can be found on our website Cedar Dot com.

Our results in the third quarter of 2019 have been impacted by new competition, particularly in certain Ontario, Quebec markets. We expect this impacted me moderated in 2022 years by the expected growth the demand for senior living accommodation, resulting from the accelerating growth in population of people.

Brent Binions: We expect this impact to be moderated in 2020 and future years by the expected growth and demand for senior living accommodation resulting from the accelerating growth in population of people over the age of 75 years. We are well on our way to executing on our five-year strategy with the rollout of our newly developed customer experience training programs to our 1,200 leaders and to our frontline staff in late 2019 and early 2020. Continuing our successful development program in Q3 2019, operations commenced at Kingsbridge Retirement Community in Kingston, Ontario, which is comprised of 165 IL and AL suites and is currently 41% leased.

Over the age of 75 years.

We are well under way to executing on our five year strategy with the rollout of our newly developed customer experience training programs to our 1200 leaders and to our frontline staff in late 2019 in early 2020.

Continue we're continuing our successful development program in Q3, 19 operations commenced Kingsbridge retirement community and Kinks in Ontario, which is comprised of 165, <unk> L.S. and <unk> suites and is currently 41% leased.

Brent Binions: In 2019 to date, we completed sales of 2 non-core retirement residences and entered into a definitive agreement to sell 4 non-core long-term care in Ontario. Closing of that sale is expected in early 2020, subject to the receipt of regulatory approvals. Our financial position remains strong, as you can see on slide 4. At September 30, 2019, our liquidity amounted to CAD 384.5 million, which included 17.3 million of cash and cash equivalents and 367.2 million of available borrowing capacity on our credit facilities. In addition, at September 30, 2019, our share of cash and cash equivalents held in our equity account of JVs was CAD 7.1 million.

Stereo.

Closing of that sales expected in early 2020 subject to the receipt of regulatory approvals.

Our financial position remained strong as you can see on slide four at September 32019, our liquidity amounted to 384.5 million, which concluded 17.3 million of cash and cash equivalence and 367.2 million of available borrowing capacity our credit facilities.

In addition at September 32, now 2019, our cash our share of cash and cash equivalents held in our equity accounted Jvs was 7.1 million.

Brent Binions: The interest coverage ratio on a rolling twelve-month basis remains strong at 3.2 at December 30, 2019, consistent with at September 30, 2019, consistent with December 31, 2018. Our indebtedness percentage calculated using historical cost of our assets was 50% at September 30, 2019, and our debt to capitalization ratio was 42.4%. Net debt to adjusted EBITDA ratio increased to 8.1 times compared to 7.8 times at December 31, 2018. We continue to build value in our real estate portfolio through portfolio and asset management programs, development of new properties, and opportunistic acquisitions, as shown on slide 5. These value-add activities are supported by extensive industry and market research and by rigorous risk management practices.

Interest coverage ratio on a rolling 12 month basis remained strong at 3.2 at December 32019, consistent with.

At September 32019, consistent with Decemberthirty one 2018.

Our indebtedness percentage calculated using historical cost of our assets was 50% at September 30, 19, and our debt to capitalization ratio was 42.4%.

Net debt to adjusted EBITDA ratio increased to 8.1 times compared to 7.8 times at December 30 118.

We continue to build value in our real estate portfolio through portfolio, an asset managed programs development of new properties and opportunistic acquisitions as shown on slide five these value add activities are supported by extensive industry and market research and by rigorous risk management practices work continues on our development pipeline.

Brent Binions: Work continues on our development pipeline of 1,005 suites with four projects, 359 suites in construction and four projects, 646 suites in pre-development. These projects are expected to generate meaningful development returns and allow us to grow our property portfolio with new efficient state-of-the-art residences. We continue to add future projects to our development pipeline. In addition, we have options to acquire close to 2,800 additional suites in Quebec through our partnership with Batimo. I'll now turn it over to Karen Sullivan, our Chief Operating Officer, to talk about some operational initiatives she and her team are working on. Karen?

And 1005 suites with four projects.

A 359 suites in construction at four projects 646 suites in Predevelopment.

These projects are expected to generate meaningful development returns and allow us to grow our property portfolio with new efficient state of the art residences.

We continue to add future projects to our development pipeline.

Additionally, we have options to acquire close at 2800 additional suites and go back to our partnership with bad them [noise].

I'll turn it over to Karen Sullivan, our Chief operating officer to talk about some operational initiatives. She and her team are working on guarantee.

Karen Sullivan: Thanks, Brent. Turning to slide six, despite the competitive landscape in several markets, we are starting to see some positive signs that our sales and marketing strategies are effectively positioning our homes for future occupancy gains. This includes improvements to important leading indicators such as initial contacts, which increased 9% quarter over quarter. We also saw improvement in our personal visits this quarter compared to our last two quarters. Our 22 September open house generated almost 1,000 new initial contacts, an increase over our last two fall open houses, and stronger than our 2019 spring open house, which is traditionally the higher attended of our two events each year. Our contact center forwarded 6,319 leads to our homes, an increase of 33%, from Q3 last year.

Brent and turning to slide six despite the competitive landscape in several markets. We are starting to see some positive signs that our sales and marketing strategies are effectively positioning our homes for future occupancy gain.

This includes improvements to important leading indicators such as initial contacts which increased 9% quarter over quarter.

We also saw improvement in our personal visits this quarter compared to our last two quarters.

Our September 22nd open house generated almost a thousand new initial contact an increase over our last to fall open houses and stronger than our 2019 spring often house, which has traditionally the higher attended of our two events each year.

Our contact center forwarded 6319 leads to our homes an increase of 33%.

From Q3 last year.

Karen Sullivan: They also successfully scheduled 3,623 personal visits, an increase of 73% from Q3 2018, due in part to the addition of a new feature where prospects can utilize an online form on our website to schedule their own time to visit their chosen home. In an effort to ensure that our sales process is effective and being adhered to, we utilize the third-party company that completed 30 mystery shops in Chartwell homes and 23 in competitor homes in Q3. Based on these findings, on average, Chartwell outperformed its competition in most categories. In order to finish the year with a strong initial contact pipeline that can be utilized now as well as into 2020, we continue with a multimedia marketing strategy at the national and provincial level.

Also successfully schedule 3623 personal visit an increase of 73% from Q3 2018 due in part to the addition of a new feature where prospects can utilize and online form on our website to schedule their own time to visit their chosen home.

In an effort to ensure that our sales processes effective and being in here too. We youd utilized a third party company that completed 30 mystery shops, and Chartwell homes, and 23 and competitor Hall in Q3.

Based on these findings on average chartwell outperformed its competition in most categories.

In order to finish the year with a strong initial contact pipeline that can be utilized now as well as into 2020, we continue with ammonia multimedia marketing strategy at the national and provincial level. It's included the launch of our New campaign <unk> live together in September Cross media <unk>.

Karen Sullivan: This included the launch of our new campaign, Let's Live, Together., in September across media platforms such as TV, newspaper, radio, digital, and magazines, along with supporting waves of direct mail for homes and areas of the country with higher levels of competition. Turning to slide 7. In Q3, we received the results of our employee and resident satisfaction survey results. I am pleased to report that we met our employee engagement target for 2019, increasing our score from 47% very satisfied employees to 48% as we continue on our goal to get to 55% very satisfied by 2023. In addition, we are well on our way to our 2023 goal of 67% very satisfied residents, having moved an impressive five percentage points from 58% to 63% in one year.

Forms such as TV newspaper Radio digital digital and magazine, along with supporting waves of direct mail for homes and areas of the country with higher levels of competition.

Turning to slide seven in Q3, we received the results of employee and resident satisfaction Survey survey results I'm pleased to report that we met our employee engagement target for 2019, increasing our score from 47% very satisfied employees to 48% as we can.

Continue on our goal to get to 55% very satisfied by 2023.

And it. In addition, we are well on our way to our 2023 goal of 67% very satisfied rather than having moved unimpressive five percentage point from 58% to 63% in one year.

Karen Sullivan: We remind everyone that we only look at the top box score for both employee engagement and customer satisfaction. We are not satisfied with a rating of satisfied, only very satisfied. I believe this tremendous year-over-year increase is a result of our focus on the customer experience as our unique value proposition over the past several years. This has ramped up with our recent investment in the development of a Chartwell-specific training program that was rolled out to our corporate office this summer and to all 1,300 general managers and their management teams over the past six weeks. The next step is to use our newly hired directors of customer experience, who will be taking this training directly to our frontline employees on a regular basis in our retirement homes.

How we remind everyone that we only look at the top box score for both employee engagement and customer satisfaction, we're not satisfied with a rating of satisfied only very satisfied.

I believe this tremendous year over year increase as a result of our focus on the customer experience as our unique value proposition over the past several years.

This has ramped up with our recent investment in the development of at Chartwell specific training program that was rolled out to our corporate office. This summer and to all 1300 general managers and their management team over the past six weeks. This next step is to sorry. The next step is to use our newly hired.

Our directors of customer experience will be taking this training directly to our frontline employees on a regular basis in our retirement homes. We have no doubt based on the feedback this will increase our referral base and help us with both occupancy and recruitment.

Karen Sullivan: We have no doubt, based on the feedback, that this will increase our referral base and help us with both occupancy and recruitment. I will now turn it over to Vlad to discuss our Q3 2019 financial performance.

I will now turn it over to glad to discuss our Q3 2019 financial performance.

Brent Binions: Thanks, Karen. As shown on slide 8, in Q3 2019, net loss was CAD -0.8 million, compared to net income of CAD 9.1 million in Q3 2018.

Vlad Volodarski: Thanks, Karen. As shown on slide 8, in Q3 2019, net loss was CAD -0.8 million, compared to net income of CAD 9.1 million in Q3 2018.

Thanks, Karen as shown on slide eight in Q3 2019 that loss was point 8 million compared to net income of 9.1 million in Q3 2018.

Vlad Volodarski: Primarily due to a write-down in the carrying value of 2 of our properties, higher direct property operating expenses, and finance costs, partially offset by higher resident revenues, deferred tax recoveries, and gains on disposal of assets. For Q3 2019, FFO was CAD 53.6 million or CAD 0.25 per unit compared to CAD 53.3 million or CAD 0.25 per unit in Q3 2018. The following items impacted the change in FFO. Higher adjusted NOI of CAD 1.1 million, consisting of a CAD 1.2 million increase in same property adjusted NOI, partially offset by a CAD 0.1 million decrease in contributions from acquisitions and developments. Lower G&A expenses of CAD 0.8 million and other items combined CAD 0.1 million, offset by higher finance costs of CAD 1.6 million. Same property occupancy was 89.6% in Q3 2019 compared to 91% in Q3 2018.

Primarily due to write down in the carrying value of two of our properties higher direct property operating expenses and finance costs, partially offset by higher rather than revenues deferred tax recoveries and gains on dispose of assets.

For Q3 2009 for AFFO was 53.6 million or 25 cents per unit compared to 53 point Threemillion or 25 cents per unit in Q3 2018.

Following items impacted the change NFL higher adjusted I know why off 1.1 million consisting of a 1.2 million increase in same property adjusted out away, partially offset by <unk> point 1 million decrease contributions from acquisitions and development.

Our DNA expenses of point Eightmillion and other items combined point 1 million offset by higher finance costs of 1.6 million.

Same property occupancy was 89.6% in Q3 2019 compared to 91% in Q3 2018.

Vlad Volodarski: Turning to operating platform results. As shown on slide 9, in Q3 2019, our Ontario platform same property adjusted NOI increased CAD 0.5 million or 1.4% as rental rate increases in line with competitive market conditions and higher ancillary revenues were partially offset by lower occupancies, higher staffing costs, and office and general expenses. In Q3 2019, same property occupancy was 83.9% compared to 85.9% in Q3 2018. In Q3 2019, our Western Canada same property adjusted NOI increased CAD 0.6 million or 4.6%, primarily due to rental rate increases in line with competitive market conditions, partially offset by lower occupancies and higher staffing costs, as shown on slide 10. Occupancy in Q3 2019 was 95.2% compared to 96.2% in Q3 2018.

Turning to operating platform results as shown on slide nine in Q3 2009 for Ontario platform same property adjusted on a lie increased 2.5 million 1.4%.

Rental rate increases in line with competitive market conditions, and higher ancillary revenues were partially offset by lower occupancy and higher staffing costs and office in general expenses.

In Q3, 2019 same property occupancy was 83.9% compared to 85.9% in Q3 2018.

In Q3, 2019, our Western Canada same property, adjusted and align 3.6 million or 4.6%, primarily due to rental rate increases in line with competitive market conditions, partially offset by lower occupancy isn't higher staffing costs as shown on slide 10.

Occupancy in Q3, 2018 was 95.2% compared to 96.2% in Q3 2018.

Vlad Volodarski: On slide eleven, you will see our Quebec platform same property adjusted NOI decreased CAD 0.1 million or 0.6% in Q3, primarily due to higher staffing costs, office and general expenses, and lower occupancies, partially offset by rental rate increases in line with competitive market conditions and lower property tax expenses as a result of the successful appeal of certain prior years' assessments. In Q3 2019, same property occupancy was 90.7% compared to 92.3% in Q3 2018. As shown on slide twelve, our Ontario long-term care platform same property adjusted NOI increased CAD 0.2 million or 2.5% in Q3 2019, primarily due to higher preferred accommodation revenue and lower repairs and maintenance expenses. Weighted average occupancy in the same property portfolio was 98.8% in Q3 2019 compared to 98.4% in Q3 2018.

On Slide 11, you will see our Clawback platform same property adjusted on a wide decrease point 1 million or 0.6% in Q3.

Merrily due to higher staffing costs office in general expenses, and lower occupancy, partially offset by rental rate increases in line with competitive market conditions and lower property tax expenses as a result of the successful appeal of certain prior years assessments.

Q3, 2019 same property occupancy was 90.7% compared to 92.3% in Q3 2018.

As shown on slide 12, our Ontario long term care platform same property adjusted and a lie increased point 2 million or 2.5% in Q3, 2019, primarily due to higher preferred accommodation revenue and lower repairs and maintenance expenses weighted average occupancy in same property portfolio is 98.8%.

In Q3, 2019 compared to 98.4% in Q3 2018.

Vlad Volodarski: I will now turn the call back to Brent to wrap up.

I'll now turn the call back to Brent to wrap up like flat and we believe that by focusing on enhancing our resident experience in our home by delivering exceptional services and care to our residents we will generate strong financial results and long term sustainable value creation for our unit holders.

Brent Binions: Thanks, Vlad. We believe that by focusing on enhancing our resident experience in our homes, by delivering exceptional services and care to our residents, we will generate strong financial results and long-term sustainable value creation for our unitholders. We recognize that only highly engaged employees can deliver exceptional services and quality care to our residents, and we continue to make significant investments in recruitment, training, and development of our team members. We continue to improve corporate support delivered to our operating teams, including the implementation of new technology solutions to better understand our customers, communicate with our employees, and reduce administrative time commitment in the field.

We recognize that only highly engaged employees can deliver exceptional services in quality care to our residents and we continue to make significant investments in recruitment training and development of our team members. We continue to improve corporate support delivered to our operating teams, including the implementation of new technology solutions to better understand our customer.

Yes, communicate with their employees and reduce administrative time commitment in the field.

Brent Binions: We have put the infrastructure in place to successfully execute on the significant development program we set for ourselves for 2019 and beyond, as we are confident that these new state-of-the-art properties will meaningfully contribute to enhancing the quality of our real estate portfolio and provide strong value creation for our unitholders over time. Thank you for your time and attention this morning, and we will now be pleased to answer any questions you may have.

We have put the infrastructure in place to successfully execute on the significant development program, we set for ourselves for 2019 and beyond as we're confident that these new state of the our properties will meaningfully contribute to enhancing the quality of our real estate portfolio and provide strong value creation for our unitholders overtime.

Thank you for time and attention. This morning, we would now be pleased to answer any questions you may have.

Thank you Mr. opinion.

Operator 3: Thank you, Mr. Binions. We will now be taking questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making the selection. If you have a question, please press star one on your telephone keypad. If at any time you wish to cancel your question, please press the pound sign. Please press star one at this time if you have a question. The first question is from Brendon Abrams from Canaccord Genuity. You may go ahead. Your line is open.

Operator: Thank you, Mr. Binions. We will now be taking questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making the selection. If you have a question, please press star one on your telephone keypad. If at any time you wish to cancel your question, please press the pound sign. Please press star one at this time if you have a question. The first question is from Brendon Abrams from Canaccord Genuity. You may go ahead. Your line is open.

We will now be taking questions from the telephone lines. If you have to question and you are using a speaker phone. Please lift your handset before making the selection. If you have to question. Please press star one on your telephone keypad. If at any time you wish to cancel your question. Please press the pound fine.

Please press star one at this time, if you have a question.

The first question is from Brendan Abrons from Canaccord Genuity you May go ahead. Your line is open.

Brendon Abrams: Hi. Good morning. Brent, in your opening remarks, you speak about the expectation for kind of a balancing in the market or kind of competition moderating in 2020 based on growing demand. I'm wondering if you could just maybe speak to the other side of the ledger in terms of supply and maybe your expectations for the supply side heading into maybe 2020 or 2021.

Hi, good morning.

Brent in your opening remark you speak about the.

The excess expectation for kind of them balancing in the market or kind of competition moderating in 2020 based on growing demand I'm wondering if you could just maybe speak to the other side of the ledger in terms of supply and maybe your.

Expectation.

For the supply side.

Heading into maybe 2020 or 2021.

Brent Binions: Certainly. As you know, we are active in many markets across the country on developments, and we monitor all the markets that we're in. We do see a slowdown in expected starts or expected openings, more accurately, really by H2 2020. Construction costs and land costs keep rising, making it more difficult to do development in some markets. We ourselves have begun to look at some of our projects and slow some of the stuff down. We see this happening kind of on a somewhat broader basis across the market. Our view is that supply will begin to moderate by H2 2020 as demand continues to grow.

Certainly.

We Oh, yeah. As you know are active in many markets across the country on development and we monitor all the markets that we're in.

We do see.

A slowdown in expected starts are expected openings more accurately really by the back half of 2020 construction costs and land cost cap keep rising making it more difficult.

To do development in some markets and we ourselves have.

Begun to look at some or projects that slow some of the stuff down.

And we see this.

Happening.

On a somewhat broader bases across the market. So our view is that supply will begin to moderate by the back half of 2020 as demand continues to grow.

Brendon Abrams: Right. Okay. Vlad, I know you disclose in your MD&A, there's about CAD 13 million of NOI opportunity on the stabilization of, I guess, five recently completed developments. Just wondering if you could remind us again on perhaps maybe a timeline or expectations to achieve call it stabilized occupancy?

Right, Okay and I'm.

But I know the.

For you disclose in your Mdna, there is about 13 million.

No I opportunity on the stabilization of I guess five recently completed development.

Just wondering if you.

I would remind us again on perhaps maybe a timeline or expectations to achieve.

Called stabilized occupancy.

Vlad Volodarski: Sure. It's actually a bit more than CAD 13 million. These five properties contributed -CAD 2 million of NOI year-to-date in 2019. Our expectation that upon achievement of stabilized occupancy of 95%, these five properties will generate about CAD 13.4 million of NOI at our share. The net impact is probably a bit higher than 13.4. These properties should stabilize over the next 2 years, and different time frames for different properties, but over the next 2 years, all of these should be stabilized.

Sure, it's actually a bit more than 13 million. These five properties contributed negative $2 million event, a why year to date in 2019, and our expectation that upon achievement of stabilized occupancy of 95%. These five properties will generate about $13.4 million us.

And a wide our share so that impacts probably a bit higher than 13.4.

These property should stabilize over the next two years.

And different timeframes for different properties there over the next two years all of these should be stabilized.

Brendon Abrams: Okay. Maybe just a last question from me. I know Ottawa has kinda been a softer market for all industry operators there. Can you just remind us your exposure in that market specifically?

Okay.

And maybe just last question for me I know auto was kind of been a softer market.

For all industry operators. There can you just remind us your exposure in that market specifically.

Yes, we have 13 properties in the auto market and certainly been impacted by the oversupply in that particular market.

Vlad Volodarski: Yes. We have 13 properties in the Ottawa market, and certainly been impacted by the oversupply in that particular market.

And so how much and Hawaii or percentage of suites with that.

Brendon Abrams: How much of NOI or percentage of suites would that represent?

Right. So 13 properties about just under 10% of our overall overtime and portfolio.

Vlad Volodarski: 13 properties, about just under 10% of our overall retirement portfolio.

Okay. That's helpful. Thanks, very much I'll turn it over.

Brendon Abrams: Okay. Okay, that's helpful. Thanks very much. I'll turn it over.

Thank you. So next question comes from Jonathan Culture from TD Securities. You May go ahead. Your line is open.

Operator 3: Thank you. The next question comes from Jonathan Kelcher from TD Securities. You may go ahead. Your line is open.

Operator: Thank you. The next question comes from Jonathan Kelcher from TD Securities. You may go ahead. Your line is open.

Jonathan Kelcher: Thanks. Good morning.

Thanks, Good morning.

Vlad Volodarski: Morning.

Jonathan Kelcher: Just sticking with the supply or the impact of supply. It sounds like you expect it to sort of even out near the H2 of next year. How should we think about Ontario occupancy over the next couple of quarters?

Just just sticking with c., the supply or the impact to supply.

Sounds like you expected to sort of even though near the back half of next year, how how should we think about Ontario occupancy over the over the next couple of quarters.

Well new supply has.

Karen Sullivan: Well, new supply has had more of an impact than we expected in Q3. That said, we are seeing a real turnaround in our leading indicators, which is a good sign. We saw an uptick in initial contacts, and personal visits. Our sales calls are definitely up. Our online traffic is up. We, you know, really do feel that the sales strategies that I've been talking to you about the last few quarters are starting to have an impact. Everything from those cluster sales strategies that we're using in the competitive markets, the advertising campaign that we just launched this fall. We had a really successful open house.

Had more of an impact than we expected in Q3, but that said we are seeing a real turnaround in our leading indicator which is.

A good sign so we saw an uptick in initial contacts and personal visits.

And our sales calls or are definitely up our online traffic is up so.

When you know really do feel that the sales strategies that I've been talking to you about the last few quarters are.

Starting to have an impact so everything from those cluster sales strategies that were using in the competitive market.

The advertising campaign.

That we just launched this fall we had at really thoughtful open house.

Karen Sullivan: Our C2C, our contact center that we now have agents in Montreal as well as here in Mississauga, and we're going to have agents in Vancouver very soon. Those B2B strategies, where we're interacting with realtors and financial people as well as the more traditional kind of healthcare influencers, are all starting to come together, and that's why our leading indicators are up. We're certainly feeling better about our future occupancy.

Our C C.

Our contact center that we now have a agents in.

Montreal as well as here and.

I missed the saga and we're going to have agents in Vancouver very soon.

And those business.

To be strategies, where we're interacting with real tourism.

Financial people as well as the more traditional kind of health care.

Influencers are all kind of coming to bear are are all starting to.

Come together and that's why our leading indicators are off so.

We're certainly feeling better about our future occupancy so hopefully Q3 19 new.

Jonathan Kelcher: Hopefully Q3 2019 is a bottom for it?

As a bottom for it.

Vlad Volodarski: Yes.

Brent Binions: Yes.

Yes, yes.

Karen Sullivan: Yes.

Jonathan Kelcher: Okay. On the just switching gears a little bit. On those, the five new properties, I guess this is more of a general question, and hopefully you can answer it. What occupancy is a home generally FFO breakeven?

Okay, and then on the I'm, just switching gears a little bit on those.

The five new properties and I guess this is more of a general question and hopefully you can answer it but.

Now what what occupancy.

A home generally fall breakeven.

Well it really depends on the size of the home.

Vlad Volodarski: Well, it really depends on the size of the home. Rule of thumb used to be 55%. It's now a bit lower than that because the homes are bigger, let's say 50%.

Rule of thumb used to be 55%, it's now been lower than that because the homes are bigger spot so let's say 50%.

Okay. So then.

Jonathan Kelcher: Okay. How have they, you know, I guess you gave occupancies for four of the developments that opened this year. How have they trended since the end of the quarter?

And how have the the I guess you gave occupancy is for for the developments. It opened this year, how how they trended since since you ended the quarter.

They I mean, they are leasing up so theres always increases in the occupancy I can tell you exactly how many units they are up but they're up as I look for sure.

Vlad Volodarski: I mean, they are leasing up, so there's always increases in the occupancy. I cannot tell you exactly how many units they're up, but they're up as a group for sure.

Karen Sullivan: Yeah.

Okay.

Jonathan Kelcher: Okay. Just lastly on the Batimo acquisitions that looks like you're gonna do in Q1 next year. Would that be the typical 85% that you would look to buy?

And then just just lastly on a on the bottom all acquisitions that it looks like you're going to do in Q1 next year.

Would that be 80.

Typical 85% that you would look goodbye.

Vlad Volodarski: Welltower has a right to participate in one of those acquisitions. If they do participate, then they will take half of our 85% of that one home. The other home, we will be buying 85% in.

Welltower has a right to participate in one of those acquisitions. So if they do participate then they will take half of our 85% of that one home the other homo the buying 85%.

Jonathan Kelcher: Okay. Would it be fair to say the cap rate would be somewhere in the low 6% range?

Okay and would it be fair to say the cap rate would be somewhere in the low 6% range.

Vlad Volodarski: Yes.

Yes.

Jonathan Kelcher: Okay. Thanks. I'll turn it back.

Okay. Thanks, I'll turn it back.

Thank you next question is from Chris Cooper from Shabby should you May go ahead. Your line is open.

Operator 3: Thank you. The next question is from Chris Couprie from CIBC. You may go ahead. Your line is open.

Operator: Thank you. The next question is from Chris Couprie from CIBC. You may go ahead. Your line is open.

Chris Couprie: Hi there. Just following up on the Batimo questions. Does Welltower have the opportunity to participate in any of the other future Batimo projects?

Hi, there just following up on the about them all questions.

Does welltower have the opportunity to participate in any of the other.

Sure about animal projects.

Yes, there are two other projects, where they have an opportunity to participate.

Vlad Volodarski: Yes. There are two other projects where they have an opportunity to participate

Okay and the value that.

Chris Couprie: Okay. The value that you thought was the value for those two that you'll be likely purchasing next quarter. It increased sequentially. Is that like kind of a final number now?

That you thought was the value for those two that you'll be likely purchasing next quarter. It getting quick increase sequentially.

That is that I kind of a final number now.

We are still in negotiations with respect to the purchase price or as soon as we are done these and would have affirmed deal we'll announce that that number okay got it and then just I've a question on on your leasing.

Vlad Volodarski: We're still in negotiations with respect to the purchase price. As soon as we are done these, and we have a firm deal, we'll announce that number.

Chris Couprie: Okay, got it. I have a question on your leasing. In terms of the different types of lead sources, open house, online, and so on, can you maybe give us an idea of the type of conversion rates for the various sources of leads?

In terms of the different types of a lead sources open house online and so on.

Can you maybe give us an idea of the type of conversion rates for the various sources.

Leads.

That we.

Brent Binions: You know, obviously, somebody who walks in, that's the highest conversion ratio. After that, referrals. You know, calls depends on how we're categorizing them, but, you know, direct calls would be next. People who come with a referral, that is by far the highest, and that's our biggest number of move-ins are people with referrals of some sort. You know, walk-ins, calls include C2C, direct calls to the homes. What's after that?

Obviously somebody walks in that's the highest conversion ratio.

After that referrals calls and refer if people depends on how your where categorizing them, but direct calls would be next but people who come with a referral that is by far the highest and that's our biggest number of move ins are people with referrals.

Im sort.

So I'll walk ins calls.

Calls include C C.

Direct cost of the homes.

What's after that.

Chris Couprie: Open houses and.

So you open houses.

Chris Couprie: Open houses and.

Oh, Hi online online snack bar open houses are smaller numbers are valuable, but there are a smaller number.

Karen Sullivan: Online.

Chris Couprie: Online.

Brent Binions: Online is next by far. Open houses are a smaller number. They're valuable, but they're a smaller number.

Karen Sullivan: I was gonna add, it's why we're so focused on the customer experience is because the referrals are such a high conversion.

And I was going to add it. It's why we're so focused on the customer experiences because the referrals are such a high massive version.

Karen Sullivan: I was gonna add, it's why we're so focused on the customer experience is because the referrals are such a high conversion.

Brent Binions: It's a massive driver. Yeah.

Vlad Volodarski: Just on average, just so you understand, half of the people who come visit us, half of the people who contact us usually come visit us, and of those people, quarter usually move in. That's the rule of thumb, but different sources have different closing ratios.

And just on average to see you I understand how the people who come visit us how have the people who contact us usually come visit us and of those people quarter.

And then move and Thats the rule of thumb, but different sources have different closing ratios.

Chris Couprie: Overall, have closing ratios been falling?

Overall, I would have closing ratios mean falling.

No they have been actually increasing.

Vlad Volodarski: No.

Karen Sullivan: No.

Vlad Volodarski: They've been actually increasing.

Brent Binions: Fractionally up.

Fractionally up yeah.

Karen Sullivan: Yeah.

Chris Couprie: Okay. Thanks. Just kind of maybe getting back to the whole narrative around supply in your pre-construction pipeline, few of your projects, you've pushed out the expected completion date. Is that a function of you're aware of your impact that those properties could have on the market, or is there something else?

Okay.

Thanks, and then just kind of maybe getting back to the whole a narrative around supply.

And your pre construction pipeline PV projects, you've pushed out the.

The expected completion date is that a function.

We're trying to.

You are aware of your impact that those those properties could have on the market or is there something else.

Vlad Volodarski: No. The projects in construction, if the date is pushed out, it's because of the site-specific issues that cause the delay in construction completion. The projects that are in pre-construction, that would be the right observation, where we're reevaluating the time of the entry and financial metrics of these projects. It really depends on where the project is in the development cycle.

No the projects in construction if the day this pushed out that's because of the site specific issues that caused the delay in construction completion. The projects that are in preconstruction that would be there right observation laware reevaluating.

The time of the entry and financial metrics on these projects said really depends on where the project is in the development cycle.

Chris Couprie: Okay, thanks. I'll get back in line.

Okay. Thanks, So I'll get back in line.

Thank you once again press star one on your telephone keypad, if you have any questions or comments.

Operator 3: Thank you. Once again, press star one on your telephone keypad if you have any questions or comments. The next question comes from Himanshu Gupta from Scotiabank. You may go ahead. Your line is open.

Operator: Thank you. Once again, press star one on your telephone keypad if you have any questions or comments. The next question comes from Himanshu Gupta from Scotiabank. You may go ahead. Your line is open.

Your next question comes from Himanshu goods from Scotiabank. You May go ahead. Your line is open.

Himanshu Gupta [Director, Equity Research Analyst: Thank you and good morning. Just going back to the occupancy question. Ontario occupancy at around 84%. From your historical experience, at what level does the occupancy bottom out? I mean, this is not the first time you have seen supply, I mean, wave of new supply in the market.

Himanshu Gupta: Thank you and good morning. Just going back to the occupancy question. Ontario occupancy at around 84%. From your historical experience, at what level does the occupancy bottom out? I mean, this is not the first time you have seen supply, I mean, wave of new supply in the market.

Thank you and good morning.

Just going back to the occupancy question so on duty occupancy.

4%.

Historically experienced so at what level or does the occupancy bottom out.

This is not the first time, you've seen supply I'm in vivo view supply and the market now I would guess based on our experience and on where our leading indicators now sit in the marketplace and the traffic flow as its them move back up.

Brent Binions: No. I would guess based on our experience and on where our leading indicators now sit in the marketplace and the traffic flow as it's moved back up, we believe that this is probably at the bottom of the trough and that it should start back up now.

We believe that is this is.

Probably a at the bottom of the trough and that it should start back up now.

Himanshu Gupta [Director, Equity Research Analyst: Sure. Like, so I mean, mid-80s or like low 80s, that's really, you know, where we can see, you know, it bottoming out and we're seeing some kind of recovery?

Himanshu Gupta: Sure. Like, so I mean, mid-80s or like low 80s, that's really, you know, where we can see, you know, it bottoming out and we're seeing some kind of recovery?

Sure like so on and mid Eightys, all likely diseases that that's really where we can see striping out and losing some better recoveries yes.

Brent Binions: Yes.

Himanshu Gupta [Director, Equity Research Analyst: Okay. You know, you mentioned in the MD&A annual remarks as well that you were kind of surprised by the impact of new supply. I mean, my question is, were you surprised by the, you know, the service levels and the product quality of the new product? Or is it just, you know, the sheer number of units being delivered is much more than what you had thought of?

Himanshu Gupta: Okay. You know, you mentioned in the MD&A annual remarks as well that you were kind of surprised by the impact of new supply. I mean, my question is, were you surprised by the, you know, the service levels and the product quality of the new product? Or is it just, you know, the sheer number of units being delivered is much more than what you had thought of?

Okay, and then you know you mentioned in DMD any annual remarks, as well that you were kind of surprised by the impact of new supply.

I mean my question is what are you surprised by the multi service level than the product quality of the new product.

Just to you know the sheer number of units being delivered is much more than what you had total.

We were not surprised by the number of units that were delivered what was more than what expected as the impact that it had on the properties that we operate.

Vlad Volodarski: We were not surprised by the number of units that were delivered. What was more than expected is the impact that it had on the properties that we operate. It's a combination of the service offering that the new properties offer, the quality of the new construction, and how much impact it had on the existing property operations, not just ours, but everybody else who are in those markets.

And it's a combination of the service offering that the new properties offer the quality of the new construction and how much impact that had on the existing property operations I'll just hours, but everybody else go in those markets.

Himanshu Gupta [Director, Equity Research Analyst: Sure. Will you consider, you know, giving like more incentives than before, I mean, given the competition there?

Himanshu Gupta: Sure. Will you consider, you know, giving like more incentives than before, I mean, given the competition there?

And we'll go to you know, giving like more incentives and before I mean, given the competition do.

No we do not actually.

Brent Binions: No, we do not, actually. That's because we're by far the largest player in the retirement marketplace in the country. Our experience tells us that any time you engage in giving away part of your rate, other people have to match, and it just becomes a race to the bottom. We find it rare when we'll do that now. It might be on a very localized, one-off occasion in one site, but it is not something we do on any broad-based basis at all.

And that's because we are by far the largest player in the.

Retirement on marketplace in the country and any time you.

Parents tells us at any time you engage in.

Giving away.

Part of your rate other people have to match and it just becomes a race to the bottom.

So we find it.

A rare when we'll do that now it might be on a.

Very localized one off location in a site one site, but it is not something we do on any broad based basis at all.

Himanshu Gupta [Director, Equity Research Analyst: Got it. Just on the Toronto property, the Sumach, I mean, it's leasing up, is it as per your expectations? In general, how is the product being received by the market?

Himanshu Gupta: Got it. Just on the Toronto property, the Sumach, I mean, it's leasing up, is it as per your expectations? In general, how is the product being received by the market?

Good.

And just wanted to Toronto property those few Mike.

I mean, it's losing up.

Is it as per your expectations and engine and how's the product being received by the market.

The lease up is a little slower than what we originally expected were close to 50% occupied right now it is a new product in the marketplace. So there are some education that needs to happen, we see quite a bit of traffic an interest in this product and we're confident that we're going to meet our underwriting expectations and catch up to our lease up project.

Vlad Volodarski: The lease-up is a little slower than what we originally expected. We're close to 50% occupied right now. It is a new product in the marketplace, so there's some education that needs to happen. We see quite a bit of traffic and interest in this product, and we're confident that we're gonna meet our underwriting expectations and catch up to our lease-up projections.

Yes.

Himanshu Gupta [Director, Equity Research Analyst: Got it. Maybe just switching gears on the forward purchase regarding the Edmonton property. I think the stabilized cap rate is around 6.5. What's your stabilized occupancy? I mean, will you have it underwritten in how many years? Probably, you know, the cap rate of around 6.5%, has the market moved since you got into this contract? I mean, the bond yields have come down, but the new supply have gone up, so any color on the cap rates there?

Himanshu Gupta: Got it. Maybe just switching gears on the forward purchase regarding the Edmonton property. I think the stabilized cap rate is around 6.5. What's your stabilized occupancy? I mean, will you have it underwritten in how many years? Probably, you know, the cap rate of around 6.5%, has the market moved since you got into this contract? I mean, the bond yields have come down, but the new supply have gone up, so any color on the cap rates there?

Got it and maybe just switching gears on the forward, but cheese regarding the Edmonton properties.

And I do the stabilized cap rate is 6.5 or what's your stabilized occupancy minimal underwritten in home and Neos and probably you know the captured over around 6.5% hasn't market moved since you bought into this contract I mean, they want to use have come down, but the new supply have gone up so.

Any color on the cabbage too.

Okay. So let's start with stabilized occupancy the we expect to achieving this home is 95, 96% the cap rates. The it the purchase price been negotiated at the time that we entered this forward to purchase agreements. So the changes in cap rates don't have any impact on the prize that were paying.

Vlad Volodarski: Okay, let's start with stabilized occupancy that we expect to achieve in this home is 95%, 96%. The cap rates, the purchase price we negotiated at the time that we enter in this forward purchase agreement, so the changes in cap rates don't have any impact on the price that we're paying. Overall, cap rates have compressed across the country in the last six months or so according to CBRE reports, particularly in the markets like Toronto, Vancouver, and Montreal to a lesser degree.

Overall cap rates have compressed across the country in the last six months or so according to CBS reports, particularly in the markets like Toronto, Vancouver, and Montreal to a lesser degree.

Sure and maybe just last one from me on the operating expenses.

Himanshu Gupta [Director, Equity Research Analyst: Sure. Maybe just a last one from me on the operating expenses. I mean, they were up, I think, around 2.7%, partly or mainly due to higher staffing costs. How should we see that, you know, next year in terms of property expenses, expectations?

Himanshu Gupta: Sure. Maybe just a last one from me on the operating expenses. I mean, they were up, I think, around 2.7%, partly or mainly due to higher staffing costs. How should we see that, you know, next year in terms of property expenses, expectations?

Were up by thinking around 2.7, plus and a party mainly due to higher staffing costs. So how should we see that.

Next to you in terms of Dolby expenses expectations.

As as always our targets and we think we can achieve it is to deliver 3% to 4% same property NOI growth on the portfolio basis with respect to expenses. The expectation is that they will probably continue to be in same kind of.

Vlad Volodarski: As always, our targets and we think we can achieve it is to deliver 3% to 4% same property NOI growth on a portfolio basis. With respect to expenses, the expectation is that they'll probably continue to be in the same kind of range of 2% to 3% a year. We do see some higher staffing costs in some of the markets where there's a tight labor market and attracting people is hard, so we incur some overtime, and in some cases, agency costs, particularly in places like Quebec City. Generally for the portfolio overall, being as diverse as it is at Chartwell, our expectation is to have about 2% to 3% expense growth in a year.

A range of 2% to 3% year, we do see some higher staffing costs in some of the markets, where there is a tight labor market then attracting.

People is hard so we incur some overtime and in some cases agency costs, particularly in places like a back city.

But generally for the portfolio overall being as diverse as it is a chartwell our expectation is to have about 2% to 3% expense growth in the air, Yes, and 3% to 4% seemed body in white goods right did you mentioned that three to four that's our expectation yes for next year.

Himanshu Gupta [Director, Equity Research Analyst: Yeah. 3% to 4% same property NOI growth, right? Did you mention that, 3 to 4?

Himanshu Gupta: Yeah. 3% to 4% same property NOI growth, right? Did you mention that, 3 to 4?

Vlad Volodarski: That's our expectation, yes.

Himanshu Gupta [Director, Equity Research Analyst: For next year. Okay. Okay, thank you. I will turn it back. Very helpful.

Himanshu Gupta: For next year. Okay. Okay, thank you. I will turn it back. Very helpful.

Okay.

Okay. Thank you I will turn it back very helpful.

Thank you. The next question is from Troy Mcqueen from BMO capital markets. You May go ahead. Your line is open.

Operator 3: Thank you. The next question is from Troy MacLean from BMO Capital Markets. You may go ahead. Your line is open.

Operator: Thank you. The next question is from Troy MacLean from BMO Capital Markets. You may go ahead. Your line is open.

Troy MacLean: Good morning. Thank you. Just given the cost inflation over the last couple years, and you mentioned that having an impact on new supply in the next couple years, would you say there's a gap between where market rents are at right now and the cost needed to bring on newer projects to start, you know, like basically put a shovel on the ground today?

Good morning, Thank you.

Just given the cost inflation over the last couple of years and you mentioned haven't that having an impact on new supply in the next couple of years.

Would you say, there's a gap between where market rents are at right now and the cost needed to bring on newer projects to start basically put a shovel in the ground today.

Yes, given the acceleration and construction costs and the fact that people always have been building to the top of the market Nobody has really building to the bottom end of the market in terms the pricing.

Vlad Volodarski: Yes. Given the acceleration in construction costs and the fact that people always have been building to the top of the market, nobody's really building to the bottom end of the market in terms of the pricing, I think there is a gap in some markets with respect to how much it costs to build and how much people can achieve on rents.

I think there is gap in some markets with respect to how much a cost to build and how much people can achieve on rents.

Troy MacLean: Is that how wide would it be? Would it be like equal to a couple years worth of rent growth? Or is it like, has it opened up where it's much wider than it has been in the past?

Hi, Hi, why would it be would it be like equals to equal to a couple of years, where the rent growth or is it like as it open upwards, but much wider than it has been in the past.

Troy MacLean: Is that how wide would it be? Would it be like equal to a couple years worth of rent growth? Or is it like, has it opened up where it's much wider than it has been in the past?

Vlad Volodarski: Well, I mean, if you look at the acceleration of construction costs over the last couple of years, they're probably in 30% range. Rents have not grown by 30% in most of the markets. It's probably wider than just one or two years of normal rent increases.

Well I mean, if you look at the acceleration of construction costs over the last couple of years, they're probably 70% range. So rents have not grow the 30 per by 30% and most of the markets. So it's probably a wider than just one or two years of normal rent increases.

Troy MacLean: Okay. That's good color. Thank you. Just on the, you know, with the supply overhang, I know you mentioned that you guys are not getting more aggressive on rents because it's, you know, kind of a zero-sum game. Are you finding competitors with a lot of product to lease up, you know, getting more aggressive on either rents or marketing versus prior quarters?

Okay.

That's good color. Thank you and then just on the you know with the supply overhang.

You mentioned that you guys are not getting more aggressive on rents because it's.

Kind of zero some gain but are you finding competitors with a lot of product to lease up getting more rents are getting more aggressive on either rents are marketing versus prior quarters for the Pope for the most part no.

Brent Binions: For the most part, no. What is actually beneficial is most of the development being done now is by experienced operators, as opposed to what we saw six, seven years ago when a lot of it was done by developers. This is experienced operators, all of whom understand the severely negative impact on long-term value caused by under-leasing, underpricing your property just to lease it up. It creates a significant gap in value. Because most of this development is being done by experienced operators, we're seeing very little of it.

People most of the developed what is actually beneficial as most of the development being done now by experienced operators.

As opposed to what we saw.

Six seven years ago, when it was a lot of it was done by.

Developers a this is experienced operators all of whom understand the.

Severely negative impact on long term value caused by a under leasing underpricing. Your property just the lease it up it creates a significant gap and value and so because most of this development is being done by experienced operators were seeing very little of it.

So most of the people doing building would be you'd look good on merchant builders looking to sell their more.

Troy MacLean: Most of the people doing building would be, you know, they're not merchant builders looking to sell. They're more building for their own accounts. Is that a fair comment?

Building for their own accounts would that was is that fair comment absolutely right. At this time in this cycle that's the case.

Vlad Volodarski: Absolutely, at this time, in this cycle, that's the case.

Brent Binions: Absolutely, at this time, in this cycle, that's the case.

And then Brett you mentioned the quality of new supply how they get impact. It was kind of curious is that just could you know.

Troy MacLean: Brent, you mentioned, you know, the quality of new supply having an impact. I was just kinda curious, is that just, you know, it's a newer product? Or is it like, are there any differences between what's getting delivered today versus kinda more of the existing product, either like, you know, layout or services that is having an impact?

Newer product or is it like is there anything <unk> are there any differences between what's getting deliver today versus kind of more of the existing product either like layered or services that is having an impact no. It's mostly the shiny us newest building is the one that attracts.

Vlad Volodarski: No, it's mostly the shiniest, newest building is the one that attracts most.

Brent Binions: No, it's mostly the shiniest, newest building is the one that attracts most.

Most.

The initial interest the initial interest from the daughter of the resident who's doing the searching.

Brent Binions: Initial interest.

Vlad Volodarski: Initial interest.

Vlad Volodarski: ... the initial interest from the daughter of the resident who's doing the searching. That's just the way it is. You know, the newer is always better in the eyes of people that are first looking at it. It's why we view referrals as so critical. Great service actually is the differentiator in the quality of life of a resident. It's a matter of continuing down the path we're on, but that is, it's no question, it's the new look that attracts the attention initially.

Brent Binions: ... the initial interest from the daughter of the resident who's doing the searching. That's just the way it is. You know, the newer is always better in the eyes of people that are first looking at it. It's why we view referrals as so critical. Great service actually is the differentiator in the quality of life of a resident. It's a matter of continuing down the path we're on, but that is, it's no question, it's the new look that attracts the attention initially.

That's just the way it is so the the newer is always better in the eyes of the people who are first looking at it. So thats why we view referrals as so critical great service actually is the differentiator in the quality of life of residents. So.

It's a matter of continuing down the path we're on but that is no question. It's the new look that is attracted the attention initially.

Troy MacLean: Okay. That's really good color. I'll turn it back now. Thank you.

That's really good color I'll turn it back now thank you.

Thank you.

Operator 3: Thank you. Once again, please press star one if you have a question or comment. The next question comes from Brendon Abrams from Canaccord Genuity. You may go ahead, your line is open.

Operator: Thank you. Once again, please press star one if you have a question or comment. The next question comes from Brendon Abrams from Canaccord Genuity. You may go ahead, your line is open.

Once again, please press star one if you have the question or comment. The next question comes from Brendan I brands from Canaccord Genuity. You May go ahead. Your line is open.

I just a follow up question I'm, just curious whether you guys track.

Brendon Abrams: Hi, just a follow-up question. Just curious whether you guys track the percentage of new residents that own or previously owned their home versus rented. I'm just curious, you know, as we've seen a tight kinda rental market here in Canada.

A new residents that that own.

Owner previously owned their home versus rent rented I'm just curious.

As we've seen a tight.

Rental market here in Canada.

Brent Binions: We do not have that. We do not have the, that information. We can't tell you the precise number of residents that come from rental versus, owning. We do know that our anecdotal evidence is the vast majority come from owning, but we don't track that.

We do not have that we do not have the that information we can't tell you.

Precise number residents that come from rental versus Oh.

Owning we do know that.

Our anecdotal evidences the vast majority come from owning but we don't track that.

Okay.

Brendon Abrams: Okay. The second would be wondering if you guys are able to quantify kind of the brand value of Chartwell. You know, you're the largest operator in the country, and one of the few probably with brand recognition. I'm wondering, you know, whether you are able to quantify in terms of benchmarking, like if you had a property next to an independent operator, is there, you know, for the same asset and service levels, is there a premium you are able to charge, or is the competitive advantage really in probably just increasing the occupancy a little.

The second would be I'm wondering if are you.

Are you guys are able to quantify kind.

Under the brand value of Chartwell.

Largest operator in the country and one of the few probably with brand recognition I'm wondering whether you are able to quantify in terms of benchmarking like if you had a property.

Next to an independent.

Operator is there.

For the same I said and service levels is there a premium you are able to charge or is the competitive advantage really.

Probably just a increasing the argument the little yeah. That's in that is very hard to quantify sorry.

Brent Binions: Yeah.

Brendon Abrams: a little higher than independent?

Brent Binions: That is very hard to quantify. Sorry. You know, we do track brand awareness across the country. We would be significantly higher than our competitors, so that means people know our name before other names. We do know that in under most research, people will only visit three properties. Having your brand out there is pretty important. We know if you show up at our door, 12% of people are gonna move in. We know it is of some advantage, but we cannot quantify that.

We do track brand awareness across the country, we would be significantly higher than our competitors. So that means people know our name before other names. We do know that Inder. Most research people will only visit three properties, having your brand out there as is pretty important we know if you show up at our dog.

Or 12% of people are going to move in so we know what is a some advantage, but we cannot quantify that.

Brendon Abrams: Okay. That's helpful. Just last question from me. I know, you know, we speak a lot about, you know, supply and some of the oversupplied markets. What would be maybe two or three of your kind of strongest markets that you're seeing right now?

Okay.

That's helpful. And then just last question for me I know, we speak a lot about.

Supply in some of the oversupplied market, what would be maybe two or two or three of your kind of strongest markets that you're seeing right now.

Brent Binions: All of BC.

All of BC.

Karen Sullivan: Yeah. The Southwestern Ontario-

Yeah.

South Western Ontario now has.

Brent Binions: Yeah.

Karen Sullivan: has had a strong year for sure. Windsor.

Had a strong year for sure.

So.

Windsor, Yes, southwestern handrail for sure all pretty much everywhere in British Columbia, Yeah.

Brent Binions: Yeah. Southwestern Ontario.

Karen Sullivan: Yeah.

Brent Binions: For sure. Pretty much everywhere in British Columbia.

Karen Sullivan: Yeah.

Let me the.

Brent Binions: would be some of the strongest markets.

The strongest markets.

Brendon Abrams: Okay. That's helpful. Thank you.

Okay. That's helpful. Thank you.

Thank you next question comes from Penny Bear from RBC capital markets. Your line is open. Please go ahead.

Operator 3: Thank you. The next question comes from Pamela Ritchie from RBC Capital Markets. Your line is open. Please go ahead.

Operator: Thank you. The next question comes from Pamela Ritchie from RBC Capital Markets. Your line is open. Please go ahead.

Thanks, and good morning, just maybe coming back to the same property NOI discussion for for 2020 sounds like BC should be should be quite strong, but can you provide some color just in terms of the three overall regions.

Pamela Ritchie: Thanks, good morning. Just maybe coming back to the same property NOI discussion for 2020. Sounds like BC should be quite strong. Can you provide some color just in terms of the three overall regions, how that might look for next year?

Pammi Bir: Thanks, good morning. Just maybe coming back to the same property NOI discussion for 2020. Sounds like BC should be quite strong. Can you provide some color just in terms of the three overall regions, how that might look for next year?

How that made how that might look for next year.

Our expectation that all three regions will show some growth and see though that's the beauty of having diversified portfolio like we do where somebody underperforming theres always an opportunity for somebody else to outperform so at this point, we are not prepared to give you the geographical breakdown, but our expectation is that we should.

Vlad Volodarski: Our expectation that all three regions will show some growth. You know, that's the beauty of having diversified portfolio, like we do, where, you know, if somebody's underperforming, there's always an opportunity for somebody else to outperform. At this point, we are not prepared to give you the geographical breakdown, but our expectation is that we should deliver 3% to 4% same property NOI growth on a portfolio-wide basis.

Deliver 3% to 4% same property NOI growth on the portfolio wide basis.

Got it and then maybe just lastly.

Pamela Ritchie: Got it. And then maybe just lastly, on the two properties where you took the write-down, in Ottawa, how do they compare to, you know, the rest of the Ottawa portfolio? What maybe made those unique in terms of taking the charge there?

Pammi Bir: Got it. And then maybe just lastly, on the two properties where you took the write-down, in Ottawa, how do they compare to, you know, the rest of the Ottawa portfolio? What maybe made those unique in terms of taking the charge there?

On the two properties, where you took the write down in Ottawa.

How do they compare to the rest of the Ottawa portfolio.

What may be made those unique in terms of taking the charge there.

These properties with felt were overpriced in this particular market. So in order to lease them up we decided that these will to be repriced, so they're somewhat different than the rest of the properties in that market.

Vlad Volodarski: These properties we felt were overpriced in this particular market. In order to lease them up, we decided that these need to be repriced, so they're somewhat different than the rest of the properties in that market.

And so the occupancy I take it was considerably lower than the rest.

Pamela Ritchie: The occupancy, I take it, was considerably lower than the rest?

Pammi Bir: The occupancy, I take it, was considerably lower than the rest?

Vlad Volodarski: Yes. The occupancy is considerably lower than the rest of our portfolio in Ottawa. Our expectation is that we will be leasing up these properties with the new rates. Because of the competitive nature of the Ottawa market, it will take a little time to get there.

Yes, the occupancy is consider the considerably lower than the rest of our portfolio in Ottawa. Our expectation is that we will be leasing up these properties within your rates.

Because of the competitive nature of the auto market It will take a little time together.

Are these newer or older properties and.

Pamela Ritchie: Are these newer or older properties in the portfolio?

Pammi Bir: Are these newer or older properties in the portfolio?

In the portfolio.

Vlad Volodarski: They're kind of middle-age properties.

Our kind of middle age properties middle age Okay.

Pamela Ritchie: Middle age, okay. You know, putting additional CapEx or maybe some upgrades wasn't gonna be enough to, I guess, stabilize level a bit sooner.

Pammi Bir: Middle age, okay. You know, putting additional CapEx or maybe some upgrades wasn't gonna be enough to, I guess, stabilize level a bit sooner.

So putting additional capex or maybe some upgrades wasn't going to be enough to a I guess get them too.

I guess.

Stabilized level, but sooner.

Vlad Volodarski: No, they're well-maintained. They don't need additional capital. They were just overpriced in the market.

They are well maintained their they don't need additional capital they were just over price than the market right.

Pamela Ritchie: Right. Okay. Thanks very much.

Pammi Bir: Right. Okay. Thanks very much.

Okay. Thanks very much.

Thank you. The next question comes from Cal movie from National Bank Financial Your line is open.

Operator 3: Thank you. The next question comes from Tal Woolley from National Bank Financial. Your line is open.

Operator: Thank you. The next question comes from Tal Woolley from National Bank Financial. Your line is open.

Tal Woolley: Hi, good morning.

Good morning Arnie.

Brent Binions: Morning.

Vlad Volodarski: Morning.

Tal Woolley: Just wanted to ask, how have you refined your response to new products, say, over the last five years? Like, you know, there was an earlier discussion sort of about incentives and, you know, and sort of refusing to kind of participate in that game in the past. Like, that sounds like one thing you learned. Is there anything else that you sort of learned in terms of negotiating a response to new products?

Just wanted to ask.

How have you refine your response to new products say over the last five years like.

There was an earlier discussion sort of about incentives and.

Sort of refusing to kind of participate in that game in the past that sounds like one thing you learned is there anything else that you sort of learned in terms of negotiating a response would be product sure.

Brent Binions: Sure.

Tal Woolley: in recent years?

Brent Binions: We try and get out in front of on the CapEx side a little earlier when we see new competition coming. Suite turns, suite upgrades, we have a much more refined suite upgrade plan than we for all our properties than we ever have before, where we focus our dollars, accretive upgrades to properties. All of these, we do a pretty significant review of every single property every single year, where we're gonna allocate our accretive dollars into the properties, and we try and put a little more focus on properties that have new competition coming in close by.

We try and get out in front of on the Capex side, a little earlier, when we see new new competition coming.

Suite turn sweet upgrades, we have a much more refined sweet upgrade plan and.

For all our properties than we ever had before where we focus our dollars accretive upgrades. The properties. All of these we do a pretty significant review of every single property every single year, where are we going to allocate our accretive dollars into the properties and we try and but a little more focus on properties that have new.

Comps coming in close by.

Tal Woolley: Is there anything on the marketing side too that you'd say you've learned as well?

And then is there anything on the marketing side to that you'd say you've learned as well.

Tal Woolley: Is there anything on the marketing side too that you'd say you've learned as well?

Vlad Volodarski: That's more local, in terms of marketing dollars. It depends really. In certain markets, we will do cluster advertising. We started that. If we've got four or five homes in an area and a new one's coming in, we'll pool the dollars, put actually a few extra dollars in from our broader marketing program, and spend a little bit more money in those markets to compete with the new build.

That's more local in terms of marketing dollars.

Brent Binions: That's more local, in terms of marketing dollars. It depends really. In certain markets, we will do cluster advertising. We started that. If we've got four or five homes in an area and a new one's coming in, we'll pool the dollars, put actually a few extra dollars in from our broader marketing program, and spend a little bit more money in those markets to compete with the new build.

It depends really in certain markets will do cluster advertising, we started that if we've got four or five homes in an area and a new ones coming in will pool. The dollars put actually a few extra dollars and from our broader marketing program and spend a little bit more money in those markets to compete with the new build.

Tal Woolley: Okay. Of your total marketing budget, like, how much are you spending right now on the sort of corporate branding projects? How much is sort of spent locally?

Okay and.

Of your total marketing budget like how much are you spending right now on the sort of corporate branding projects and then how much is sort of spend locally.

Most of the marketing budget is controlled centrally.

Vlad Volodarski: Most of the marketing budget is controlled centrally. Now with this new age, a lot of stuff is being done online. The advertising, though benefiting individual properties, but we control it centrally. That's where most of the allocations are going. We're doing online, we're doing advertising, as you could see on TV and newspapers. Some of it is done regionally for specific properties in particular regions. Most of the marketing spend is controlled corporately.

Now with this new age so a lot of stuff is being done online. So the advertising, though benefiting individual properties, but we control. It centrally so that's where most of the allocations are gone. So were doing online we're doing advertising as you can see on TV and newspapers.

Some of it is done with regionally specific properties in particular regions.

Most of the marketing spend is controlled corporately.

Tal Woolley: Okay. Just from an accounting purpose, that's mostly captured in the corporate G&A line or?

Okay, and just from an accounting purposes, Thats, mostly captured in your in the corporate jewelry line.

Vlad Volodarski: No.

No no it'll be allocated to the WD, that's part of the direct operating expenses, Okay got it.

Tal Woolley: Oh.

Vlad Volodarski: No.

Tal Woolley: Oh.

Vlad Volodarski: It'll be allocated to the property as part of direct operating expenses.

Tal Woolley: Okay. Got it. Finally, just G&A, you know, I think you talked earlier this year about expecting it to kinda ramp down in H2. Does that still feel consistent for Q4? What sort of envelope should we be thinking about going forward?

And the.

Finally, just genie.

I think you talked earlier this year about expecting it to kind of ramped down.

In the back half of the year, that's still feel consistent for Q4 and.

What sort of envelope should we be thinking about going forward.

Well, we sat in the beginning of the year that our expectation that DNA will grow in line with inflation. This year. We continue to believe that will be the case, maybe little bit lower because we adjusted the incentive based compensation.

Vlad Volodarski: Well, we said in the beginning of the year that our expectation that G&A will grow in line with inflation this year. We continue to believe that will be the case, maybe a little bit lower because we adjusted the incentive-based compensation for our corporate people. That should be the expectation going forward, inflation increases.

For our corporate people.

And so that that should be the expectation going forward inflationary increases.

Tal Woolley: Okay. Great. Thanks very much.

Okay, great. Thanks very much.

Thank you.

Operator 3: Thank you. Once again, if you have a question or a comment, please press star one. The next question comes from Chris Couprie, sorry, from CIBC. Your line is now open.

Operator: Thank you. Once again, if you have a question or a comment, please press star one. The next question comes from Chris Couprie, sorry, from CIBC. Your line is now open.

Once again, if you have a question or comment please press star one.

The next question comes from Chris Cooper pre sorry from Sidoti. Your line is now open.

Hi, there just.

Chris Couprie: Hi there. Just, follow up from me. Most of your properties are predominantly IL, ISL. I'm just wondering if you've noticed any occupancy trends in the properties that have a greater mix of AL memory care. On the kind of new supply, is there anything that you can tell us about what the suite mix is for the new supply?

A follow up from me.

Most of your properties are predominantly I'll I asked so I'm just wondering if you've noticed any occupancy trends in the properties that have.

A greater mix of al memory care and.

On the kind of new supply is there anything that we can do you can tell tell us about what the sweet mix is for the new supply.

No. We haven't noticed any particular trends trends are consistent from our perspective across all property types and the new supply various market by market said kind of hard to make general statements like this.

Vlad Volodarski: No, we haven't noticed any particular trends. Trends are consistent from our perspective across all property types. The new supply, it varies market by market, so it's kinda hard to make general statements like this.

Chris Couprie: Okay. In your, the managed communities, I noticed it's kind of been, you've been adding a kinda property here, property there for the last couple quarters. Is there anything just kinda happening in terms of the property management side?

Okay.

And then in your the managed communities I notice, it's kind of being it's a you've been adding a kind of property here property. There for the last couple of quarters is there anything I'm just kind of happening on in terms of the property management sorry.

No. The only managed properties that we would be adding our batching mall properties that are opening we did not add.

Vlad Volodarski: No, the only managed properties that we would be adding are Batimo properties that are opening. We do not add properties to our managed portfolio. We like to own and operate our own, or we manage properties, which we have options to acquire interest.

Properties to our managed portfolio would like to own and operate our own or we managed properties, which we have options to acquire interest understood. Okay. Thanks.

Chris Couprie: Understood. Okay. Thanks.

Thank you I.

Operator 3: Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Brent Binions.

Operator: Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Brent Binions.

Questions for just you're not this time I would now like to turn the meeting over to Mr., Brian opinions.

That wraps up todays conference call. Thanks, again to everybody for joining us as always if you have any further questions. Please do not hesitate to give us a call. Thank you and goodbye.

Vlad Volodarski: All right. That wraps up today's conference call. Thanks again to everybody for joining us. As always, if you have any further questions, please do not hesitate to give us a call. Thank you and goodbye.

Brent Binions: All right. That wraps up today's conference call. Thanks again to everybody for joining us. As always, if you have any further questions, please do not hesitate to give us a call. Thank you and goodbye.

Thank you. The conference has now ended Keith disconnect. Your lines at this time and we thank you for your participation.

Operator 3: Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation. This conference is no longer being recorded.

Operator: Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.

This conference is no longer being recorded.

No. There's just a modest goofy homes it does.

50 for them.

Tal Woolley: Please note that this conference call has ended. Please disconnect your line at this time. Thank you.

Please note that this conference call has ended please disconnect your lines at this time. Thank you.

Okay.

Okay, that's associated with running.

I'm in such a function.

Please note that this conference call has ended.

Disconnect your lines at this time thank you.

Okay, and that's because it does.

She was pending.

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