Q3 2019 Earnings Call

And then officer, a fantasy now living.

Please be aware that certain statements all information discussed today are forward looking and actual results could differ materially.

The company does not undertake to update any forward looking statements or information. Please refer to the forward looking information and risk factor section and the companies public filings, including its most recent mdna somewhere information.

You also find a more fulsome discussion on the company's results in this M.D.N. and financial statements for the period, which are posted on <unk> and can be found on the company's website C N not living does see a.

Today's call is being recorded in the replay will be available instructions for accessing the call I posted on the company's website and the details are provided in the company's news release.

Company I suppose it's five which accompany the husband marks on the company's website under events and presentations with that I'll now turn the call to Miss climax. Please go ahead mr. format.

Thank you Joe well.

Thank you hi, good morning, everyone. Thank you for joining us on our Q3 call. This morning.

During the third quarter up 29 team, we made great strides in strengthening our balance sheet and optimizing our capital structure.

Subsequent to the end of Q3, Deanna received an investment grade Triple B credit rating, what's a stable trend from DBRS, which supported our 150 million inaugural unsecured financing in early November .

This rating and subsequent debt financing reflects the strength of CMS balance portfolio sophisticated operating platform.

With respect to our operations, we're realigning and augmenting our sales and operations team and have made further enhancement to our operations sales program.

Slide five.

Moving to our Q3 financial metrics on a per share basis, Q3, Oh, a thoughtful and a thoughtful remained near prior year levels.

36.4 cents at 36.8 cents respectively.

As a result lower occupancy in the retirement segment, our Q3 same property NOI decreased by 0.8%.

During the quarter, we continue to strengthen the balance sheet and ended Q3 2019.

Got to gross book value, 46.5%.

A reduction of 180 basis points year over year.

Slide six the long term care portfolio remained virtually at full occupancy at 98.2% with waiting list for each of our residences.

Q3 long term care same property net operating income increased by 1.5% year over year.

Average same property occupancy in the meantime portfolio was 86.9% in Q3 2019.

There are a number of factors that are contributing to this softness in occupancy, which I addressed on our Q2 call as well.

Including high resident attrition rate to long term care in the portfolio that we acquired in 2018.

The disruption associated with property upgrades and renovation at a number of our property.

And the oversupply in the auto market.

We've been focused on a number of initiatives to improve occupancy in the retirement portfolio, which include.

Enhancing our assisted living services offered to residents in order to reduce the attrition rate to long term care.

Realigning and augmenting ourselves in operations team.

Intensifying marketing and communication campaign.

And increasing community outreach and every local community.

Enhanced sales programs, including promotions and incentive.

Taking further suite and amenity upgrades.

And investing in our team through enhancements to recruitment Onboarding and leadership development.

In addition, our residences are now gearing up for an act of flu vaccination and prevention campaign in an effort to minimize the severity and duration of the upcoming flu season.

Slide eight.

Well fundamentals in the sector remains strong with an aging population and growing demand for senior living accommodation.

We are expecting competitive pressure in some markets in the short to midterm.

However, we believe that the majority of Seattle's retirement residences are located in markets, where future demand is expected to exceed supply.

In addition, we believe that high barriers to entry, including rising construction costs and licensing requirements will help to limit future oversupply.

Our recent expansion that island Park and Campbell from his leasing up well and we estimate to reach stabilized occupancy at the end of 2021.

I'll now turn the call over to netting for further details on Seattle Finance results.

Thank you Lois and good morning, everyone I'm, starting on slide 10.

Same property net operating income for the quarter decreased appointed percent or 305000 compared to the same period last year for a total of 40.2 million.

This decrease was largely a result, the softer occupancy and as a Carmen Red segment offset by an old rental rate increases in line with market conditions.

The LTC division generated same property NOI of 23.3 million and increased a 1.5% or the prior year.

The determine division generated same property NOI of 16.9 million, a decrease of 3.7% or the prior to your as a result of softer occupancy partially offset by annual rent increases and a focus on adjusting cost.

Well with AFFO increased by 1% year over year in Q2, 2019 to 24.2 million.

This increase was largely the result of lower interest expense or long term debt and or current income taxes, partially offset by a decrease in same property NOI indirect common portfolio.

Q3, 2019 diluted FFO per share was in line with the prior to your at 36.4 cents.

Yes, AFFO increased by 20% year over year in Q3, 2019 to 24.5 million.

You did if a corporate share was 36.8 cents in Q3 2019 down marginally from 37.2 cents in Q3 2018.

Moving to slide 12.

We continue to strengthen our balance sheet at the end of Q3 2019, CMS debt to gross book value was 46.5%.

Our production up 180 basis point from Q3 2018.

She has debt to EBITDA declined to 6.6 times in the quarter compared to 6.9 times in Q3 2018.

Our interest coverage ratio remained high at four times and a weighted average cost of that was lower by 20 basis points year over year to 3.7% highlighting our refinancing <unk> initiatives over the past four quarters.

We ended the quarter up at approximately $228 million, an undrawn credit lines in cash.

As Louis mentioned, we are pleased with CNS Triple B issuer rating from DBRS. This investment grade credit rating reflects our focus on strong balance sheet and highlights our balanced portfolio and sophisticated operating platform.

Our subsequent hundred 50 million dollar inaugural unsecured debt financing at an interest rate of 3.109 for a five year term is a strong would have confidence on the execution of our strategy.

We intend to use the proceeds from this offering to pay down part of for Doug and create a pool of unencumbered assets. After the unsecured financing closing, we currently have $307 million unencumbered assets with that I will turn the call backs Lois. Thank you now huh.

Our long term care portfolio is expected to deliver stable and consistent and NOI growth and 2019 and 2020 inline with growth achieved in 2018.

We expect Q4 2019 same property NOI growth and every time portfolio to be consistent with Q3 2019.

Which will result in flat same property NOI growth year over year for 2019.

Or 2020, we anticipate occupancy improvement, which should translate to low single digit and Hawaii growth and the retirement portfolio.

We believe that fundamentals and senior living will remain strong and are optimistic about potential development opportunity.

Including exploring the development of freestanding retirement residences, the joint venture partners.

Intensification opportunity at existing retirement residences.

As well as the development of senior living campuses.

We expect to begin a 60 suite expansion at King's near retirement resident and Alister by mid 2020.

Yes, the made an unlevered returns for this approximately 20 million investment is approximately 10%.

What's an exceptional team a strong operating platform and our strategy in place.

I'm confident about our future and the immense opportunities we have as one of Canada's leading high quality providers.

Thank you for your participation on the call today, and <unk> and I won't be pleased to answer your question.

Thank you to ask a question you'll need to press star one on your telephone to withdraw your question press. The punky. Please stand by we compile the candy roster.

Our first question comes from Fred's Lawndale with actual on wealth partners. Your line is how open.

Thank you and a good morning.

It looks like you were very well defined the causes for the decrease in India, Garnham occupancy and just give us a more granularity on your actual done what's your a scenario in terms of occupancy for 2020.

And what's your timeline before seeing and getting to a more optimal level I guess.

So I think as we mentioned in our outlook and our call. So for for the total 2019, we expect our retirement same property NOI to be.

Flat to bear it wasn't 28 team so not no growth.

As it occupancy at the end of Q3 2019 for the same property was that on 86, when three and video and similar.

Range today, so we expect that year might be similar by the time Beone and it and it will take us two to three quarter to start building it up and you know we hope to be.

300 basis points are so by the end off.

And up 2020, but it will take us sometime to get there <unk>.

Mm Hmm, okay understood.

And knits in could you remind us whats your target leverage ratio at this stage.

So we my oldest and again is that to book value not a fair market value and we think 40 to 50 is a good place to be up the considering its a book value and we are right now below it. So again, if you have a reason to go up if its development off the right strategic opportunity to grow be we'll do that otherwise we'd like the ratio we have it at this.

Today.

Oh.

And the logs I think I missed that that beyond you mentioned, they are an expected return or or or an IR on your park project up what could you could you remind us what what's your eye our own Ireland Park and what's your I guess, what's your expected IR on Kings Mayor.

Yes, so though on island Park.

Got it was 10% than lowest mentioned King smeared, it's also 10% roughly.

Okay. That's great. Thank you.

Thank you. Our next question comes from Chris Cooper <unk>, what's the IVC. Your line is now open.

Thanks, just a turning back to Fred's question on the outlook.

What does it gives you confidence that the occupancy rate is going to improve into next year is at certain markets or.

Where exactly yet do you think you're going to get those occupancy gains.

I think its a good question, we don't expect really any change in the auto wall market. Because you know there continues to be new supply there, where we think we will see changes is in our assisted living program, we're making some enhancements there we do have a number of designated assisted living units and.

Hi, kind of changing our service packages and.

Awesome, better marketing and communications about the program, we do expect to get to get some gains, particularly over the winter months.

Let's say that.

Primarily the area and then as well we have as we had mentioned a number of upgrades that we're doing and not a number of properties and we expect them to be pretty much complete.

No into early Q2 next year.

I don't have in the numbers in front of me, but if you look at your I'll versus a all suites are there you know material occupancy differences between the two.

I wouldn't say material, we just know that we do have some vacancy right now and are designated a al units and I were really focused on that opportunity. They said, particularly over the winter months, where we feel that we can really get some traction there.

Because as you know in the winter months.

A difficult time for seniors to move Dan. So traffic is usually down for aisle and we believe the aaas are opportunity.

Okay.

Maybe just a different question have you looked at.

Dispositions at all.

Well, we always look at you know the basket you know our capital allocation and we've been on a journey you know as you know to upgrade the quality of the portfolio and we've done.

You know, we would do and good job on not no, but we're always looking at so what makes sense for Sienna and get the most value for shareholders.

Sure I guess it sounds like there's nothing really contemplated right now whether it be in the LTC or.

You're not retirement home different that's mostly recently acquired.

I think as Louis mentioned, Chris we always are looking for what's the right mix for us So again nothing eminent at this point.

Thanks, I'll turn it back.

Thank you next question comes from Jonathan Culture with TD Securities. Your line is now open.

Thanks, Good morning.

Just just sticking with the the occupancy question. So it sounds like it looks like you're going to look those sort of hold occupancy over the winter months by lowering attrition.

It's up is that fair to say.

Yes, we and we also like we haven't number of promotions where.

Really hoping that we can get some traction you know before the end of the year.

But yeah, we think between assisted living our promotional package as all the work that we're doing a with our sales teams and so on that we we hope to get some further traction we know that Q1's always kind of.

The flu season, there's a lot of attrition at that time, but we're hoping to our assisted living programs.

Try and a close that are reducing.

Okay. So then they the 300 basis points, you're hoping to get by the end of 2020 that what's sort of start to come in Q2 in Q3. It next year, yes, yes, that's right.

Okay, how many how many properties or are undergoing upgrades.

Well in total there was there's 10 property.

So at any given time, we've completed I think there's three or four complete and the others are at varying stages and you know there's a couple that will start in Q1.

Okay and are you getting better on those three or four letter complete are you getting better traction.

Are you seeing a difference.

Hi, yes in a couple of them yeah that couple that have just stop just been complete that is a well the residents living there are very happy with them and you know there's good good feedback from prospects that are coming in.

Okay and then how do you look at your return on investment in <unk> is it more just a defensive bubbles.

Maintenance Capex or do you target a return on the oney upgrades and those are a different Jonathan So when you acquired the Maple portfolio last year, we set aside $5 million you know as part of purchase price or I would say on top of purchase price to spend on it because.

Some of those properties needed a bit of work. So it was more contemplated using whatever and why do you want to get from those properties and knowing that we had to spend that additional five so.

What do a price you paid at that point in our mind me pit that plus 5 million. So thats, how we looked at it.

Okay Fair enough and then just <unk> just lastly on the.

On the unsecured debentures.

I think at Q3 at 49 billion on your line.

So I assume you pay that down and how how should we think about the other sort of 100 million of unsecured.

Yes, so most most of Hum hundred 50, we have already used to pay down debt. So you know that a volume would be part of it we had some other debt maturities, which are coming due mom in Q4 switch you got paid down as well and you have little bit left over for some of the other upcoming maturities so I would exceed.

What we would say most of the 150 would be to pay down kind of debt and get on track to do that.

Okay, So you're not you're not going to see material uptick in interest cost correct. You should view, we would not.

Okay. Thanks, all that I'll turn it back.

Thank you. Our next question comes from Himanshu good dealt with Scotiabank. Your line is now open.

Thank you and good morning, Oh, just on the occupancy discussion I think Louis you mentioned running on number of promotions.

So are you offering more price concessions concessions or incentives to drive occupancy.

And How's your diamond homeowners, even see you know trending since September so far.

Yes, so I've known effect completely caught your question, but we don't.

We do promotions and onetime incentives rather than rate reductions was that your question. That's right. Yeah. I mean I. My question was are you offering more what do you what offering previously just to drive occupancy there and the second part of the question was how's your occupancy trending since September .

So I didnt answer that one before from onshore. So we ended the quarter at 86 when for you in same property and getting them similar range today.

So we are beyond where we are very ended the quarter win.

Sure.

Maybe just switching gears on the acquisition side is the integration already portfolios, which were required.

2018, and some de now fully complete and do you plan to be active on the acquisition front.

Yes, the integration of the acquisition is fully complete.

I mentioned in our.

Earlier, we are doing a number of things like enhancing our assisted living program really looking at the services.

Surface packages that we offer to meet the needs of seniors.

In all of the assisted living programs are designated units.

So we were doing that and making some other enhancements to our sales programs and operation that's kind of just ongoing improvements that we're always making so but the portfolio has been completely integrated.

And then with <unk>.

The acquisitions you know, we're always looking at the right opportunity for Sienna and our goal is to grow across the country.

Sure.

Just last question underdevelopment side or do you have any timelines.

Oh for the Phase one development Oh fighting, it's like thousand LTAC beds, and 500 noon retirement homes.

And how do you plan to finance, the stepping up and cost.

Well at the present time, there's no we're working with.

Government in our associations and the other providers in the sector ought to get up Seasonable program for these.

For these developments to work so that's that's a current focus.

You know as you know governments doing a lot of reorganizing. So that's not work is underway. So we can't really commit to a timeframe and they would all be financed on our balance sheet.

Okay, we have a high liquidity yeah sure sure I'll turn back thank you.

Thank you.

Our next question comes from Brendan Abrams of Canaccord Genuity. Your line is now open.

Hi, good morning.

Listen it's in I mean, you you speak about the auto loan market in the impact there and it seems like the challenges are fairly well understood or for that market.

I guess my question is.

No we've talked to in the past the though.

The retirement business being very localized.

I'm just wondering in your view.

Your portfolio includes pretty significant exposure in let's say the Kingston market rate, which is still a two hour drive away.

How broad is the auto market.

Is the impact from the auto market writing.

Through other parts of the region or is it really just Oh, you know localized impact.

Yeah, No autumn was definitely a specific to Ottawa no kinda Ottawa Valley area area, It would not spread to Kingston Kingston would have its own.

Local supply issues from time to time and there is you know the wasn't new property that just jumping in Kingston, that's out a few months ago. So you know that's having a little bit of impact in the Kingston market, but the two markets would be completely distinct.

Okay, so you're not seeing that spread.

No no markets that fairway no okay.

And I guess, you know the industry headwinds so far have been focused on a on the supply side. I guess, then you know.

From your view how much of the imbalances.

Tribute to both to the demand side and you know it right.

Speak about this I'm thinking about.

Some of the commentary around senior living in their home longer seniors are healthier not moving in as early maybe you could just talked about kind of or the demand side that you're seeing and kind of kind of profile.

And your building or not coming in.

I mean, if you look at demand and capture rates haven't substantially changed.

Typically and there are some variation within within region again, there is some variation and capture rates within.

Local markets, but overall the capture rate.

Jerry ill Ah right now is about 6%.

And that hasn't changed I mean, not not experienced doesn't change and I would say for US you know homecare doesn't really compete with retirement living.

Seniors you know when they choose a retirement residences for the lifestyle, they want socialization and food and.

So on and you know seniors that used to live at home that's not the experience that they're going to get because often results in social isolation Soc, most seniors that move into law our retirement residences.

Often will say that they wish they'd done it sooner.

Right. Okay. So you're still are the view that it's.

The challenge of their supply driven.

Not a more structural on the demand side.

I would say and it's again, it's very local.

You know, there's there's markets that we're anywhere.

Where there's there's not excess supply where you know, there's they're very stable market.

Okay, maybe just switching gears to think in your Mdna here, you talked about receiving I guess, the first level of approval and three.

Project for for LP <unk>.

Greenfield.

Project.

I'm just wondering if he could provide any color with respect to these in terms of.

Timing cost.

Okay and return.

Okay.

Then he called it the timing it will be subject to getting the.

The feasibility, which you know we're working with government to get a program that will work for all for more of these projects so that.

Other than not they're ready to go like we've done everything we can from or real estate point of view. So we're really waiting for that right Ministry program on that.

And in terms, so, yes, and again I think it just the financial feasibility is the step smile. So once there is a financially feasible program, which we are hopeful there would be one with the Ministry we would proceed accordingly.

Right I guess I was my next question have they have the outlined are changed any.

Any of the.

Incentives or.

Payment structures that would that would have.

Change change if he's no.

No.

Right.

Okay. That's it for me thank you very much.

Thank you.

Our next question comes from Joe Henry I guess with Raymond James Your line is now open.

Hi, I'm, maybe just kind of adding onto brennan's question.

In the slide deck, you mentioned that most of your markets retirement resins market.

You see future demand exceeds supply.

I was just wondering.

Which market.

I didn't see that.

I guess or what would be obvious one but anywhere else.

BBC or Ontario.

Yeah on the road you kinda see.

Current supply.

Causing that problem.

Yeah, if you.

I mean other than the Ottawa area, We think you know central Ontario, the G D. A lower mainland B C and every other area that we operate we see by 2023, there will be you know probably more demand and supply if there's no additional projects go in there.

Ground and what are known to date.

We have thought there was a bit of a chart in around DNA that.

But some color on that.

Okay.

And then.

You know just kind of you know in the back half for next year and maybe in the first a little bit of 2021, when you get a bounce back in occupancy in the retirement business.

To kind of about 90 level you'd have a little bit of a spike in the same property coming off of you know.

The the low comps.

The second half of this year, but.

On a stabilized spaces beyond what would you expect kind of.

You know over a long period of time retirement resin same property NOI to grow out.

I think you you're looking at kind of like 20, 121 and beyond is that what you're asking.

Just or just you know if you get the if you get the portfolio back to 90% after that initial.

Balance that you'd get because you're coming off you know, 86% occupancy was 90% Ben.

You kinda envision that portfolio.

Yes, I mean, we've always talked about you know when things get stabilize low to mid single digits for retirement and stable consistent performance for long term care sort of you hasn't really changed and some that pichardo named unit talks about.

The data in 2023, because lot of those projects underway. It does not to say that today all the markets oversupplied Auger, saying is today. There are couple of markets, which are oversupplied today and by 2023, even with the existing supply coming in on new supply coming in this still would be more demand.

Okay, I'll turn it back.

Thank you. Thank you. Our next question comes from San <unk> Srinivas with BMO capital markets. Your line is how open.

Thanks, with you mentioned in her comments this morning, but oh about marketing and promotional campaigns as well those people listening from so it was.

Moving from a.

Pretty good some color on that.

Yeah, we do like as I mentioned, we do one time incentive so we provide our.

All of our residences with a tool kit, if you well loved things that seniors might be looking for when their move moving in to help them transition from their home into into retirement living so there you.

You know, it's a range of options that the site can use to support the senior with that transition. So just kind of just think about it as a onetime thing to.

Helped residents move in.

The other is just Oh, we do a lot of things like a community relations to invite seniors into the community to join their friends for lunch and dinner, there's there's always campaigns and promotions going on.

This fall, we had one campaign to try and encourage seniors to move and before the end up here.

Right.

That's that's really helpful Lewis and those of you know I'm pretty bullish.

This is that you briefly mentioned for the assisted living properties, what he got keeping busy.

Paul its and I didn't know.

So.

My gut is.

I'm just wondering on but it's all of that it's I'm really looking at the whole programs. So what's included Dan kind of the base rent and then one of the service packages. So this is kind of responding to resident needs as they age in place so typically as a resident stays longer.

After a few years they meet may needs just a few services and then as they age or their health changes they may need more so we're really targeting them service packages to meet.

The needs as the seniors needs change overtime.

Right right up the that's great color. Thanks.

Thank you. Thank you. Our next question comes from Towell, you with National Bank. Your line is open.

Hi, good morning.

My first question just as on the financing environment not necessarily for you for Sina, specifically, but what is.

It like trying to get.

That capital trips capital right now for long term care centers.

Yeah I mean.

Well I think book from a debt capital and again, our recent unsecured financing would reflect on it because it is underpinned by fuel for long term care assets as well.

The market seems very strong there there are lot of life because were very active in this business as are most of the the bank somebody active.

Ontario does not have unfortunately assume it see program, but the the CMC program for BC long term care is very robust and we have couple of properties, which helps you might see financing and bcl two c. So again that Mark continues very strong lexia mid C. Financing tenure rates started on a 2.7 to put date.

Percent, excluding the upfront fees so.

I think all around between Diamond life, because there is it there is lot of demand for this kind of product for financing.

And so is it your intention that too finance more through the LT side LTC side of the business.

With sort of unsecured and maximize the theme if you find is going to retirement fund.

You know, we always look at up so does that assume it's you financing conventional revolver secured or unsecured as you know different things to look out in our debt structure. So it's never you know there's never a very specific answer okay. All the time and see image CNO long term care and unsecured and secured so I think it really is property depend.

And the needs for the business at that time.

And so this is.

Opening up another capital source correct, Yeah, and we do not expect you know again the idea was not to do it one time. So we do expect to do it when the mark when the market is right. When it makes sense, but I would say you know you should expect or the market should expect that we would be doing range of these things from everything we had been doing so far in unsecured would be just an additional.

Item to it.

Okay.

And then in your earlier commentary you mentioned.

Perhaps working with some partners on some ground up development opportunities in retirement.

Is that also a bit of a commentary on what the market for stabilized acquisitions looks like right now.

Not necessarily I think what for you talked about always is you know we might we mentioned in our second quarter conversation as while you're looking at Standalone retirement residences with joint venture partners.

Calipers or builders, who are who had quite a bit of this expertise.

That's would be on top off what you're doing acquisition. So.

About good access to capital we have a strong balance sheets. So we don't take that these two things are mutually exclusive.

So it's by doing one doesn't mean, we will not be doing another.

Okay, and then so that maybe I can just asked for what your commentary as on the on the market for stabilized properties right now that.

I think there's always you know there's always opportunities that that come up from time to time, we we look at everything and we always do where we believe we can add value to our portfolio or an asset.

And so you just really because I mean, it's been quite sometimes it through our portfolio acquisitions or is there anything that's sort of.

Limiting you or do you or is it just been you haven't like the assets. We've seen really no. There's just there's been nothing nothing eminent that we've Uh huh.

You know that we that's come up that we can add value to that's kind of the right that meets all of our investment criteria.

Okay.

And then sorry, just to pivot back to the assisted living.

[noise] issue.

Is the solution to that issue is it a capital question arisen operating expense.

Oh, it's operating instead.

Its service package is getting the right staffing and the education enough promotional materials to explain it to to seniors into two grad students, who are I, Alan I need to convert to AOL.

Okay got it thanks very much guys.

Thank you.

Thank you. Our next question comes from you asked Thank Paul Lawrencium Bank. Your line is now open [noise].

Hi, good morning.

Hello.

Good morning, Ash Hi, first question is on the time at home and all I imagine it has been holding up quite well. So I'm just wondering do you.

That's it would be able to maintain this 44% <unk>.

Q1, Q2 2020.

Yeah, I think our margin have been pretty consistent Q3, yet a year to date is that on 44%.

Total 2018 was around 44.9, obviously, there's you know when occupancy declined materially up you would have an impact in margin. So at this point. Thank you know that the number of every ended the Q3 is a good way of thinking about <unk> for what it might be in 2019 and going forward.

Okay and just on your taxes I was wondering if you could give us some idea as to how we should model.

And.

20.

Yes. So this year have you ever around you know seven not happened <unk> dollars of taxes than I think next year, we in the range at around $9 million.

Okay and one question for laws so.

So long as these programs.

Considering the assisted living.

<unk>.

So.

Does that mean actually trying to convert.

I am.

<unk>.

Two.

No we don't convert like a resident when a senior needs Karen services, you know, what we want them to stay in place rather than have to move out to a long term care and so what we tried to do is designed service packages.

We can handle.

You know that we have the staffing for I mean physical environment for to avoid sort about premature moved out to long term care. So this is the area that we're focused on so you can't convert an ideal.

So it yeah, that's right I can I only converts to an a. out when the senior need the surfaces certain level of service.

Got it okay. That's it for me thank you.

Thank you.

Thank you as a reminder to ask a question you'll need to press star one on your telephone. Our next question comes from Pammi be out with RBC capital markets. Your line is now open.

Thanks, and good morning, just maybe coming back to the development a commentary on the retirement home space can you just maybe expand on you know what markets you're looking at at this stage and how much capital you're comfortable allocating to to retirement home development.

So I know, we can't really comment on specific markets. So you know there a couple of specific opportunities you had initial due diligence unfair <unk>, there's a potential site tend to be an understanding if that's the right side for us depending on market conditions and if the pro forma works.

From a my development standpoint, so far our program has been quite small it'll be a committing close to $20 million for a king smear side, which will happen over the next year and a half or so I would say pammi fit if things work out.

In the period of three years. So so we might build a program bitches hundred million dollars a so at any given time.

More than that based on a cut a methodology that could change over time, if you'd find that that's up my more lucrative than what we think it is today, but I think $100 million and if you'd get dead in the three years, we think that would be good place.

In summary would that 100 million include the long term care redevelopments or is that strictly just retirement.

It's everything any development, we do that would be sort of add at any given time.

Right.

And just you know we have heard commentary in terms of rising costs for retirement owned developments I'm just curious what sort of returns would you expect.

Even on this maybe the one thing you mentioned that you're looking at not Kingsbury, but the one that you were talking about earlier, what sort of a unlevered returns would you be thinking about today for retirement homes.

The market has changed quite a bit and in terms of expectation because of rising cost and you know.

There are acquisition opportunities time to time, but you know by building something which would work with your platform. So the our return expectations would be if the acquisition cap rate is actually it would be you know call. It 50 to 150 basis point on top of X. I would be our expectation for the BOP retirement development.

And for for lease up let's say to stabilize levels is that changing as well or is that you know is it three years is it two years or is it is it getting a bit longer well it depends on the market I think generally in three years, depending on where it is and that's Connecticut.

Net and said earlier about the locations on the site.

We are in due diligence and lots of big factor that there's adequate income qualified demand.

Great. Thanks very much.

Thank you I have not showing any further questions. At this time I would now like to turn the call back over to lowest carmack for any further remarks.

Okay, well. Thank you everyone for joining our call. This morning, we appreciate your support and have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.