Q4 2019 Earnings Call
Oh, but defense. Please standby your meeting is ready to begin good morning, ladies and gentleman welcome to the Chartwell retirement residencies Q4 and year end 2019 financial results Conference call. Following the formal comments, we will hold a question answer session. Please be advised said this.
Call is being recorded I would now like to turn the meeting over to Mr., Brent opinions, President and Chief Executive Officer of Chartwell retirement residents. Please go ahead mr. opinions.
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 Dot com under the Investor Relations death.
Joining me are glad bloodthirsty, Chief financial Officer, and Chief Investment Officer, and Karen Sullivan, Chief operating officer.
I remind everyone that during this call. We may make statements contain forward looking information to non-GAAP measures I direct you to our Mdna and other security filing 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 Cedar Dot com.
Before we discuss our Q4 results I'd like to take a few minutes to reflect on the progress we've made in 2019 and executing on our strategy.
Strategy statement is in 2023, we will achieve in our retirement residents employee engagement of 55% highly engaged resident satisfaction of 67% very satisfied and same property occupancy of 95% to drive strong I asked that both per unit growth by providing exceptional.
Resident experiences through personalized services, and our upscale and midmarket residences in urban and suburban locations.
The sequence of the key targets and our strategy statement is deliberate we believed that only highly engaged employees will deliver the exceptional resin experiences that will drive high resident satisfaction.
Exceptional experience there always personal we get to know our residents before they come in to reside with us and tailor our service offering to their individual preferences and needs.
Only very satisfied residents in their friends and families will become chartwell ambassadors in their communities and will generate a growing number referrals referral is our most important source of new resident move ins.
Operating our properties at higher fee rates will drive strong cash flow per unit growth and lastly, and even more focused geographical footprint and service offering will make us more efficient in our ability to deliver exceptional services to our residents and deliver on a vision the making people's lives better.
In 2019, we made solid progress toward the achievement of art 2023 goals and our retirement residences, our employee engagement scores increased to 48% highly engaged from 47% highly engaged in 2018, and we were extremely pleased with the significant significant improvement in our right to.
Back to score the 63% very satisfied in 2019 up from 58% very satisfied in 2018.
In 2019, we continue to put the building block walks in place to drive results in these two areas. The most important one being the development of our proprietary multi year customer experience program, which I have no doubt set us apart from competition and help us deliver on our goal.
The first phase of the customer experience training for our corporate and retirement residences in progress Lincoln completed by the end of Q3, the second phases in development now and the training will begin later this year.
We are moving ahead with the implementation of our human capital management system, which was fully rolled out over the next few years will allow us to standardize payroll improve our ability to analyze employee related data and enhance our ability to recruit train and develop our employees.
In early 2020, we completed the development of our new corporate office, the Chartwell up 130000 square foot state of the are building with numerous green features and training and collaboration spaces and our own Beast or 70, 70, which serves as it trainee kitchen for our residences shifts.
We already seeing how this new space changes the way, we work, making us more creative inefficient.
I'd also like to highlight the great results, our long term care achieved in 2019.
Long term care operations provide chartwell stable cash flows meaningful economies of scale and significant operating expertise, particularly in the area nursing care and infection control and remain important part of our business.
Long term care team has consistently as being consistently implementing programs to drive employee engagement resident satisfaction.
Which is especially difficult to do and they're highly regulated regulated environment, that's heavily dependent on government funding.
These rising above the regs programs include our innovative imagine training program for management in frontline staff and they're producing exceptional results.
In 2019 or long term care team achieved 59% resident satisfaction score and eight percentage point increase from the 2018 score a 51% which exceeded their initial 2023 target of 57%.
And we have now reset that target to 67%.
Their employee engagement scores increased to 43% in 19 from 42, and it 80, and all quality and compliance metrics in Ontario long term care residences are better than provincial averages.
In 2019 or teams opened seven new residents, including two residences managed for bad animal and go back and the newly acquired chart will emerge Bill's retirement residents in Edmonton, Alberta.
In addition, or partner signature living commenced operations that kingsbridge retirement residents in which we own a 60% interest.
These news data the art projects will add significant cash flows and value to our portfolio over time.
We also continued to streamline our property portfolio in accordance with their strategy. The 2019 completed sale. The three noncore assets and entered into a definitive agreement to sell for noncore older LTC residences.
I'd now like to turn it over to care and Sullivan, our Chief operating officer to talk about some operational initiatives as she and her team are working on Karen.
Thanks Brent.
Turning to slide seven as I reported last quarter, despite increasing competition in some markets, we started to see improvements in our leading indicators.
This improvement continued with a 12% increase in initial contact.
7% increase in personal it's compared to Q4 last year.
Our contact center also continues to be a very effective differentiator, including now having contact center agents in our Vancouver office to add to those working in our Mississauga in Montreal.
This will allow us to have coverage over a longer period, each day and will also enhance the personalized service for Western Canada.
Our concerted effort to focus on business development strategies have led to agreements with a number of national for eventual organizations that will enhance our opportunity to increase referral.
Now have much more purposeful plan for business development and community engagement in our property.
Our 2019 brand awareness survey conducted by its a threed shows that awareness at Chartwell is at an all time high including top of mind awareness known as unaided awareness are most statistically significant gains have been in the last two years.
Against the competition Chartwell dominates in English, Canada, and since 2015, our unaided awareness has tripled and come back where we now ranks second.
Based on all of these encouraging results, we believe that our fail business development and marketing effort are effectively helping us to stand out from the competition and will lead to increased occupancy going forward.
Turning to slide eight.
Q4, we also continued to focus on the customer experience as our unique value proposition.
Including completed its including completing a two day training session for all of our retirement fund managers across Canada, and beginning our frontline training program that is deliberate directly in our retirement homes by one of our four directors of cultural experience to date, we've trained over 3000 employees and expect to have all 9000 employees.
On this first unit by the end of Q2 ongoing training or both our managers in frontline staff is a key element of this multifaceted approach that is designed to improve employee engagement and resident satisfaction with the goal is increasing both resident and employee referrals.
In addition on the long term care side of the business. We've developed a program called imagine, which is being delivered to manager and frontline employees and our Ontario long term care.
It's four day training program participants understand and support those living with dementia introduces Montessori technique.
Make fans of families assist in overcoming resistant and improve leadership skills.
Finally, with respect to controlling expenses, our supply chain management team negotiated a number of national contracts in 2019 that led to annual savings of $2.8 million.
Also recently, we entered into a new contract that begins on March 1st which will yield future savings with respect to the purchase of medical supplies and equipment and incontinence products.
I would now like to turn it over to flat theater skier Chief Financial Officer to talk about our financial results.
Thank you Ken as you can see on slide nine in 2019, we continue to build financial flexibility, we increased our unencumbered asset pool, which at December 31st 2019 had valeo learn how to 15.6 million compared to 676.9 million at December 31st 2018.
This allowed us to add a new funded 25 million unsecured loan further expanding options to finance our growth.
In 2019, our real estate finance team arrange 269.2 million of new mortgages, which carried interest at the weighted average rate of 2.92% and had a 10.1 year term to maturity and majority of these new mortgages are CMHC shirt.
Our mortgage maturities remains well staggered with an average term to maturity of 6.8 years at December 31st 2019.
At December 31st 2019, our liquidity amounted to 414.7 million, which included 22.9 million of cash and cash equivalents and 391.8 million of available borrowing capacity under our credit facilities.
In addition at December 31st 2019, our share of cash and cash equivalents haven't our equity accounted Jvs was 5 million.
Interest coverage ratio was 3.1 at December 31, 2019, compared to 3.2 at December 31st 2018, our that this percentage calculated using historical cost of assets was 51.7% at December 31st 2019 in our debt to capitalization was 45%.
Net debt to adjusted EBITDA ratio increased to 8.3 times compared to 7.8 times at December 31st 2018.
The increase in this ratio is primarily due to financing a five new developed and one acquired properties that have not yet achieved stabilized occupancy and EBITDA contribution in 2019. These properties collectively contributed negative 1.7 million of adjusted and Hawaii Upon achievement of stabilized occupancy of 96%. These properties are expected.
Contributed 22 million of adjusted and Hawaii.
Our results in 2019 continues to be impacted by new competition in certain markets. We expect the pace of new construction to moderate in the second half of 2020 in the meantime, as Ken discussed the implementation of our branding sales and marketing strategies resulted in strong improvements in our leading indicators, which positions us well to begin occupancy recovery.
2020.
As shown on slide 10, 2019, I think there was 1.1 million compared to 18.5 million in 2018, primarily due to higher direct property operating expenses finance costs depreciation amortization expenses impairment losses lower gains on asset sales, partially offset by higher revenues remeasurement gains and lower deferred tax expenses in 2000.
The 19 AFFO was funded 99.7, though at a 92 cents per unit compared to 193.6 million or 90 cents per unit in 2018.
The increase in F. FFO was primarily due to higher adjusted and awhile for $11.7 million from including a 3.9 million increase in our same property portfolio higher interest income lower DNA expenses, lower lease and lease termination costs, partially offset by the increase in finance cost a lot of in higher corporate depreciation of any an intangible assets.
2019, FFR was impacted by 8.2 million of lease up losses, and imputed cost of debt related to our development projects compared to 2018 amounted to 4.1 million.
Included in 2019, F. always 1.6 million of recovery of prior years property taxes and related interest income.
Same property occupancy was 90% in 2019 compared to 91.2% in 2018.
As shown on slide 11 in Q4 2019, net loss was 11 and a half million compared to loss of 13.1 million in Q4, 2018, primarily due to lower deferred tax expenses impairment losses and higher contributions from property operations.
For Q4, 2019, AFFO was 51.9 million or 24 cents per unit compared to $48.5 million were 23 cents per unit in Q4 2018.
The increase in FFR was primarily due to higher adjusted and a lot of 2.1 million consisting of point 2 million increase in same property, adjusted and Hawaii, and 1.9 million increasing contributions from acquisitions and development higher management fee revenue lower DNA expenses lower lease termination lease expenses, partially offset by higher finance costs and higher.
Our corporate depreciation if any and intangible assets.
In Q4, 2019, FFR was impacted by 1.8 million of lease up losses in imputed cost of debt related to our development projects compared to 2018 amount of 1.3 million same property occupancy was 89.9% compared to 91.4% in Q4 2018.
Turning to our operating platform results as shown on slide 12 in 2019 in Q4 2019, Ontario platform same property adjusted and the why increased by three point, Fourmillion and point, sixmillion or 2.4% of 1.7%, respectively as rental rate increases in line with competitive market conditions were partially offset by law.
Our occupancy isn't higher staffing costs.
Occupancy in both 19 in Q4, 2019 was 84.8% compared to 86.5% and 86.7% in 2018 Q4 2018, respectively.
In our in 2019, our Western Canada same property adjusted antibody decreased point 1 million or 0.1%, primarily due to lower occupancy is higher staffing costs, partially offset by rental rate increases in line with competitive market conditions.
In Q4, 2019, or Western Canada same property, adjusted and Hawaii increased point 1 million or 0.9%, primarily due to rental rate increases in line with competitive market conditions, partially offset by lower occupancy and higher staffing costs.
Occupancy in 2019, and Q4, 2019 was 95.1 and 95% respectively compared to 96.2 96.3 for the respective periods in 2018.
2019, our Quebec same property adjusted that NOI decreased point, threemillion or 0.6%, primarily due to lower occupancy is higher staffing costs food or repairs and maintenance expenses, partially offset by rental rate increases in line with competitive market conditions and lower property tax expenses as a result of successful appeal of certain prior years assessments.
In Q4, 2019, Arca that same property adjusted otherwise decrease point 2 million or 1.8%, primarily due to lower occupancy is and higher staffing costs, partially offset by rental rate increases Atlanta competitive market conditions in our utilities expenses.
In 2019 in Q4 19 same property occupancy was 90.9% and 90.6% respectively compared to 92.29, it seems like 3% for respective periods in 2018.
Our Ontario same property and Terry LTC platform same property adjusted and the wine 3.8 million or 2.9% in 2019, primarily due to higher preferred accommodation revenue adjusted data wide decrease 0.3 now there are 3.5% in Q4 2019 compared to the same period in 18, primarily.
Due to timing of expenses 2019 in Q4 2019 same property occupancy was 98.6% at 98.5%, respectively compared to 98.3 in that 8.5% for their respective periods in 2018.
Well, we expect that competition in some of our markets will continue to be robust in the near term we are looking to 2020 with optimism.
We believe that our initiatives and employee engagement customer experience branding sales marketing recruitment and information technology will continue to move Charles forward. Our 2020 outlook is based on our expectation of a stable Canadian economy in housing market. It continuing strong labor market and slowly rising interest rates.
We expect our operating platform to deliver solid operating results in 2020 with gradually improving occupancy rental rate growth in line with competitive market conditions of between two and 3% and ongoing expense optimization through our centralized supply chain management programs, we expect DNA expenses to grow in line with inflation.
As we fund new corporate initiatives within the existing cost footprint.
Development will continue to be one of our core growth strategies of the three projects. Currently in construction one is scheduled for delivery in 2020 and two in 2021.
We expect to commence construction of three to four new projects in 2020 and number of other projects are undergoing design municipal approval and feasibility activities, we continue to source and evaluate other opportunities, including development opportunities in our own lands with an estimated development and redevelopment potential of close to 2500 additional suites, we will.
Continue to search for a portion is stick acquisitions, and we'll continue to evaluate our property portfolio and sell properties and did not fit our strategic direction.
Two of Charles that in more developments in Quebec have now achieved stabilized occupancy and we expect to acquire interests in these projects in the coming months and other chartwell. The teasdale phase two is expected to achieve stabilized occupancy later this year.
Slide 17 shows the history of our distribution increases and I'm pleased to report that yesterday, our board approved Chartwells sixth consecutive annual increase in monthly distributions, while the cash distributions will increase by 2% from five cents per unit 60 cents per unit on an annualized basis to 5.1.
As per unit 61.2 cents on annualized basis effective for the March 30, Onest 20, Twond distribution payable on April 15 2014.
In 2019, 100% of our distributions were classified as return of capital for tax purposes.
And our current forecast, we expect to have sufficient that actions and losses carried forward to eliminate any cash taxes in 2020.
Long term prospects of our industry in general are traveling in particular are very promising into four products as Charles currently operates the sector needs to add 262000 retirement suite by 2039 as you can see on slide 18.
We believe that the retirement living industry has a great opportunity to create and service additional demand over and above the demand, resulting from the seniors population growth along the demand for the government funded long term care is similar to the demand for retirement accommodation. If governments are unable to fully address such demand growth. Your time, it operators will need to step up to surf people who.
Cannot access government funded ltcs.
As an example of such opportunity in Ontario today, there are approximately 36000 people on the way to lift for LTC accommodation, many of whom reside in retirement residences.
The existing inventory of 232000 retirement suites in our far provinces includes a number of smaller older homes, which are likely to become obsolete overtime further increasing the need for new retirement suites.
The acceptance of retirement living is significantly higher and come back spending the rest of the country, where the penetration rate defined as the ratio of available retirement suites to number of people over the age of 75 of 18.4%. This compares to 5.5% penetration rate in Ontario, 5.7, Alberta and eight NBC, we believe the introduction.
Thats more flexible service offering and pricing options, including all the parts services across the country may increase the acceptance of retirement living and further drive demand.
So we see many opportunities to leverage our leading position in the Canadian retirement living market to continue to make people's lives better and to create sustainable value for all of our stakeholders.
I will now turn the call back to Brent wrap up.
Thanks flat as previously announced I will be retiring in two weeks I. Originally sold my family business. The chart with 2003 in after holding several positions with the company.
I was appointed President and CEO in 2009.
It has been a great run.
Our out of our achievements not only of bringing the company back to help that gets tougher early years and the financial crisis, but more importantly, and putting built solid building blocks in place for its future success.
I know I leave the company with an exceptional culture clear vision mission and strategy.
With World class corporate governance, and a strong and committed board a company with experienced and dedicated senior leadership team and most importantly, accompany a 15300 engaged in dedicated people that come to work every day with the goal of making People's lives better.
I note I'm very pleased that I will continue to serve chart will as a board member.
Thank you for your time and attention. This morning, we would now be pleased to answer any questions you may have.
Thank you Mr., Vince I will now take questions from the telephone lines. If you have a question and you are using a speaker phone lift your handset before making your selection.
If you have a question. Please press star one on your telephone keypad. If at any time you wish account. So your question. Please press the pound side. Please press star one at this time, if you have a question.
And the first question is from Jonathan culture with TD Securities. Please go ahead. Your line is now.
Thanks, Good morning, and can spread and hope you enjoy the.
Retirement.
Thank you very much.
First first question is just on on your outlook I guess, you're looking for a little bit of occupancy gain in 2021, and 2% to 3% or revenue growth is or is there anything on the cost side or any cost pressures that would prevent that from translate.
Again, the same property NOI growth.
3% plus range.
We do not expect that they'll be anything on the cost side that would preclude us from achieving that kind of annualized growth.
We spoke before about some pressures in certain markets in terms of recruitment and.
Well, we're incurring additional overtime and agency costs.
We expect these pressures will continue in 2020, but that should not be driving a significant growth in the labor costs.
Okay, and then just on the occupancy where you're talking about increasing leading indicators not translate into some.
Occupancy growth in Q4.
Are you seeing further occupancy growth into Q1 or is or sort of seasonal slowdown. There. Yeah. No. We are seeing or same types of trends with respect to our initial contacts and personal visits and.
A number of leases on January 2020 over January 2019.
Okay, and then just lastly on the the longer term 95%.
Occupancy target, it's up do you see that as being sort of a linear progression or more backend weighted does as new supply slows down and demand picks up.
It's we see it as a more backend weighted not just because of the supply slowdown in demand picking up but because the initiatives that we're putting in place right now will take time to help to take hold were confident that they will make a huge difference in our resident satisfaction employee engagement and by extension occupancy.
It will take time for us to roll all these things out of that we have planned to do so the growth in occupancy we see more robust at the backend of this now four year period.
Okay. Thanks all.
Okay.
Thank you next question is from Himanshu Gupta with Scotia Bank. Please go ahead.
Thank you and good morning.
Morning.
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Okay.
Thanks.
But.
So.
It's growing at a similar vein.
Hi.
No. This is will be in line with what our expectation for the markets would be.
Okay.
Okay.
Even 2019.
About the same.
Okay. Okay.
And then.
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Hi.
Oh.
Sure.
So if I look at it.
Excellent.
No.
So what has changed your decision.
Yeah.
Yes.
Yes, we've been talking about it for a while that we have delayed a number of projects that we thought would be in construction by now and we are revisiting then again.
Because of the acceleration in the pace of construction costs and in some cases, the competitiveness of the markets.
The project that were showing in Preconstruction, we still expect to commence construction its just going to be a little later, there's a number of projects that are not on this chart that we're working through a municipal approvals and feasibility analysis that we might also begin construction in 2020, but this is really just out of abundance of caution and making sure that we're comfortable.
The cost and projected returns.
Okay.
No on the same subject.
New supply.
Back to the new supply.
Sure.
Yesterday.
So.
Oh you there.
40 projects.
Oh, which were competing with you.
So.
Yes.
Last year.
No. So what we're showing in this Charlie Murphy is the projects that are currently in construction. So whatever wasn't construction last year. Some of these projects have been completed and so they're off that chart and then some new projects had started so they were added to the chart, but it's a fluid situation, but if you start analyzing it from year to year, you'll see the impact.
Got it has on these all our properties and they stopped 15 markets. So you correctly pointed out that last year, we had 7200 competing suites within five kilometer radius of our properties in those markets and this year that number is I think 5200, so there's a little lower number or quite a bit lower.
Competing suites in those markets, having said all of that you'll see that ER Durham and auto markets continue to be competitive.
Got it.
So let's focus on site.
Okay.
Okay.
Right.
Thanks.
Oh, yes, we absolutely do track internally all supply around our properties in terms of disclosure. It's a rule of thumb that about 70% of the people that come to live with you account within five kilometer radius of the property. So this is pretty indicative.
The immediate competition for these properties. So thats why we selected that that reporting.
Okay. Okay.
Maybe.
Development continues to be an important.
Oh.
Looking forward.
Oh.
Yes.
Yes. This is an ongoing program, where we analyze and review our property portfolio every year and as part of those reviews. We made determined that some assets that fit strategic direction of the company and we'll dispose of them you'll see our track record we have been pretty active seller every year of the properties that you should expect that that will continue.
Okay. Thank you.
Thank you.
Next question is from Chris Corr pre with see RBC. Please go ahead.
Morning.
Two questions first on on the bottom all projects a couple of them have seen their stabilization dates pushed out a little bit.
Are these related to delays in construction or is lease up going slower than expected.
I, probably a combination of both the ones that's been open for a while our because of the at least have gone slower that wasn't recently opened there were few some delays.
Construction.
Okay, and then the to that.
Unique and.
And San Gabriel what's the what's the what's the timing for you guys with respect to.
Your requirement to to acquire those properties.
Our expectation is that a San Gabriel go close shortly in the next week or so and the unique probably shortly thereafter in the next month or so.
Okay, great. Thanks, and then a question on on the Schumacher sort of like were 51% or lease compared to 48% and the prior quarter. Just curious if the leasing is going according to your expectations and you know with.
With what you've kind of experienced so far.
What youre eagerness is to do more of these same types of properties.
Yes, we started I guess, a little bit behind our expectation is that on opening we would have a bit higher pre leasing ratios. We had some issues with construction delay from this project that impacted that the current lease velocity is satisfactory inline with what our expectations, our and our desire to build more of these is.
Pretty big Wattup, continuing to do that we think there is a big potential for this type of model outside of core back and we're searching for more size to do more of these.
And how much of your portfolio could you see the this type of assets are becoming.
Well I mean, it takes time to build these projects so everything almost everything that we built now had some component of these apartments, they may not necessarily albeit larger assume that but everything that we're building has some components of these apartments within our card service offering. So we expect that that part of the portfolio will.
Continuing to grow now, we'll continue to own and operate hundred 60 other retirement residences.
They're not going away.
Thanks.
Thank you next question is from try Mclean with BMO capital markets. Please go ahead.
Good morning, you mentioned, an increase in leading indicators that is that true for markets, where you're seeing a lot of oversupply.
Yeah, It it's pretty it's pretty consistent.
Really.
And then.
You mentioned I was curious the rising construction cost are you starting to see how or other developers dealing with that or are you seeing any accepting lower development yields just to get a project started or is most of the industry. Taking the same approach you are than holding off on news on on getting on the ground.
I think if we do the averages we see the same sort of reaction from the rest of the people who are developing as we mentioned numerous times. The majority of development at the present time is being done by experience developers and or operators and so people are more disciplined in this development cycle than they were in the past development cycles.
So were seeing people differ and their project as well when they see the acceleration of construction costs or occupancy pressure on the existing inventory given the competitiveness of the markets.
And then what's the biggest driver employee engagement.
In the survey is it wages opportunities for advancement training I'm you know what do you think what do you get the best Bang for your Bakken trying to improve the score.
I.
I would tell you, it's all about leadership and.
We put a lot of effort into developing our local leaders and making sure that they are.
Very good at recognizing and communicating with our employees.
And allowing them to make a difference in homes and we see those scores going being important and I also increasing year over here.
And then just with a tight job market or is it getting tougher to keep employees and I was wondering if you could you know comment on both the LTC and the retirement homes.
So yeah there.
Definitely pressures around that in particular markets.
And we have a number strategies that we are putting in place on some of our employee engagement.
Initiatives are to retain that people that we have and I think that those are effective including that training, we're doing for customer experience for frontline employees on the feedback from the employees has been tremendous.
But in terms of recruitment. We are also developing a number of strategies, including programs to train people to become P. S. W. In our home.
Partnerships with schools.
Additional recruitment advertising doing job fairs, those types of thing.
Thank you that's good color I'll turn it back.
Thank you. The next question is from Brendan Abrams with Canaccord Genuity. Please go ahead.
Hi, Good morning, just on the supply chart in your Mdna I think.
You answered them into his question on why the five kilometers I'm, just wondering what that might look like.
Terms of the impact on number properties.
Sweets or NOI, if you extended.
The competitive set from five kilometers to say 10 kilometers.
Right I won't be able to answer that question because we haven't done the work to put this consolidated stats together, we are tracking as I mentioned competition in all of our market that is outside of five kilometer radius. We all less often feel the most pressure from the properties that are within that five kilometer radius and that's why we choose to report it that way.
Right. So I will be able to give you any sense of Ah the 10 kilometer radius issues or 15 kilometer radius issues because the that that data is not available on a consolidated level.
Right, Okay, and just in terms of the completed projects.
In the I guess forecasted stabilized NOI.
Just to confirm the NOI you referenced the negative 1.6, I assume that for 2019 and of 14.2 million would be.
Upon stabilize occupancy obviously looks like.
About two years from now everything.
Depends on the subset of properties that were talking about so I was referenced projects that we opened in 2000.
19, and a project that we acquired in 2019 that was right. After development those projects contributed a negative 1.7 million Abanto why in 2019, and they expected to contribute $22 million event, Hawaii on stabilization they will achieve that stabilization at different times.
They all stabilize at 96% expected occupancy they will be contributing $22 million an hour.
Okay.
And just going back to I guess the.
Some of the lease up in these recently completed projects, maybe the sumac and.
Westcott, specifically sumac looks like occupancy increased 3%.
Whatever quarter, which would translate to about 10 suite.
Is that in line or or with your expectations or or below below expectations and similarly, the westcott I guess moved from a 36 at 38.
Yeah, well on sumac as I mentioned, we see pretty good velocity of traffic and people coming through in high interest and the its just a question of closing on the sales, we and believe that the newness of this model in the Ontario marketplace is what causing a bit slower than what we originally expect.
In terms of the lease up of the property, but generally it is inline with expectation right now a wescott is a bit slower than expected we are expecting to pick up on occupancy later in the year.
Okay.
And I guess a lot of talk on the fundamentals.
Just on the supply just turning to the demand.
I'm wondering if you may not have the exact study now, but directionally with respect to let's say leads or traffic or conversion conversions.
Would you say that that's up flat down.
To to what it was a year ago.
I guess my question being is it is that an issue with getting the traffic and prospective residents through the door.
Or and they're just choosing.
To go with one of your competitors or is the traffic.
Maybe not the up to your expectation.
Well right now as Karen mentioned, we have seen now for five months a significant increase in leading indicators. So that means traffic initial contact that means personal visits people, who come visit us and our closing ratio actually have encasing as well so right across the board.
Were seeing pretty positive signs in terms of the demand and we are closing. These people are more than what we had before now it's only five months phenomena. During the early days of 2019 the situation was different.
So right now that's what causes us to look with optimism to 2020.
Right. Okay. That's helpful I'll turn it over.
Thank you.
Thank you. The next question is from Tommy Burris RBC capital markets. Please go ahead.
Thanks, Good morning, just in terms of the comments around new supply, perhaps slowing in the back half the year.
What what signs are you seeing that give you that confidence.
For I guess the back half and then it is it based on stabilization, perhaps to some of the competing properties or your own initiatives I'm. Just curious what gives you that confidence.
Thanks, I missed what we're talking about is the pace of new construction starts and what causes us to believe that this will slow down at the back end of 2020 is the escalation of the construction costs and the fact that the projects are taking longer to lease up in this environment than some of the competitive markets. So.
In mentioning that we were deferring our own project starts because of these issues and we know that others are doing the same thing.
So those two things caused us to believe that it will slow down the pace of new construction starts will fall down at the back end of 2020.
Right. So this is I guess.
Happening for probably the last six to nine months.
I guess that gives you that visibility that's correct. The projects that are sort of in construction they will be delivered.
Right.
And just on that can you maybe provide some context and perhaps how lenders are our altering maybe their underwriting standards for development.
Are you seeing any change in the availability of credit.
For for development.
So it would be difficult for me to comment on others for us it's never been a problem to borrow for development that otherwise, but our situation probably is different than the majority of individual developers out there.
But for Chartwell, it's always been I'm, not very hard to borrow the money for the project in it you should know the projects that were developing on our on balance sheet, we usually do not borrow specifically for the project, we just financings with our existing credit facilities or other sources.
And then we refinanced project with a C machine sure financing when it's built and achieve stabilized occupancy.
Right.
Maybe just one last one in terms of the changes or I guess possible changes in the long term care.
Compliance premiums.
And your outlook changed at all for same property NOI growth in that segment I know, it's a small piece but.
Just curious.
Now we're still thing that we can do between one and one of the half one and 2% same property NOI growth in our long term care portfolio, all the initiatives and successes that Brent Karen talked about.
Translate to the same kind of same property NOI growth.
So I guess overall im just going back to the earlier comments it sounds like you're sticking with your.
Typically call it 3% to 4% same property NOI growth for for the year.
Yeah, it's our expectation that we should be within that range.
Thanks, very much I'll turn it back.
Thank you once again, please press star one on your telephone keypad. If you have a question.
The next question is from Paul volley with National Bank Financial. Please go ahead.
Hi, good morning.
Our until I just wanted to say congratulations on a good quarter in a tough market and congratulations brands.
Here's were successful retirement.
I wanted to.
I'm just ask maybe take advantage of your I guess I'm, assuming it's going to your last time on the call and so if you talk about if you think about the last 10 years.
In the future trajectory of this industry.
How how is your thinking about development.
Growth factor for Chartwell evolved over that 10 years.
Because one of the things that I've been impressed with this year as how sort of judicious you guys had been managing the pipeline.
You know ticking project off the board is not an easy thing to do.
You have to worry about signaling and stuff like that but.
Yes.
I think it's been a real positive.
To sort of exercising financial discipline and so maybe if you can walk me through look how you're thinking of evolved on development over time.
Okay.
I think if we go back before I was CEO I think our process was any and all development is good.
No matter, what and we all saw the results of that it was not that was not the case. So we decided to take of much more judicious approach as a strategy to develop and we still believe quite strongly that development was a terrific mechanism for growth for us.
We get the buildings that we wanted the markets we want built the way we want.
But we want the do it on our own terms and certainly at a much more cautious level. So we kind of set a target three to five at any given year to start up and we've stayed with that that's what we believe weekend effectively manage a build and then open with the teams we've had we've had.
We've added some people during that period of time on the opening side, we have our real estate integration team. When she was a adjustment to our strategy a couple of years ago and Thats proved tremendously successful. So we think the pace that we set for ourselves is appropriate we're not looking to do more than that and where the numbers don't pens.
Hello, as they getting tougher in this market with construction cost.
We've said no what if it doesn't meet our standard it doesn't matter standard on the return side. So I don't think there'll be any change on that strategy. As we go forward were going to continue to be judicious in our development and take advantage, where we can grow the company.
I'm glad you have anything to add to that I can confirm the previous stated [laughter].
The next next question just.
Regarding capital budgeting.
You've got about I think about 70 million committed to the about a mile acquisitions. This year can you just talked maybe about what you see the spending envelopes would be for your regular capex and what you would have committed for development spending this year.
So a regular capex is easier it'll be in line with what we've been kind of trending over the last couple of years between 80 $85 million a year. That's what you should be expecting us to invest back into our existing property portfolio development is trickier, we will complete obviously the projects that are in construction right now, but the rest of the device.
All of them spend will be dependent on the timing of the construction starts and that as always uncertain because some of it is our revaluation of the projects feasibility in some cases redesign in some cases, it's just timing of getting approvals and getting shovels in the ground. So I will not guide you to that number because whatever guidance would be the going to be different.
Okay.
And then.
I would like acquisitions. The are you anticipating this to be an active year for you guys or not.
Apart from the about ammo about about so.
Yeah apart from the bottom aside it's going to be just like it's been every other year. We are fortunate ticket looking at acquisitions. If we have a great opportunity that fits our strategy, where we can create a difference and create value by.
Utilizing our management platform, we will do it otherwise we want so it's the same slug going to change we do not have any specific targets about the volume or the size of acquisition that we do every year, but if you look at the track record there hasn't been a year, we haven't done something so my expectation is that something will come up okay.
And then this is a more of a an accounting accounting question anything else, but.
A lot of the other companies, we follow who have development arms capitalize certain expenses.
A lot due to recapitalize the DNA do you do you guys capitalize any of your DNA right now.
Of course with it we have people, who specifically dedicated to the development activities and we capitalize the time of these people.
A lot of people are invested into development activities. Since they are part of our company because of the fact that we have these development activities. So those people's time capitalized on expenses that are related to that you do you have the rough amount that you guys are capitalizing right now annually.
No I do not have that amount with me right now and it fluctuates depending on the volume of the development activities that we have every year.
Okay, maybe I will you can follow up about offline. Thanks for your time gentlemen, appreciate it. Thank you.
There are no further questions renters at this time I would now like to turn the meeting back over to Mr. business.
All right that wraps up todays conference call. Thank you again to everybody for joining US now I want to note a if you should join US at our annual General meeting with scheduled for Thursday May 14, 2020 at 430. This year make note. It will be held at our new offices located at 70 70 dairy cast drive in Mississauga.
Rather than downtown.
So as always thank you for your questions you anything else give us a call it's been a pleasure working with all of you and goodbye.
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Good.
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Okay, and you're not because it had been the Tommy.
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Okay, and they're not because it had been for Tommy.
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Okay, and you're not because it had been the Tommy.
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Okay opinion, that's because that's something else to tell me.
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Okay, and you're not because it had been the Tommy.
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Okay opinion, that's because that's something else to tell me.
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Okay, and you're not because it had been coffeehouse autonomy.
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Okay, and they're not because it had been for Tommy.
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Okay. That's good for that.
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Okay, and they're not because it had been coffeehouse autonomy.
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Okay. That's good for that.
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Okay, and you're not because it had been for Tommy.
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Okay opinion, not because I can tell me.
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Okay. That's good for that.
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Okay, and they're not because it had been coffeehouse autonomy.
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Okay, and they're not because it had been for Tommy.
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