Q4 2020 Sienna Senior Living Inc Earnings Call
Ladies and gentlemen, welcome to Sienna Senior living Inc. Q4, 2020 conference call. Today's call is hosted by net and Jane President and Chief Executive Officer and cash.
Karen.
The Chief financial officer of fee.
He and the senior living and Inc.
Please be aware of as certain statements or information discussed today are forward looking and actual results could differ materially.
The company does not undertake to update any forward looking statement or information.
Please refer to the forward looking information and.
And it's a section and the Companys public filings, including its most recent MD&A and the I asked for more information.
You'll also find a more fulsome discussion of the Companys results and its MD&A and financial statements for the period, which are posted on SEDAR and can be found on the company's website and a live.
The thing that CA.
For today's call is being recorded and a replay will be available instructions for accessing the call are posted on the company's website and the details are provided in the company's news release.
The company has posted slides, which accompany the host's remarks on the company's website under events and presentations.
With that I will now turn the call to Mr. Jain.
Please go ahead Mr Jain.
Thank you Michelle and good morning, everyone.
Thank you for joining us and our Q4 call today.
First I would like to express my deepest gratitude to the team members.
The demonstration of resilience compassion and commitment for the past June and has been inspirational and truly humbling.
Yeah of making a remarkable difference for prioritizing the health and wellbeing of our residents and their colleagues.
While the often making significant sacrifices and their own lives.
But the arrival of COVID-19 vaccines, we ended 2020, the both promise and urgency and the ongoing fight against the pandemic.
Yes, the new protection and renewed hope as many of our residents and team members on all vaccinated.
Since mid December Sienna vaccination task force has been rolling out vaccinations across our long term care and resident residences, and retirement residences, and Ontario, and British Columbia.
For the past few months approximately.
The 92% of Sienna is long term care of residents and.
And 60% of Chinas long term care team members have received their first dose of the vaccine.
While the rollout of the vaccine and long term care has been a government priority approximately 46% of of residents and 28% of team members.
Now at the time of residents who have also received the first of all of the vaccine.
In addition, the administration of the second dose is also well underway at many of our residents.
The arrival of the vaccine has been a turning point and is expected to be the most impactful defense and the fight against COVID-19.
The team at the high vaccination rates at the resident and since we are encouraged that the number of residents of an outbreak and the severity of outbreaks has started to decrease significantly over the past few weeks.
As of yesterday of 12 residences with active cases of COVID-19, including nine residents of the long term care and three residences.
And retirement.
At this point, we have no active COVID-19 cases across any of our residences and BC and.
And the only six residences and Ontario have active resident cases.
This marks a significant improvement and represents a 96% decline since the beginning of 2021.
Moving to our continued focus on quality of care and safety.
We continue to expect to have stringent precautions in place to reduce the COVID-19 the impact of COVID-19 at our residences.
Coupled with the high level of community spread the transmission rate of the virus and older B and C buildings has posed significant challenges.
And vigilant AIPAC measures and protocols will remain in place for the foreseeable future.
Our incident management team meets on a regular basis and review the announcements and changes to provincial directives and provides guidance and oversight for implementing changes to out the cable policies and procedures.
Yeah.
Challenger of the guidance of Dr. <unk>, our Chief Medical Officer, and Dr. Magee, our CNS infection cheap of infection prevention and control adviser.
Made enhancements to our AIPAC measures and developed the standardized COVID-19 management guide based on public health guidelines.
This guidance provides further advice of AIPAC.
Two of team members and help standardize the clinical management of COVID-19, and our residences.
Moving to slide six.
As a result of the pandemic the enhanced our staffing strategy book.
Our internal talent acquisition teams and the use of external agencies, who.
Measured short term and ready to deploy team members.
From March of December of 2020, the added approximately 200 team members to our workforce.
And we increased our full time workforce by 16% due of about two thirds of our total employees.
Okay.
Learnings from the first.
And will provide continued to be a key focus of team member training and weekly debt at training Webinars, which are held at all of our properties along with Webinars to address site specific needs.
We have also placed additional emphasis on wellness programs, including mental health and wellbeing.
We also.
<unk> made improvements to the way the communicate with residents and team members.
The strengthened sienna's family caregiver engagement program to better engage with the residents families and caregivers and to provide them with the additional support.
Every residents now holds the virtual town hall with all families at least once a month.
And sent out the newsletter every second week.
In Q4 via posted close to 170 million virtual town halls, and issued more than 300 newsletter.
We also launched of Vela series currently focused on stress management and dealing with losses.
We engaged our in house medical experts Dr. Most of.
And Dr. <unk> to provide information and answer questions about the COVID-19 vaccines two of team members residents and their families.
We made further enhancements to our centralized call center. This includes longer hours of operations and enhancements to its marketing and sales function to support our retirement.
Operations.
And we continued leverage true our team member mobile App, which has been invaluable and connecting with thousands of team members and different locations quickly and efficiently.
Over the fall and winter months, we continued with intensified marketing and sales activities and process improvements across.
Our retirement platform to include efficiency and productivity.
Our continued investments and our digital presence had been driving traffic to our website and and social media sites to support lead generation.
Online leads have increased by approximately 80% in Q4 of 2020.
Compared to the prior year and remained well above the prior levels and the first week of 2021.
Initiatives also include professional referral programs and our sales incentive program. In addition, we continue the use of virtual tours at our residences.
Moving to occupancy.
Given the ongoing pandemic occupancy declined and at the time and portfolio by three 7% and the fourth quarter was 79, 7% at the end of 2020.
But the average occupancy of 81, 3% and Q4 year over year occupancy declined by six 1% since the end of 2019.
After several months of occupancy gains and the late summer and early fall of 2020 renewed.
The renewed access restrictions led to the occupancy decline and the final months of 2020.
Average monthly occupancy further declined to 78, 6% in January of this year down 120 basis points from December.
And we expect continued occupancy pressure until mid 2021.
Based on the assumption that restrictions and other retirement residences will ease over the coming quarters.
The forecast occupancy improvements during the second half of the year.
Supported by anticipated pent up demand and our continued investments and our sales.
Our marketing initiatives.
And of long term care portfolio average occupancy declined to 84, 8% and the fourth quarter from 98, 2% and the same period last year due to access restrictions and capacity limitations.
Occupancy will continue to be impacted by the pandemic with gradual improvement.
<unk> is expected during the second half of the year.
Excluding the impact of net pandemic expenses, we expect the financial performance of Sienna is long term care portfolio and 2021 to be similar to 2020.
Long term care residences of fully funded for vacancies of new residents cannot.
Be admitted due to an outbreak and.
In addition, we continue to see full funding for capacity limitations to a number of two residents per room, and multi bedrooms and class B and C homes until February 28 2021.
This occupancy protection Highwood does not compensate us for the loss of premiums we receive for preferred.
Patients of private and semi private rooms of their vacant.
Moving to slide nine.
Our operating performance has been significantly impacted by the extraordinary expenses incurred to manage the pandemic.
Q4, OSF per share was $21 one.
The commentaries of $12 <unk> compared to the prior year, excluding the pandemic expenses OSI for per share would have decreased by $4 <unk> compared to the prior year.
Q4, <unk> for per share was $19 six.
A decrease of $11 seven compared to the prior year, excluding the pandemic expenses.
And <unk> per share would have decreased by $3 <unk> compared to the prior year.
Sienna's <unk> payout ratio increased to 119% and the fourth quarter, excluding the net <unk> expenses of the payout ratio would have been 83%.
For the full year and type of per share was $1.
<unk> for <unk> compared to $1 40, and the prior year and the payout ratio was 90% compared to 66% in 2019.
While we expect a continued increase level of expenses and the foreseeable future IMAX and Asian rates, coupled with the many actions we have taken to strengthen our operations.
<unk> provide new protection to our residents and team members and increased optimism across our sector and our company.
With that I'll turn it over to Kevin who will provide an update on our operating and financial performance.
Thank you Nathan and good morning, everyone.
As Nick mentioned Sienna has taken extent.
And the precaution to manage the impact of COVID-19, which is reflected in our results and key metrics.
We have made investments and addition of backing PPE and property infrastructure entered into the management agreement with hospital and other senior healthcare expertise to navigate the effects of COVID-19.
All of this affected our operating and financial income.
I will start with our Q4 financial results on slide 11.
Revenue decreased by one 9% year over year to $168 8 million and Q4 2020 compared to Q4 2019.
Our.
Same property net operating income of $28 5 million and Q4 2020 decreased by $9 5 million over the prior year, mainly related to net unfunded pandemic expenses of $7 7 million.
Retirement same property NOI decreased by $4 3 million to $12 2 million.
Which included net unfunded pandemic expenses of $1 8 million recognized during the quarter.
Excluding net pandemic expenses retirement same property NOI decreased by $2 5 million to $14 million, mainly due to lower occupancy levels and inflationary increases and labor costs, partially offset by annual.
Rental rate increases in line with market conditions.
The long term care same property NOI decreased by $5 2 million to $16 3 million year over year due to net unfunded pandemic expenses of $5 2 million.
Excluding the pandemic expenses long term care same property NOI was.
Annual two prior year with decreases and preferred accommodation revenue and our Ontario portfolio offset by timing of expenses.
Moving to slide 12 on a full year financial results same property NOI decreased by $31 5 million compared to 2019.
Same property NOI.
NOI and retirement decreased by $16 9 million or $11 6 million and long term care same property NOI decreased by $22 5 million for $19 9 million over the prior year.
Rent collection levels and the retirement portfolio remained high and approximately 99% throughout.
Relative pandemic.
We incurred and increased level of expenses to support the cost of fighting the pandemic and minimizing the impact of outbreak.
There are various programs and financial assistance provided by the government to support pandemic related expenses.
It has.
To note that there may be timing differences between the time of incurring these pandemic expenses and the funding of such expenses.
During the quarter, we recorded net unfunded pandemic expenses of $7 7 million related to managing COVID-19, a decrease of 28% compared.
It is important and third quarter $9 $7 million.
The decrease compared to last quarter was mainly related to lower pandemic staffing costs as a result of our effective recruitment and retention initiatives, leading to a reduction and external agency costs.
We also incurred the lower hospital management fees compared to the last.
Last quarter.
This was partially offset by increased PPE costs and response to the second week.
For the full year net pandemic expenses were $28 2 million.
We are very grateful for the continued government support the helps us cover some of the extra ordinary.
Pandemic expenses.
With the exception of funding related to accommodation all government funding is flow through funding, which means the has to be spent entirely on resident care.
Any amounts that are not directly on the resident care, our pandemic expenses have to be returned to the government.
At the beginning of January the government of Ontario announced additional funding for long term care of $398 million for costs related to enhance testing requirements and continued infection prevention and containment efforts, increasing total funding to the long term care sector to over $1 3 billion.
The funding included and allocation of $6 9 million to date to Sienna for expenses that were incurred in 2020.
Half of the impact of the additional funding being the recognized in 2020 same property NOI and our long term care portfolio would have been $23 2 million and Q4 2020.
To date, the Ontario government has approximately allocated $747 million excluding amounts for the occupancy protection funding.
Of this amount approximately $47 million has been allocated to sienna to date.
The government of British Columbia has allocated approximately 190.
$97 million and funding for cost and connection with additional screening and staffing and infection prevention and control measures and social visitation of which $3 million has been allocated to sienna.
All of the funding is crucial to help offset some of the significant costs driven by the pandemic.
Moving to our debt financing efforts.
And October 2nd we successfully completed $275 million of debt financing, which significantly reduce near term debt maturities and improved our long term debt ladder the.
The financing, which reflect the confidence placed and our company included.
$175 million and secured and unsecured debentures carrying the coupon rate of 345% and maturing in February 2026, and 100 million credit facility carrying of floating bankers acceptance plus 225 basis points.
The proceeds from the financing were.
On the Youtube early redeem our series B secured debentures, which would have been due in February 2021.
With the successful financing the weighted average terms of maturity of our debt has been extended to four seven years at the end of the year.
Looking at our debt metrics for the full year of 2020.
On slide 16.
Excluding the impact of net pandemic expenses, our interest coverage ratio was three nine times in 2020 and line with the prior year.
And excluding the impact of net pandemic expenses debt to adjusted EBITDA increased to seven five times in 2020 from $6.
The remaining times and the prior year.
And the debt to gross book value increased by 220 basis points to 48, 2% year over year, mainly due to an $87 million drawdown on our credit facility of which $40 million has been invested and short term investments to provide us with continued financial flexibility.
Subsequent to the end of the year, we repaid $63 million of our credit facilities, therefore, decreasing our debt to gross book value by 150 basis points to 46, 7%.
We decreased our weighted average cost of debt by 40 basis points to three 2% year over year.
<unk>, primarily due to increasing our mix of floating rate debt.
In terms of both balance sheet GNL maintains a strong financial position and investment grade credit rating and ended the year with $217 million and liquidity and an unencumbered asset pool of over $840 million.
Our debt is well distributed between unsecured debentures conventional mortgages.
And Mitch the insured mortgages and credit facilities.
And I've mentioned, we expect an increased level of expense for some time, which will continue to affect some of Sienna key performance indicators and particular with respect.
The respect to the company's operating performance.
Given the many factors influencing the results we remain committed to providing periodic business updates on the impact of the pandemic and all of our business operations and financial results.
I will now turn the call back to net and for his closing remarks.
Thank.
Yep.
I had the opportunity to safely and within all of the provincial guidelines visit 24 of our residences since June of last year, including five and the last few weeks.
And visiting our residences I witnessed firsthand the dedication and courage of our incredible team members many of whom have been battling COVID-19.
And most of the year now.
I'm truly grateful to the government's prototypes senior living and the rollout of vaccines.
It gives the residents and team members of the much needed protection of the dessert.
I'm also thankful for the government of one two of those decision two and please direct care of hours for the coming years to an average of $4 per day for each of resident.
For all of the care a significant increase compared to the current two eight hours.
At <unk>, we have taken many actions over the past year to review and strengthen our company's foundation by adjusting and enhancing our operations and our capacity to respond to the pandemic.
Many of these initiatives have been highlighted.
And the long in our inaugural ESG report, which was published yesterday.
The extent of the pandemic impact on the operational and financial performance and 2021 depends on numerous developments.
These include the duration and scope of COVID-19 outbreaks of the residences and the impact on our residents employees.
Lighted and suppliers.
The speed of vaccine rollout across the wider population and Canada. The arrival of new variance of the virus as well as the extent of the general economic recovery.
In terms of our strategic focus and development. Our plans include over $600 million and capital investment to develop our.
So the long term care portfolio over the next five to seven years.
This is a major opportunity to invest with a focus on sustainability to it.
And the lives of seniors, we serve and enrich the work environment for our team members.
Our 2021 goal is to start with two development projects and this year.
Last year, it has been filled with learning innovation and resilience.
With many of our residents and team members and all vaccinated the of new protection and increased optimism.
As we look beyond the pandemic overall sector fundamentals remain strong.
And aging population long wait list of for long term care.
On 10, a slowdown and the future supply of retirement residences are all expected to support our sectors outlook going forward.
I am incredibly grateful for our team up over 13000, who is doing everything it can to prevent the spread and our residents during the second wave.
I also want to acknowledge the many stakeholders we're dedicated.
For putting us in our ongoing fight against COVID-19, including the governments of Ontario, and British Columbia, a sector and associations and our residents and their families.
Thank you for your participation on the call today, we're pleased to now answer any questions you may have.
Ladies and gentlemen, if you'd like to ask a.
To support and please press Star then one is the.
Your question has been answered and you'd like to remove yourself from the queue press the pound key.
Our first question comes from Jonathan Culture with TD Securities. Your line is open.
Good morning.
Morning, Jonathan.
First question just.
On the on the long term care and and the extra had debit cost I guess with vaccines being rolled out and your infection rates.
We doubt, which is which is obviously good what when do you think those start easing off a little bit of test.
Should taper over the over the course of 'twenty and 'twenty one.
Good morning, Jonathan.
We are very pleased with our vaccination rates.
And with long term care, having been parked horizon, our residents being 92% back of the needed today.
And that's very meaningful and we see of various favorable correlation with the highest.
Cash and rate and the decline and the number of outbreaks.
We are now at less than 0.2% of active resident cases.
And our pandemic expenses do vary greatly depending on whether a home is an outbreak or not.
And the severity of that.
Outbreak.
And what we've seen is <unk>.
And once the home goes into the outbreak there is increased needs for staffing costs for PPE and cleaning and cohort and so for.
Yes.
However, even with the vaccinations in place.
Very.
The committed to continuing with our AIPAC measures and protocols, which means continuing with an elevated level of staffing and PPE and and all of those measures that come with it.
And with the homes now coming out of outbreak the door.
The cost would continue for some time.
And <unk>.
And would unwind some of the extra effort, but it really.
Has the standard level of Ipass protocols that will continue for some time and really until the general population, while we'd get back to the needed because we see a direct relationship between community spread.
And the infection.
And of our residences.
So we are fully committed to ensuring that our residents. Our team members are still very well protected from the pandemic and as the pandemic subsides and the general population those costs would come down.
Okay. So I guess another way.
Our basket.
And I asked the matters.
If we if we were to assume.
That you are fortunate.
Oh, great and all of Q2.
Roughly what would be extra and debit cosby for for that quarter.
Jonathan I think it's very hard to estimate the because it depends on.
On the the.
And the community restrictions and that area as well and they would be of dentists, Karen mentioned there'll be a certain standard you will always keep you would be screening people too.
The the overall population is vaccinated.
People would still be wearing some personal protective equipment. So it is really hard to.
The estimate at this point, what it would look like if you had no outbreaks.
Okay.
Okay, maybe switching gears just on the the.
Development program that <unk>.
And the $600 million.
How would how would funding work for a typical development how much loan to cost could you get in terms of the construction financing.
Sure so around 75% for long term care given the certainty of the.
And really no lease up risk so.
We can borrow a bit more and.
There are certain lenders who are very active in the space. We can borrow close to 25 year money for and on fee and a quarter percent. So we are speaking with few of them.
And the balance.
Were funded from your equity upfront and after the home of the building.
As completed depending on the radio located you can get around 10% to 17% of debt the construction.
And I'm on the back as an upfront grants so one of our equity put in our own half of it could be recovered once the home has opened and so for.
And for our $600 million program. If you just think of bit of high level.
If you bought a $450 million, which is the 75%.
And all of the balance of the 150, and we believe close to $70 million upfront over the next three years and.
And then once the program gets going is building comes online.
The equity is self funded through those grants going forward.
Okay. So so bottom line and Youre looking at about $70 million.
Cash that you guys need to come up with over the next three years for Undergrad program.
Correct.
And these are again high level numbers at this point as we have detailed prototypes of a few sites and we have high level.
<unk> for some of the other sites, but the rationale.
Yes.
Okay. Thanks, I'll turn it back.
Sure.
The next question comes from spread Blondell with <unk> Securities. Your line is open.
Thanks, and good morning.
And just looking at the action plan.
And from here would you say you're pretty much done increasing the size of your team and.
And in terms of the <unk>.
Occupancy protection funding I mean could you remind us and I might have missed that.
What.
What happens post the February 28.
Sure Hi, good morning.
And so on the first one August our team is overall builder.
The three areas, where we added expertise the first one being the healthcare for the second one of them communications, which included as the opening of call Center and the last one is the centralizing all of our talent acquisition and we were fortunate and we will do that and the time you did.
In terms of the February 28 guidelines and we continued to work.
With the Ministry on how safely to reopen the homes. So people can start to come back and also discuss how do we get people back into the three of four bedrooms and still maintain infection prevention control. So I know lots.
It's a lot of conversation happening at the multiple tables to ensure the how do we do it and the best interest of everyone. So at this point, we really don't really have any more guidance than that.
No that's totally fair and and expanding on the Jonathan's question on your redevelopment program.
I know, we discussed that and the.
The what would be your current assumptions in terms of yields on cost on that.
Would you say that these assumptions evolved over the last year or so.
And the reason why im asking and obviously that we all saw.
Material costs rising over the last couple of quarters.
Correct, so our assumptions.
Past what seem to be the.
We would expect for development of tons to be and 50 to 100 basis point over.
Yeah, you know stay.
The stabilized long term care of home now the reality is theres been very limited construction of a long term care homes, and Ontario, and they were 500 and that's built and the last five years.
And so people are making guesses on what the cap rate would look like.
When you look at eight homes have recently went through a very fulsome appraised of process because as you are doing and unsecured financing the cap rates for <unk> homes could be anywhere from 675% to seven in the quarter.
And.
And we would argue and advocate that a few of our brand new building.
Built now with the brand new license the cap rate should be lower than the $6 75 number so I would say anything and the 7% yield range would make.
It makes sense for us financially.
And secondly, it is also of the.
To do these older homes for about 50 years back for different resident profile 50 years back when people used to walk into long term care home of.
The average length of stay could be for five years today people come and much of.
Later in life and acute health care needs and those buildings are just not.
Right.
The.
We have to make them work for the next five to seven years, because you cannot really change them overnight.
But going forward as the acuity level would only become more and more difficult to manage you did the night you need the right infrastructure to be able to do that so for us of you feel from a.
From a USG.
Our effective it's the right thing to do socially it's the right thing to do environmentally and it would have that we expect.
A decent return for our shareholders as well because we would be relying on huge amount of capital to make this happen.
No that was great and.
Congratulations he and the team on the Greek word and I can only.
The personnel difficult the situation is thank you.
Sure.
Our next question comes from Himanshu Gupta with Scotiabank. Your line is open.
Thank you and good morning.
Good morning.
With respect to additional funding announcement and generally how.
Has that been fully allocated now.
And then just to confirm you have received $6 $9 million and January pertaining to expenses incurred in 2020.
That's the only thing I'll dig into the financials so far.
Good morning human issue.
Youre right all of those fronts. So in the January funding.
The announcement.
Ontario has shared a new funding of $398 million, which helped with the testing requirements as well.
The COVID-19 related expenses covering staffing P P and all of the kinds of costs, we have been incurring and out.
The new funding.
About 40% of that has been allocated to date.
And we've shared that what we have received.
$6 9 million related to 2020 expenses.
And because the funding announced when was the only known in January.
Those are not reflected in our year end results.
Got it and if I.
Google on some of the expenses of 'twenty 'twenty, one of the walls around it.
And it looks like you have received $7 million or how do your January and do you get a sense from the Goldman debt, you're you're likely to see more funding to close.
The GAAP between debt.
The $12 million left now of $11 million left no, which is don't think of it from the last year.
And that's a good question what I can only say is that out of that new funding that had been shared.
There is still about 60% of the to be allocated we're not sure how.
And that would be allocated.
But in addition to that there was also a funding programs out of was announced back in the fall and September whereby every month, we have been getting pandemic funding.
To support with our ongoing cost as well and as of late that monthly Alex.
Occasion has been about $3 million to $5 million of mine.
Got it okay. Thank you and then just looping of the nature of the pandemic expenses on the NIPA.
Look at the P. P M D and expensive of almost $2 million of the quarter.
Other expenses as well I think and obviously.
And obviously, we'll continue to be elevated so book expense category do you think will come down and like you.
Similar to Jonathan's question of news on the homes, which is hungry for some Covid C 100 per some of that's needed which category do you think you know the first guy because of you between you and should come down and for any.
You know.
What could be the level of savings day.
I think that's a fact.
And John for you right Jonathan asked the same question and.
It's not that we're not looking to give you an answer but let me just walk you through some of the scenarios for example, the.
The vaccination is still relatively new.
And.
And amongst the conversation was even if you've received the explanation you should still be getting screened and tested on a regular basis.
And there's some new conversation coming.
And as.
People are vaccinated that maybe they don't have to get tested for recommendations, but again that is still in very early stages before.
The method.
And the second concept of the rapid testing and.
We are now doing a pilot and five of our sites.
And the initial assessment was that it will take incredible amount of.
Team members to make that happen, because you're really creating a mini lap and <unk> 83 of your residences, even though it is not <unk>.
You can and retirement at this moment. So it's it is very hard to estimate at this point as we learn a bit more.
And we again.
Again, and can provide a bit more information and thats why we are committed to provide.
And our business guidance, rather than just waiting for the quarter. So as we know a bit more and how and what level of expenses can.
Come down given the vaccination.
Can certainly come back and provide a bit more fulsome update.
Okay. That's fair enough and then just turning the.
Changing gears to retirement home occupancy.
And so the question is worthy of any restrictions in terms of admissions to the diamond homes and Q4.
And it isn't a 13, John Lee said mutual funds.
And then just looking at the occupancy growth you can you can you elaborate debt.
Sure.
Our retirement and team has done an excellent job of following upon previous leads and as you can imagine of fab as seniors of moving into one of the and one of the retirement homes and they would like to see it.
And compared it to other options and then moving so during the summer of <unk> of last year. When they were they were not there was less restrictions and there are more in person tours of people, who are already and the pipeline we were able to actually see occupancy increase now since all of those leads are gone and restrictions.
All of this for quite some time and day of a certain cycle for a senior to move into a retirement home Europe and many cases, they're selling their own house. So the good news is the housing prices continued to be very strong and and are only going higher but if you're a senior and you're in the middle of Covid with all the restrictions it is challenging to be lifting your home and.
And selling it.
So we haven't really seen much traction and with the.
The restrictions there are only virtual tours available.
And there's still the need to ensure that people are isolating for the 14 days from the first mortgage and even though they might have.
Covid negative tests. So there are some items that the continued to work and we.
<unk> been in position and with the government to see if the kinder.
<unk>.
And influenced them and are safe manner to make.
Moving a bit more easier for seniors, but against our safety always comes for so long way of answering your question around that there continues to be restrictions, we've been doing virtual tours.
The first of all are visiting and person the allowed to do so they have to have a COVID-19 test to be able to do that so at this stage I would say we are cautiously optimistic with the vaccine, but as vaccine started take impact we can start to have a bit more.
Visits in person and a bit of a follow up from a sales and marketing.
Marketing perspective.
Got it.
And then maybe the last question and Steve as you mentioned.
And you were giving much incentives.
And for <unk>.
Supporting the the Donlin gold of occupancy.
Has that changed now of and that view changed at all given that some of.
For the homes will be.
Below 80% occupancy levels.
Right. So in the past of always talked about we provide onetime incentives rather than changes in rates. So we will continue with onetime incentives, whether it's moving cost whether it's the <unk>.
And there's some help for the furniture.
Some of.
The rental Pudic free upfront and we believe that's a better way of <unk> and lower market rents because it also upsets your current residents.
It's a bit unfair and if someone is living with you for.
For two years and the next door neighbor is marketing less because you're just trying to fill occupancy and.
There is continued cost pressure from.
From a PPA perspective, as well so most of the sophisticated retirement of owners and operators. The continued to provide incentives rather than lower rates because don't think that's the right strategy and the long term. So we are and the same boat of providing onetime incentives, but not really.
And might be the changed market rates.
Got it. Thank you so much of that.
Thank you.
Our next question comes from Tal Woolley with National Bank. Your line is open.
Hi, good morning.
Good morning Tao.
The staffing.
And looking back from the interim rates, what sort of of the impediment to increasing those because we think you know one of the things you sort of when and if that's sort of been one of the vectors that have created some of the outbreak going forward and I'm.
And I'm just wondering if it's the vaccine availability issue or if theres anything of it anything else that sort of factoring into and factoring into that.
Interest issue is availability because of the residents.
Our prioritize first and for team members of the usually.
Pat has been the you go to the local hospital vendors vaccines available to do that and we had 60% of the team members and long term care vaccinated.
Our refusal rate has been quite flow.
The bits being less than 10% and with the new variants coming and the rate is only going lower and more education, which both.
Our Chief Medical Officer, a chief infection prevention control advisor of doing big.
It was a lot of mix of on this vaccine how it might be on the safe because of the flows develop so fast and that is not the case.
So.
And we don't really see a huge number of refusals and and cases, where we had vaccine availability and the it staff who were water.
Moving to content share, we can provide one and one.
Education to get people of accident, because you're 100% correct the best.
And the most fulsome way of fighting this pandemic.
Just to get people vaccinated, so that continues to be high priority and we do expect our team members numbers to be.
Extremely high once there is a fulsome availability, which we understand might be coming in and next.
Social.
Okay.
And just pivoting back to the retirement occupancy I mean.
And we're sort of a year into it and I appreciate that.
You know regulatory changes everything and the Safran true everything that's happened throughout the year. It's made it. The you know obviously it was making it a little bit difficult to call like month to month, what the expected impacts should be on the business, but when you sort of look now kind of.
A year out.
And.
And thinking about what the average tenure of of retirement residence and is like.
The rate of occupancy losses, it's been about what you expected now I like it for.
Or is it a little worse and what you were thinking or maybe even a little bit better now that you've got like sort of some tie and looking at the looking at how it's performed.
Performed.
Sure so usually.
And the retirement homes Q1 is a challenging quarter because of the flu season, and many people will be moving into long term care. So I'll just give you some.
High level.
The metrics for example.
If you had 90 move outs.
And I'll, let <unk> and January of last year and retirement, just I'm, just giving the aggregate numbers the number of move outs would be 70% of that.
This year, because so the number of people moving out has definitely gone down the challenge of the number of people moving in might be of 20% rate of what people were a year back because of all the reasons I talked.
Let's call it for in terms of tours and people selling their houses and other so the the move outs actually has not been of challenge and in fact has come down because of restrictions and long term care.
It's the move ins, which we actively need to work on and what we have been busy doing whether its with our call center visits of whether it's the sales and.
The voting program is ensuring that we are ready.
The restrictions do come out and the markets, where it's out yet we are actively doing that building those local partnerships.
And I can imagine the frustration on calling it out of the same applies to us, but I would just give you. The example in November there was no conversation of our UK variant.
And now currently thats going to be the the <unk>.
As part of Covid and Canada, So things are changing at a rate.
Of which are difficult to manage so far from everything we've learned this new vaccine is for the vaccine.
And as to defend people against the variance so that is positive but theres just.
And lot of new information coming on a regular basis call, which it makes it very difficult to.
And to forecast things.
Okay.
And then.
From your marketing teams like what's the tone you know like has the has.
Or are they noting more.
And concern from.
The prospective residents about moving into a senior zone or pardon me of retirement residents through.
Through this period like are they part of your primary like their conversations are having the revolve around like you know here of the infection control and stuff like that or is it more like it was in the past.
Got it.
And remember.
Remember relative to who need for assistance.
I'm just wondering if the conversation of strange from a marketing perspective.
Not really again, our resident profile of 85 years old and it is need driven to some extent.
To do that of the 14 to isolation period of definitely is challenging.
But it does seem like a lot but some.
All of them moving in but you also have to ensure we are keeping everyone safe. So that's the work youre doing if people have a negative COVID-19 task for our residents have a negative COVID-19 tests and the isolation period could be different but again the law will only change that once it's safe to do so so it's more things are on being able to tour.
Sure, probably being able to talk to people being able to tour of multiple times, rather than really a change in mindset because again as I talked about are the time and.
And our resident profile is more need driven rather than just.
Living style.
And.
Okay.
And then.
You mentioned two and your MD&A just about trying to do more medical visits virtually within your long term care homes and looking to spend some money on the can you just talk to me about what exactly what exactly you are talking about and what what type of them money where sort of the.
The discussing and that initiative.
It's not.
And then.
That for virtual care, it's more on technologies, such as ipads are our hardware and you always have to as our chief Medical officer keeps reminding everyone that virtual care visits and the go so far so you really need to do bolt, where its physical visit and the virtual visit what youre trying to do is that between.
And in person visits you are really doing the virtual visits and there would be sort of upfront costs, such as the hardware to set that up.
Okay. So it's nothing not a big system and implementation by any stretch the imagination. Okay got it. Thanks very much guys. Thank you maybe I'll just add to that Paul is we did get off.
And those separate bucket of funding for ice pack related capital expenditure for that.
And helpful.
Great.
Our next question comes from Joe and Chen with BMO capital markets. Your line is open.
Hey, good morning, guys.
Maybe just.
And going back on just on the kind of expenses and I'm, assuming I know it's hard to.
Because things are changing day by day, but assuming kind of the trend that youre seeing now so it would be fair to assume that the portion of that and funded.
You know the expenses should continue to trend down like it.
And Q3 of the Q4.
2021.
Again, it is hard to tell whether kind of trend down, but we are very encouraged with the decline in our number of hosts an outbreak and the number of cases.
So I.
And from the number of outbreaks and cases come down of the expenses would also come down but still there is a level of ipass measures that are required and now we're.
And we are fully supportive of and so we could expect that our expenses could still be a bit higher than what the funding.
And Mike.
Right right.
Hopefully that gap closes and sorry, I might have missed this earlier and you you mentioned something with respect to the $147 million and then the.
And of 47 million allocated and Ontario is that for expenses I don't know if I heard it wrong, but with the for expenses to be incurred in 2021.
No.
And.
And the everywhere.
The number I referred to in the total pandemic funding that we have gotten to day okay.
And of the new funding announcement in January of three.
And $398 million.
Out of that we had allocated a portion of it of which $6 9 million.
And was recognized in January but related to 2020 of expenses.
Okay.
I guess the assumption of later a couple of months later down the line for whatever and expenses incurred in 'twenty.
And of 'twenty, 'twenty, one and that will come.
From the government later down.
And then you're correct.
Thanks for the Joanne you were saying and Thats what expenses and this year will be continued debt funding again thats that would be our.
That is something that you would be looking for because again all of this funding goes.
Wildly towards the pandemic expenses and if you don't use it and you give it back to the government. So.
And as outbreaks go down and hopefully the expenses go down maybe the funding will go down but at this point, we continue to see increased level of staffing and true increased personal protective equipment. So that is something which would we.
<unk>.
Direct and hope that will continue on.
To help us and mitigate all of this risk.
Okay, and perhaps this is a longer term question, but assuming the.
And the piece of the vaccination continues at a good rate and.
We finally achieved.
And.
And sort of the herd immunity.
With respect to your retirement home and is there any thoughts on the.
In terms of what you guys are thinking in terms of the occupancy.
Recovering back the timeline for the occupancy to return and kind of back to the close to pre pandemic levels.
<unk>.
Again, our RV on fundamentals Havent changed and in fact with slowdown of some of the retirement of new supply and we will leave and give you. Our example, there.
And the previous time, you've announced that you're going to do a project in North Bay, and we were thinking of doing both long term care and retirement, we are only going to go ahead with long term care at this.
We will want to do the project and King-smith for that.
Expansion and we have put the project and hold so again, we expect for the common supply is going to decrease and that will continue to again help from other time and occupancy perspective.
So our view really hasn't changed and we expect on a stabilized for you to get to the.
Point of 50% and the long term. It just we just don't know how the long term is it 18 months of the two and a half years of its hard to predict that today.
And the summer.
Last year of you saw significant uptick in occupancy and a very fast pace, but it's just hard to say that today.
Okay, that's fair.
And that's.
The loan and meal.
Has it back thanks, guys. Thank you. Thank you.
Yeah.
Our next question comes from the US Thank Paul Laura She and Bank. Your line is open.
Good morning.
Good morning.
Let me try this one more time.
And that's okay.
Would it be fair to say that you will continue to think of these out of profit of course sizable amount of them.
And 2021.
Good day.
Let me ask that question and a more direct way so.
What we will ensure it is do not do we are not going to cut the cost if it's unsafe to do so so whether we get the funding from the government of not we will continue to have the right level of staffing the right level of personal protective equipment, but anything else needed to fight the pandemic. Our view would be that this is a sector wide issue and.
Time, Inc.
And you get support from the government, but that is bundled of stop us from continued to.
Do what we need to do.
And things such as extra care of ours.
In terms of changing from the current coupon debt for those of long term debt those are the ones, which we expect the government to continue to work for the government and others to make it happen.
We are fully supportive of doing that it just hard to predict how that would look like how much funding, we would get worse as our expenses.
Thank you.
No.
You wouldn't.
The prospect the.
Incurring higher cost from a foreseeable.
And.
And the uncertainty in terms of you were the cause.
And the Oh, you're the diamond home occupancy.
How does the board think about your distribution at this point.
So the so we have been talking about are.
Distribution throughout.
The year.
On a monthly basis and there is a lot of the media conversation around dividends as well around people, taking government funding and putting into dividends, which is absolutely.
True because you cannot actually do that you can only.
And make any income from either of your retirement homes, which we have which is half of our business.
All of the accommodation portion of the funding.
And our payout ratio for 2000.
<unk> was 90%, we always believed and having a conservative payout ratio.
To ensure that we continue to bring our leverage down and we're saving it for a rainy day, while it's been a hurricane for quite some time.
All of the part of it the vaccination and the higher rates of vaccination, we see we do see and and.
To this and the call it short to medium term or expenses coming down we just don't know how much. So for now we do feel.
Strong and invested in and what our dividend of about that is a conversation we would have.
And 20 and with the board on a regular basis and.
Think of that it's going to.
And we need to make a different decision, we'll do that but we have not so far we continue to believe that we have.
Quick payout ratio and it's and we have strong liquidity to offset any of the short term cash flow.
Okay.
And.
And thank you that's it for me ex U.
Our next question comes from Brendon Abrams with Canaccord Genuity. Your line is open.
Hey, good morning, everyone maybe.
Maybe just following up on the earlier line of questioning the around the.
Pressure for the long term care development.
And Fred Fred's question relating to yield on cost.
I'm just wondering if you can be a little bit more specific in terms of on a percentage basis like of cash on cash return and what you would be expecting in terms of.
Future.
Long term care redevelopment.
Yes, I would just say from a from a total investment perspective because.
At the high leverage the of cash return might look a bit different we expect.
Just from a development and yield perspective, and total investment worse of the NOI, you would generate and we.
Future develop and the yield to be and the range of.
7% to 8% so depending on project. So that's really our view of has not has not changed on it and but as I did talk about.
With the the way the development program works and the high leverage on long term care you could.
Okay.
We expect cash and cash yield might look.
Better than your overall developed and Neil but thats that could be misguided of time. So for US we can true believer development deal of <unk>.
78% of on total investment that would make sense for us to key point with the development program.
Right and what would it translate to in terms of.
The price per suite basis, like if we're thinking about.
$600 million over the next five to seven years.
And how many suites would that represent and so we of 2200, all the long term care beds for this assumes roughly call it $2 75 to $300000 of beds, including land cost and <unk>.
The.
And in most cases, we have existing land and our goal would be there where possible wary of land, where there is the highest and best use for something else to be able to do that and reinvest that money into our long term care plan. So again as we talked about our internal estimates are.
Areas of need close to $70 million to Kickstart. This program over the next three years and after that and it should really becomes self funding between the construction financing and the government grant and to get upfront.
Okay, that's great that's helpful and.
Maybe just returning to operations.
That'd be wins.
You know clearly no and no one has a crystal ball at this point, but if we look out to 'twenty 'twenty two.
Hopefully we're in a more of kind of normalized environment.
The effect, if I look back to 2019.
Operating margin for retirement was 45% of term care with <unk>.
<unk> per cent.
How are you thinking about operating margins and the business.
And maybe 2022 and beyond and a more normalized environment do you think you can get to pre COVID-19 levels or.
Given maybe some of these.
Measures might become permanent.
<unk> it.
And it would fall somewhat shy of that.
You are correct that is and that is a big question and and our view.
Really the long term care or the.
The long term margins do not really change so let's say the use of retirement for an example, the receiver.
And margin pressure is additional personal protective equipment discrete and cost it's a longer dining hours because instead of having for people on the cable you might have one of our people might beating and the rooms and in all of my visits.
When you talk to residents and Theyre not looking forward to living wearing of masks every day and.
Eating separately because of that as.
Part of coming into retirement home is too.
Is the whole aspect of not going through.
Social isolation, and so our belief is that and retirement homes as of <unk> <unk>.
Occupancy picks up margin will come back to the right levels for non compare the two.
Two biggest areas are of personal protective equipment.
And which is rare.
Hi, efficient the vaccine is and as we get more data on how much personal protective equipment do you need when people when everyone is vaccinated debt.
Remains to be seen but we do expect that number to come down and on a staffing team.
The whole direct care of ours as you've talked about in the in.
And the past no operator, which of any ownership kind of make any money of care. So we expect with the government's announcement of additional care of all of us going up to for we will get more funding and we will spend the funding towards care. So our margin percentage might come down but margin dollars should not change.
Right.
Hey, that's helpful I'll turn it over the Q.
There are no further questions I'd like to turn the call back over to knit and James for any closing remarks.
Thank you Michelle.
On behalf of our management team and our board of directors and I wanted to thank all of for you for your continued support and.
And I hope all of you to stay safe and healthy.
Ladies and gentlemen, this does conclude the program you may now disconnect everyone have a great day.
Okay.
[music].