Q3 2021 Sienna Senior Living Inc Earnings Call
Okay.
Ladies and gentlemen, welcome to Sienna Senior living Inc. 's Q3, 2021 conference call. Today's call is hosted by Mr. Zhang President and Chief Executive Officer, and inherent Karen Hahn Chief Financial Officer of Sienna Senior living Inc. Please be aware that certain statements or information discussed today.
Our 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 risk factors section in the company's public filings, including its most recent MD&A and Aif for more information.
You will also find a more fulsome discussion of the company's 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 senior living that CA.
Today's call is being recorded and the 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 website under events and presentations.
With that I will now turn the call to Mr. Jeong. Please go ahead Mr. Jain.
Thank you Latif and good morning, everyone and thank you for joining us on our Q3 call today.
Our strong third quarter operating results and occupancy growth reflect the journal optimism for CNS path forward.
Occupancy is up significantly in both our long term care and retirement portfolios.
Projects have gained further momentum and the rollout of our new retirement platform is progressing well.
We had also in the preliminary stages of developing a new long term care platform.
As part of a new service model, we wanted to improve our rather than the dining experience activities and recreation programs.
We also find want to find ways to create a better community experience for our residents whether it is a vintage car club a visit from a local school.
We believe that creating more connections with the wider community will give our residents something to look forward to and to date no matter, how big or small.
The design up on your long term care platform is based on best practices and the input from our residents and their families.
Our ultimate goal is to stick and significantly enhanced the quality of life of our residents by providing holistic and integrated care at our communities.
The completion of the platform development is expected in the second quarter of 2022.
The launch of a new long term care platform, followed a sphere, a new retirement platform.
As Peter will make the retirement brand within the <unk> business lines more distinctive.
Our aim is to target prospective residents to consider a spin out of retirement living as a better option to living at home and alternative that provides a personalized experience offers more choices with an increased emphasis on being a vital part of the local community.
During the third quarter, we concentrated on the development of resident centric model, which emphasizes personalization and expanded choices.
And included team member training on the new resident experience model and marketing initiatives.
It also in the final stages of developing the brand design and identity for a dedicated Aspira website.
The website feature include a centralized lead management system chat options webinar series and transparent pricing.
All of which will support brand awareness lead generation and occupancy growth.
In addition, we are continuing the development of the platforms brand awareness strategy, which includes both online and offline marketing initiatives specific to the local communities as well as widespread communications campaign.
We are also developing new programming, which will support the brand's promise of a refined culinary program and enhanced residents' programming.
We are currently piloting various concepts at select retirement residences.
Moving to slide seven.
Throughout the summer and fall are operating environment continues to improve.
We saw the positive impact of high vaccination levels with a limited number of COVID-19 cases at our residences.
In addition, a strong infection prevention and control practices, our extensive education programs and incentives to get vaccinated and a new mandatory vaccine policy, but all very helpful.
To date many of our residents have received their booster shots as of last week over 70% of our long term care residents and over 40% of the residents in our retirement communities have received their third dose of the vaccine.
As a result of a more stable operating environment and current months endemic related expenses continued to decrease and we are encouraged by the improvements in occupancy in our retirement and long term care portfolios.
Yes.
Our retirement portfolio benefited from in person tours and continued strong lead generation, which resulted in a 44% year over year increase in resident move ins for the quarter.
Average same property occupancy improved by 280 basis point during the quarter, increasing from 79, 3% in Q2 2021 to 82, 1% in Q3 2021.
In the long term care communities admissions of new residents accelerated and resulted in a 460 basis point increase in occupancy during Q3.
And in the quarter with an occupancy rate of 87, 8%.
Or 92, 4%, if we exclude the unavailable code and fourth beds and multi bedrooms.
Given the long term care waiting list of 40000 seniors in Ontario, we expect the strong occupancy gains to continue.
The government of Ontario announced the extension of the occupancy protection funding until January 31, 2022, and we expect to achieve the average annual occupancy occupancy target of 97%, which is required for full funding in 2022.
Moving to the focus and building a team for the future.
During the third quarter, we continued with our proactive stopping strategy to lessen our reliance was agency staff and to position <unk> well for the increase in direct hours of care in our Ontario long term care portfolio.
Our proactive approach helped us fill positions, resulting from attrition from a company wide mandatory vaccination policy, which came into effect on October 12.
It also supported extensive new talent acquisition and help us bring back approximately 330 former teammates since April of this year, who previously were restricted to work at single location as a result of a single site director.
In addition, during the third quarter, we supported a placement of approximately 350 students at our residence is through our collaboration with colleges and universities.
We are thankful that the government of Ontario extended its wage enhancement of $3 per hour for personal support workers until March 31 2022.
Okay.
CNS culture, a fairness and equal opportunity is also reflected in our fair compensation and gender pay equity models or.
Over 95% of our frontline team members on more than the minimum wage and approximately 80% on at least 50% more than minimum wage.
In addition, male and female frontline team members in similar positions receive comparable compensation.
Yeah.
Moving to the next slide our team members are our most important asset which has inspired us to launch store.
First employee ownership and rewards program of its kind in Canadian seniors living.
Yeah, initially investing approximately $3 million to provide our employees with the opportunity to become shareholders.
This will be done through onetime brands of common shares of approximately $500 per full time employees and $300 for part time employees.
We are also introducing an employer matching program for employees, who wish to further invest in the company.
Yes.
We launched this program to recognize the compassion effort and dedication that team members bring to our residents and communities every single day.
Okay.
Moving to slide 12, we continue to make good progress with respect to with respect to our development projects.
Our $50 million joint venture development of retirement residents in the agro Pauls is progressing well.
In early November we secured construction financing for this project.
And last week, we started construction at our new Northern Heights care community in North Bay.
We are monitoring current cost escalations, which will impact our original cost estimate of $55 million.
Our near term redevelopment programs in Ontario also include the replacement of the current 60 long term care beds with 160, new beds at our campus of CAD and <unk>.
And the redevelopment of our current 120 bed long term care community in Bradford to 160, new long term care beds with modern design with the addition of 147% with retirement residents to create an integrated campus a cure.
Yes.
We expect construction at these two locations to start during the first half of 2022.
Yes.
We are also currently in the process of selling two assets. The sale includes 138 suite retirement residence located in Burnaby, British Columbia, and a 236 bed long term care community located in the greater Toronto area for a combined selling price of approximately $53 million.
We intend to invest the net proceeds to further grow our business through our development programs.
These dispositions are part of a fulsome review offer assets to add value through capital recycling.
With that I'll turn it over to Carol for an update on our financial results.
Thank you Milton and good morning, everyone.
I will start on slide 14.
The operating environment continued to improve in the third quarter and we saw the positive impact of high vaccination level in particular with respect to the decrease in pandemic related expenses.
We are also encouraged by the improvements in occupancy in both our retirement and long term care portfolio and the continued to come down the funding support that we are receiving from our government.
These positive developments are reflected in our Q3 and year to date financial results.
Revenues increased by two 1% year over year to over $170 million this quarter.
Operating income increased by 15, 4% to $33 4 million this quarter compared to last year.
Cna's long term care NOI increased by $5 1 million to $20 1 million compared to last year.
<unk> due to annual inflationary funding increases and lower net pandemic expenses, partially offset by lower preferred accommodation revenue annual inflationary labor cost increases higher insurance premiums and utilities costs and timing of repairs and maintenance deferrals from the prior year.
With Carmen same property NOI decreased by 700000 to $12 9 million compared to last year, primarily due to higher agency staffing cost utilities costs and insurance premiums.
Actually offset by annual rental rate increases in line with market conditions and decreases in pandemic expenses.
Rent collection levels remained high at approximately 99% consistent with pre pandemic level.
Over the past two years, we have seen significant cost pressures and particular with respect to staffing.
Agency premiums are generally 75% to 100% above regular staffing right and we have been experiencing a generally higher reliance on agency staff as a result of staffing shortages.
We forecast that agency staffing costs for 2021 will total approximately $44 million compared to $35 million in 2020 and $19 million in 2019.
The estimated impact on NOI from additional agency staffing cost is approximately 2 million for 2021 compared to 2020 or four.
4 million compared to 2019.
We are thankful that a significant portion of the increased staffing costs are covered by government funding in long term care. We believe that agency staffing costs will moderate as more health care workers, we entered the workforce and as we start to see the impact of the government's enhanced focus on training, our personal support workers and nurses.
To address the current labor shortage.
We have also experienced a significant increase in insurance premiums and notable market rate increases with respect to gas and hydro.
And then the expenses continued to decline during the third quarter as a result of the improved operating environment.
We incurred $1 million of net pandemic expenses, which included retroactive government funding of $1 $9 million for expenses incurred in Q1 of this year.
This represents a $2 8 million decline compared to Q2, 2021, and the decline of $8 8 million compared to Q3 of last year.
We expect pandemic expenses to moderate further as the pandemic subsides, while related government funding gradually decline.
We also expect continued timing differences between the incurrence of pandemic expenses and the recognition upgrades latest government funding.
To offset cost pressures, we expect that continued occupancy gains in our retirement portfolio and an improving operating environment to support our operating margin in 2022 and beyond.
Moving onto slide 15.
During Q3.
<unk> increased by 34% to $18 3 million compared to the prior year, primarily due to higher NOI driven by the timing of government funding lower pandemic expenses lower interest expense and lower administration expenses due to mark to market adjustment on share based compensation, partially offset by.
Lower recovery of current income taxes.
Q3, <unk> per share increased by 34% to 27 two cents.
DSO increased by 10, 5% to $15 7 million compared to the prior year, primarily for the same reasons that the increase in <unk>.
Which was partially offset by higher maintenance capital expenditures, resulting from <unk> <unk> from last year, a onetime capital improvements in the long term care quasi community as well as a lower construction funding principle.
Q3, <unk> per share increased 10, 4% to 23 four.
Looking at our debt metrics on slide 16.
Our debt to gross book value improved by 260 basis points to 45, 6%.
30th compared to 48, 2% at the end of 2020, mainly as a result of repaying our credit facility.
Adjusted EBITDA improved to seven eight years for the nine months ended September 30, compared to 9.4 times in 2020.
Our interest coverage ratio improved to three eight times compared to three one times in 2020, and we have limited debt maturities over the next few years.
In terms of our balance sheet on slide 17.
<unk> maintains a strong financial position and investment grade credit rating.
On October seven D. Brs confirmed TNF issuer rating and senior unsecured debenture rating of Triple B mid with stable trends.
These ratings underscores the resiliency and strength of our business and support of our redevelopment plans.
We ended the third quarter, well capitalized with $222 million in liquidity and an unencumbered asset pool of $1 1 billion.
I will now turn the call back to inventory for closing remarks.
Thank you Karen.
Third quarter operating results reflect the journal optimism at Sienna.
Strong occupancy gains the transformational changes to our operating platforms and our continued development momentum all support our optimistic outlook for 2022 and beyond.
We forecast continued occupancy gains across our operations and our long term care portfolio, we expect to achieve the required occupancy target of 97% for full funding in 2022 and.
And we anticipate that retirement occupancy levels will reach between approximately 87% to 89% by the end of 2022.
The transformational platform changes currently underway will further support our operations in 2022 and beyond.
Over the past year, we have gained many insights through intensified stakeholder engagement and market research.
Informed our strategy to launch a spira, an inspired us to develop a new long term care platform.
Both platforms are aimed at significantly enhancing the quality of life of our residents.
As we execute our strategic goals, we will continue to draw on the insights we gain from our residents families and a team to build a stronger future for all stakeholders.
Every initiative, we have put into motion over the past year is grounded in the belief that it is a privilege to care for and serve Canada seniors, ensuring the live with utmost comfort dignity and respect.
I want to finish by thanking our team members, whose drive compassion and commitment will support our mission to provide our residents with the highest level of care and services for years to come.
On behalf of our management team and our board of directors I want to thank all of you for your continued support and your participation on the call today.
We're now pleased to answer any questions that you may have.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key again Thats star one on your Touchtone telephone to ask a question. Please standby, while we compile the Q&A roster.
Yes.
Our first question comes from the line of Jonathan Culture of TD Securities. Your line is open.
Thanks, Good morning, good morning.
First question just on the occupancy you seem pretty confident in that.
Good outlook for next year, but if we look on the cost side, what do you think margins.
And the retirement on the retirement side returned to close to pre pandemic levels.
Hi, good morning, Jonathan.
Yes, we do feel comfortable with some of our leading indicators on the retirement occupancy.
Not only compared to 2020, which is can be an off year to compare but even compared to 2019.
Causes are significantly up I think margins as Kevin mentioned in his remarks, the three areas of cost we see is utilities insurance and age.
Agency cost related to labor. So it is really hard to predict those do you see a lot more comfortable on the revenue side still uncertainty on the cost perspective, and I don't think we can give you any more guidance than that at this stage.
Okay.
Okay, then I guess to switch gears just on the asset sales.
Capital recycling, if that's something you guys have done a ton of historically.
And you mentioned going into putting it towards development what about on the acquisition side are you seeing much in the way out there.
So.
For sure acquisition market has been quite competitive we have not.
Actively participated because our focus has been to ensure that we focus on our platform square. So aspira first and now the work that we're doing in long term care, but and we wanted to ensure our development projects get started so one started last week and we have two which we expect to start over the next six months or so so now is the time and we do feel confident.
But we can do acquisitions, and underwrite them, well and integrating well and ensure that it can create value. So we would be looking for bolt.
You are right, we have not done asset recycling before but the reality is we have 70 properties and time to time, you might have one or two which do not fit your portfolio while so.
We don't have we do not have a long list of assets. These are the two where it made sense.
Because the market have changed in the second half was a C hub and it fits extremely well.
For the needs of local community in terms of long term care capacity in hospital capacity. So you might see one or two from time to time, but there's nothing overall our portfolio is in very good shape.
Okay. Thanks, I'll turn it back.
Thank you.
Thank you. Our next question comes from Scott prompts.
CIBC your question please.
Thanks, and good morning.
Question on the occupancy in retirement residents. It was it was pretty strong and just wondering what you attributed attribute this growth to is it representative of normal activity.
Quarter over quarter basis.
And maybe just looking at move ins, you mentioned, a 44% increase where movement move outs lower than expected.
Or lower than normal.
So by mobile its actually were also higher than before.
So we talked about 2020, but maybe I'll give you even perspective 2019, because last year we were in.
The middle of May one and wave two so for example, our deposits in Q3 of 2019.
Around 200, and our deposits in Q3 of this year is around 400, Silvia or a 100% increase there.
And our attrition rate has stayed strong so its not that people are.
Staying longer like our attrition rate in 2019 was around 10% and now it's similar so we've been talking about focus.
Our marketing initiatives local approach, having a centralized call center getting back to people on a on a quick basis and all the work that our retirement team and our sales and marketing team had been doing too on our platform. So we're really happy to see the results and that what's gives us comfort in terms of our forecast for the next year.
Okay. Thanks.
I'll turn it over.
Thank you.
Thank you. Our next question comes from Himanshu Gupta of Scotiabank. Your line is open.
Thank you and good morning.
Gain on the retirement home occupancy discussion.
How is that trending between onto.
Yes.
So should.
We do not split that because we only have five retirement homes and British Columbia, and we are in the process of selling one so it's not really.
On the home could have a significant impact I mean, the changes we're seeing in occupancies across the portfolio. There is not really one market or one asset which is driving it so its been consistent across both Ontario and BC overall.
Got it fair enough and then if I looked at the guidance of 87 to 89 for the next two years.
Is that a conservative number.
Do you think there's more scope to beat.
Got it.
<unk>.
No at this stage.
Still a year away. So we feel comfortable with 87 to 89 as we get closer and obviously, we can keep updating it on a regular basis, but at this point no. We don't think it's going a little bit about aggressive this is.
It's realistic at the moment and we'll find out as we get closer to that timeline.
Got it.
Thank you.
Just on your own to their portfolio.
Position.
Are you more independent or are you more assisted.
Assisted living.
Any color there.
Our portfolio is.
A very.
So many of our retirement homes get dedicated assisted living floors, but even in homes, where we do not have that you would provide care behind door. So no it's not.
Not really.
Geared towards one side, it's a really good mix of independent assisted living and some memory care and we are getting more into memory care with our campus in Branford.
And also sold assets that we've acquired in the past.
Got it okay. Thank you and just switching gears to LTC.
No pandemic expense recovery, Kevin I think there was a $1 $9 million catch up related to Q1 NTT expenses.
Q1 and two.
Thank you.
For our Q1 LTC after that retroactive funding, we still have some unfunded expenses.
More so on the PC side and on the funding.
Rahim is a little bit different so we are not yet fully covered and that might remain the case for Q1.
Got it and is it fair to say that even though you went to New York I know that they were pretty much everything.
And then there's a timing difference but eventually.
It seems to be the company.
No it's hard to tell what we have experienced is that.
There have been two three quarters of delays between when we incur the expenses and when the government might come back with more funding.
What we would say that is we do expect some unfunded pandemic expenses for some time, however quarter over quarter, we have seen sequential decline in our net pandemic expenses as our operating environment continues to be stable and improving.
Fair enough.
And then on your higher agency cost.
I got it right, you said $4 million compared to 2019 level.
So is that something we should expect in 2020 do also.
Is it mostly at <unk>.
Thank you C plus with them in homes.
So on long term care, because we have our government funding.
A lot of that $44 million cost that we have incurred for agency is related to long term care just based on the nature of the operations with.
Our staffing, but most of that has been covered through the government funding. So the impact on long term care blocks and so that a variation compared to 2020 and 2019 is more heavily weighted on the retirement side.
Thank you Mitra to your other part of the question at this stage.
Human services as prices across all sectors, so you've talked to.
Say at this point I mean, our focus.
Initiatives internally, whether it's working with universities.
Supporting <unk> supporting nurses, we are doing.
All the things, we can internally, but it's hard to predict a significant decline on those agency cost.
Got it Okay and then just a final question for me.
The LTC development it looks like I think.
He has started.
Construction.
And you are working on guests we can for those one so are you advancing the pace of development is that the idea here.
Yes, so our goal was to be drawn with with two projects. This year. So between Diego Falls and North Bay, we have done that and our goal was to add two additional ones next year, so both gastric and Bradford would've happened so and our goal is to start a couple of projects each year.
And then really get at a phase where to come out each year and to go in so that's going to take us through 2023 do build that run rate so but.
Our goal is to start around a couple of projects each year.
Awesome. Thank you guys I might get them back.
Thank you.
Thank you. Our next question comes from Joanne Chen of BMO Capital. Your line is open.
Good morning.
Good morning Joanne.
Maybe just sticking on the development side of things.
Yeah.
So some of the timing of the project.
No changes given the current inflation inflationary environment.
Okay no changes.
No changes in timeline I mean in North Bay, we disclosed previously our cost was 55.
We are seeing some inflationary.
There it's hard to predict.
That cost will go up we expect it to go up whether it's 2% or five I think we will still have to figure that out but that project still makes operational and financial sense. So at this stage.
Work, but it is getting it is definitely getting more and more.
Difficult with construction costs in some areas being up closer to 30%.
30%.
I guess on the labor side of things.
Also material.
Huge supply chain issue as well.
Huge issue with labor so.
So I think it's a combination of all of those things people talk about lumber went up came down but the building. We are building in North Bay for example, we're not using any lumber.
Going off of price coming down is not really helping us there overall price our prices are going higher and ideas come to work with good partners tried to manage cost by the fixed cost as much as possible upfront. So those are all the things we're doing and we will again if it comes to escalate.
Rethink our development program at this stage we are comfortable.
Where we are in terms of two projects a year.
Got it and then maybe just going back on the question.
Of course, yeah.
This additional capital recycling opportunities.
Looking forward to 2022, you didn't mention that.
Okay.
I was quite competitive do you think.
Yes.
Alright.
Over the near term.
Yeah, we don't really have.
Many other assets to be selling you know again as we've said it might be one or two so.
No.
We expect to be net buyers on if it makes financial sense, and we do want to grow across Canada.
And on into provinces with idea would be to.
Grow nationally.
Okay.
Got it and maybe just one last one on the broader picture.
The reason, Ontario, Bill for long term care is there any direct how is the direct impact.
With that though.
I mean overall, what the Bill 37 is talking about is increasing care hours, which is excellent news because.
The resident acuity level has changed significantly since the last funding model was put into place. It talks about increased transparency and accountability, with which which would align with people should be accountable and transparent and there is a big focus on increasing new capacity and also upgrading long term care capacity.
So overall I think we're all headed in the right direction, obviously because.
We are in the process of consultation through our association directly.
With the Ministry to ensure that we understand the changes coming in being able to implement them.
Great.
Okay. That's helpful.
Is it for me. Thank you very much guys I'll turn it back. Thank you. Thank you.
Thank you. Our next question comes from Tammy <unk> of <unk>.
RBC capital markets. Your line is open.
Thanks, and good morning.
In terms of your occupancy forecast.
What are some of the underlying assumptions in your outlook.
And then maybe just secondly is that more back end weighted to the end of 2022 or is it more evenly dispersed.
Yeah.
So I'll, let Karen answer the second part, but just in terms of assumptions.
What we have been doing is working with our retirement team and build property by property. So it's not the high level assumption, obviously, the big assumption built into it is that there is no significant for the fifth wave. So if there is significant COVID-19 for some reason obviously all of these things go.
Out of the place and then I'll, let Karen talk about our occupancy projections for Q4 and also how it might play out next year.
Good morning, Hanmi. So for Q4 typically in the winter months, we do team loosened a bit slower because if the winter people don't really want to move into the holiday season and that could also trickle into Q1.
Frame.
And when we resume the normal seasonality of the move and we expect a recovery will happen during those months.
Okay, sorry, so more I guess.
Q2, 2022 onward.
With that I guess, the last three quarters of next year.
Yes, Q2, Q3 that would be the normal seasonal I mean in the past couple of quarters the seasonality seems to.
It will be a bit different.
And looking at Q4 next year if the team.
Patterns have been happening next year than Q4 might also be a bit slower.
For next year.
Okay. Thanks for that.
With respect to the retirement portfolio, maybe without giving away too much of the secret sauce can you maybe provide more color on the types of sales and marketing initiatives that you use in your local communities.
The referral program works.
So it's really a combination of lot of a lot of different things set up for a program could be referrals from current residents.
They would get some kind of incentive whether it's whether.
Whether it's some rent.
We had some free rent, whether it's a new TV and there is obviously incentive for the new resident moving in.
Similar to what we have done in the past, where those month, one month free or moving expenses and others, but also retro programs for medical offices and others too.
By them to us.
So I wouldn't really think there is one specific thing which is done.
<unk> done that but it's really.
Its training of sales consultants, whether it's our online lead generation as the centralized call centers. So I don't think there is really one thing that we can point to versus really a system off.
Great execution over the time and operations great work by our sales and marketing team I think that's really what it comes down to.
And maybe just to clarify I guess with respect to the comments around referrals from.
For the surrounding communities like medical offices or other local health care operators is that sort of like a financial incentive that they're incentivized with or is it something else.
So a lot of.
That is really a partnership with the hospitals because.
People go for a final surgery and then they are they are looking for saying well my needs have changed so is reconnecting with a hospital system. So it's not really a financial incentive it is really a service and the local community. That's that's the big focus.
Those are really Germany, the tight because people are looking for the right recommendations for a place so thats what they were before.
Okay.
Lastly, with respect to I guess the disposition in BC any color you can share with respect to maybe the NOI impact or not.
Cap rate range and then just secondly was that.
Stabilized asset.
So again, let me talk to the last part and then Kevin can cover the first one so the.
That asset and going to be the market conditions have changed significantly it has become.
A very very expensive area to be in with a lot of high rise condominium really coming to that area. So there is not.
Theres not much interest in senior housing so the location of those change so that's where we got too so and that that was not stabilized. So we.
So our point was either we have to see.
Significantly change.
The kind of asset I'll look to sell it so we decided to sell it and in this case it's <unk>.
When we bought by a not for profit, which focus on providing affordable housing for younger seniors. So this is.
So that's why it made sense and then I'll hop can provide you a bit of update on NOI for both of those properties.
<unk>, one and actually even the long term care disposition.
Morning, Amit so for the two properties that we are.
In the process of selling when we look at the stabilized NOI.
<unk> combined would be contributing about four $4 5 million.
Currently those two would have contributed on a full year basis approximately $3 million.
Three 3 million that $5 million.
Sorry.
$404 5 million that was the stabilized in the three to three <unk> in place.
Correct.
Okay.
Thanks, very much I'll turn it back.
Thank you.
Thank you. Our next question comes from Josh St. Paul.
<unk> Bank your line is open.
Good morning.
Hi, good morning.
Just what what was the cap rates on the assets you sold.
That's funny.
So theyre not really sold by Capex because the first one is <unk>.
Being bought by.
A not for profit, which is working with the government of BC to provide affordable housing. So it's not written as an as an a cap rate and the second one is I see home they are.
The long term care beds over won't be moving to a new community that partners help us building and in Mississauga and the land is being bought by the hospitals. So it is not really sold on a cap rate basis versus more the highest and best use for the kind of asset.
Okay.
And then moving to the C 37 discussion.
Based on what Youre seeing right now.
How should we model your long term care margins and retirement home margins given the increased.
Labor costs and.
Probably your insurance costs will also go up because of the.
Bill.
Is that fair.
Yeah.
We don't really anticipate insurance changes because of the 30.
<unk> 37, so I mean insurance cost has been going up across the sector. Because there were significant losses for insurance companies, whether it is the floods in BC are sort of the wildfires in BC or other things. So we don't think it has anything with insurance costs.
Having said that the insurance utilities and labor costs are the key drivers and really we don't really have any insight to provide at this time in terms of how and when and how they would come down we do expect them to moderate over time the timing of it is really going to say, we can provide you any guidance on that.
Yeah.
Okay.
And for modeling purposes.
The award beds.
How many should be removed.
And what would be the total NOI impact of those.
Okay.
Thanks.
Hi, Good morning, Yes. So we have about 380 <unk> for fats that have been put out on available for very long time and in terms of how occupancy is calculated and how we would be funded it would also exclude the isolation dates that are unknown.
So between the third and fourth on the isolation that dummy Cup above 500 beds that.
We continue to get full funding and as you know the occupancy protection has been extended to end of January 2022.
And our expectation is that there was an available that will continue to be funded.
It has been based on directive that they are.
They have come out of capacity.
We havent really.
Modeled out like what is the impact of the third and fourth because we expect continued funding for them.
Can you think the funding will come through until the end of 2022.
Yes, that's the expectation yes.
Okay.
Sure.
2% of your employees have been.
Bought from working.
Now how many people is that.
And.
Has there been any impact.
Positive impact.
In fact at that mill.
Sorry, say that again I'm not sure I get your question.
Based on this.
I think 2% of your employees.
Because they're not vaccinated knock on local.
Is that right.
Yes, roughly that's correct.
How many people do that.
So we.
We have a close to 10000 employees. So you can do the math there.
2%.
So it's a couple of hundred.
Alright, and have you seen any kind of loosen after that.
Anybody.
Willing to take back.
It's one of our cases.
This is really October 12th cut off for a year.
Before the vaccines are available, but we know that we're coming with it.
A lot of action education through our Chief Medical Officer, and our Chief infection Prevention and control officer. So we did that then we provide all sorts of support to ensure people were getting vaccinated than we provided incentives for people to be vaccinated and the last one of those mandatory vaccine policy. So this was moderate Brock so when we go out to the balance of.
Two 100 people I think they made their choices in terms of <unk>.
Finding employment elsewhere. So we did not see a huge change in that and there might be one or two people who might come back, but nothing significant from that pool.
These are diehard guys okay.
And.
Just one last follow up question on accretion comment you said about 10% a few of the residents.
No.
The facility how much of that.
That is because they moved to a long term care at home.
No.
By the way.
How much of that is.
Some other my time.
I'm at home.
It's really we don't see a lot of people moving into another retirement home I mean, moving is a challenge for anyone and when you're when you have seen or you make friends. It is unless you are really unhappy with the place you are and people don't move out so I would say that would be less.
102% of people and the difference between people moving to long term care or other reasons would be around 50 50.
That's it for me thank you.
You.
Thank you. Our next question comes from Tal Woolley.
National Bank your line is open.
Hi, good afternoon.
Good afternoon, good morning actually yes.
Still morning.
<unk>.
I was just wondering as Spiro relaunch.
You're obviously going to want to.
Some money behind the behind the launch of the new brand in Q1, how should we think about just cost for that unfolding over the course of 2020.
So the Aspira <unk>.
Platform would be a one time investment of about $1 million and theres going to be a portion of that in capital investments and another portion for one time.
<unk> cost, but overtime, we expect that for the first of all it will be cost neutral.
The sense that we expect there will be <unk>.
Revenue gains from occupancy lift as a result of the brand and over time, it would help us contribute to further occupancy gains rent as well as supporting rent growth and therefore in the longer term, we expect that it'll be a positive contribution to our NOI.
As well as our margin.
Okay and can you just speak to like the marketing mix like online versus traditional media versus.
Promotions within your partner.
Health care provider partners.
And how that.
Might change from sort of maybe where you are where you were or how you're spending your money like three four years ago.
So it's really I would say first of all it is quite local.
There's not really one national strategy for marketing and that's on purpose because it doesn't work.
By the way a majority of our spend is digital and.
Whereas the majority more than 65, 70% and the balance would be the combination of all those things you mentioned, whether it's retro programs, whether it's local newspaper advertising what others.
Okay and for the long term care platform enhancements you are making do you intend to rebrand the long term care side of the business here.
Long term care is a very.
Local decision people do not.
Theres no attraction to a brand the attraction is to the quality of care and services that we provide so our goal is to stay very hyper local for long term care versus the branded.
Launch for retirement, which is a spear. So we expect our long term care homes to be locally named with no common brand across.
Okay.
Again Youre doing this re launch it with spira, you've invested and you made some investments in call centers things like that.
When we think about your occupancy outlook.
Can you provide some color on like.
Are you sort of expecting outsized gains from what you would have made in the past because of those investments if I read into what Kevin was saying before it seems like that would be a fair conclusion.
Yes, I mean, that's our expectation.
We invest all of this and the result of the Sam we should not do those investments because I mean, thats the thats a pretty blunt the conversation we've had internally as well so and we do feel.
During COVID-19 it is hard to differentiate.
If your results are suffering the suffering because of COVID-19 or the suffering because we don't have the right programming. So we do feel confident that the programs that we put into place and it does take a quite a bit of time too.
For them to take into effect like we feel we are headed in the right direction and that's what gave us comfort in giving occupancy forecast as well. So we do think they are working.
Okay.
And then just on the LTC side of the business.
There's a lot of focus on redevelopment.
Obviously, but we.
We also at least here in Ontario, we need to grow the number of beds too.
How do you think about like do you want to grow the LTC business as the <unk>.
<unk> grows at or.
Are you look.
Are you, okay, leaving your exposure with where with what it is right now like are you looking to add facilities overtime.
We have around 6000 beds in Ontario long term care, we are one of the largest.
Later, we do feel we.
We have enough beds in the system. However, when we do development and Brian for it is a good example, the current home is 122 beds, we built $160. So we would add capacity there.
At Cedar Valley Lodge, we have at a time in home, which is attached to only 60 long term care beds. We are changing that 60 to 160 has been rebuilding it. So I think it would be places, where we added capacity, but in Mississauga. For example, we sold our C home because it was a better use for the hospital.
And for residents.
Faster to get to the new long term care being built by the hospital and partners community versus us going through a whole the rezoning process and building in Mississauga. So I think it's really one off but.
We don't expect our long term care numbers in Ontario to significantly change in the future, we expect them to stay overall, consistent but with a higher portfolio.
And a better quality of portfolio as we are really developing D C homes.
Okay, and then just on the emission side like.
Prior to the pandemic unfolding, we were moving away from the Linde models, the Ontario health teams.
<unk>.
What's happened with that.
Pandemic.
For obvious reasons has sort of followed that restructuring kind of fallen out of the news and I'm. Just curious has it made any has it made any difference or.
Has anything changed as a result of those ships and so lets have gone away. So it's Ontario health teams that we work pretty closely with great relationship across Ontario health teams that.
Admissions in long term care is still directed through onto how teams I mean, we have to realize you have.
Set of capacity across the system to do a certain number of people.
Long term care residents and when you when the number grows about four to five times it will take a bit of time, but.
Working with Ontario health teams.
Team in Ontario have done an incredible job of getting people back into long term care, which is reflected in our long term care occupancy and we continue to see good progress moving forward as well.
And just finally on the campus on the campus model that you guys have been touting overtime.
I can obviously see the draw for the retirement of an LTC on the same side.
There is a draw for the for the family to sit there and say like Hey, we've got basically the full spectrum of care in one place.
But you sort of have this weird thing right where.
It's technically not you in charge of the admissions into the long term care facility.
Like.
Hi.
Yes.
Like for example, Patrick just happens to be campus, our care because there is existing retirement beds beds and we are exist and we have more glass. So we are building their brand. So it is a great retirement.
Well, there's not much competition. So we are building a campus.
We're not we're not focused on only building campuses I would say if I have to guess.
The majority of our long term care home developments would be standalone long term care developments.
That's for US we have limited amount of development dollars and we want to make sure that we are smart with that and in long term care. Our focus is to redevelop those long term care beds, because without doubling the cost for our campus. If you find the right land the market makes sense for retirement, you would add campus, but what we're not doing is we're not saying, okay, we will own.
The two campuses so let's find land where it works and then we will do so it's more we will.
The idea is to provide solutions for long term care and if it is somehow lens into our campus and that's a great outcome.
Got it.
I appreciate it thank you.
<unk>.
And at this time I would like to turn the call back over to Mr. James for closing remarks.
Thank you Latif on behalf of our management team and our board of directors I want to thank all of you for your continued support.
Hope you have great rest of the day integrate weekend.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].