Q4 2021 Sienna Senior Living Inc Earnings Call
Ladies and gentlemen, welcome to Sienna Senior living Inc, Q4, 2021 conference call.
Today's call is being hosted by Lytton, Jane President and Chief Executive Officer, and Karen Hahn, Chief Financial Officer of Senior living Inc.
Please be aware that 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 risk factors sections 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 in its MD&A and financial statements for the period, which are posted on SEDAR and can be found on the company's website Sienna living that CA.
Today's call is being recorded and a replay will be available.
<unk> 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'll now turn the call to Mr. Jain. Please go ahead Mr. Jain.
Thank you Andrew and good morning, everyone and thank you for joining us on our fourth quarter call today.
Recent months have been marked with some exciting developments and important progress at CN.
Our strategic priorities have been focused on enhancing engagement elevating the quality of life of our residents and advancing our growth initiatives.
This included notable investments operating platform, our properties and the wellbeing of our residents and our team.
Our solid Q4 results reflect the impact of these investments also highlight generally improving fundamentals in the senior living sector and put us in a strong position to accelerated investments in strategic growth and value creation initiatives.
Under this backdrop, the macro to services and care of the offer continued to build in 2021.
This was reflected in our strong Q4 operating results occupancy on a common portfolio reached its highest level in nearly two years.
Resident admissions at our long term care communities continue to accelerate but most of the fourth quarter.
Yes.
Our economy portfolio benefited from in person tours, and a robust marketing and sales programs. This resulted in strong lead generation and 140% increase in resident move ins year over year in the fourth quarter.
In December to average same property occupancy levels reached 85, 3% and further increased to 85% to 9% in January 2022, the eighth consecutive monthly increase.
Since may of 2021 average same property occupancy has improved by a total of 710 basis points.
And I'll I'll compare communities admissions of our new residents accelerated for most of the fourth quarter.
Excluding the events that are unavailable due to the capacity limitations in isolation requirements.
Property occupancy reached 95, 3% at the end of 2021.
Anticipate continued occupancy gains throughout 2022, given the long wait list of long term care beds in Ontario, and British Columbia.
In recent months operating environment continued to improve which has led to the easing of restrictions across the residences.
There are currently no significant outbreaks and then Youll sienna's long term care communities or the timing of residences with most of our residents and team members, having received a boost of shops and the majority of our residents and team members symptoms have been either mild or moderate.
In 2021, we announced the launch of our new retirement platform SBR and the development of a new long term care platform both to be launched later this year.
These platforms are expected to elevate the quality of life and care of our residents and include enhancements to the dining experience activities and programs.
With respect to spear. Our recent efforts have been concentrated on team member training on new resident experience model marketing initiatives and the rollout of pilot programs of Venus concept select a ton residences.
And then it shouldn't be finalized the core brand and marketing elements for the launch of our platform in the second quarter of 2022.
Development of a new long term care platform is well underway and is aimed at providing holistic and integrated care.
Platform is expected to be launched in Q3 of 2022.
Now moving to our recent joint venture on February 3rd 2022, we announced that we entered into an agreement to acquire a 50% ownership interest in a portfolio of 11 11 retirement residences on catering Saskatchewan with a joint venture partner Sabra Health care REIT for a total of $308 million.
This transaction, which we expect to close in late second quarter. What is it creates a number of our owned and managed retirement suites by 26%.
The portfolio is currently owned by extended care and represent that entire private pay the common portfolio in Canada.
High quality portfolio with an average age of approximately $60 and it offers extensive amenities, which reflect the changing lifestyle of seniors.
With an approximate 6% unlevered yields in the first 12 months. Following closing the acquisition is expected to be accretive to <unk> and <unk> per share.
The portfolio is located in growing communities in Ontario, and Saskatchewan and will provide us with immediate scale a platform for future expansion and entry into new products.
We expect to capitalize on the growing demand for quality senior living in each community.
And on care of the assets are strategically located around the GTA and in southern Ontario.
The portfolio will increase our footprint in veneer I go to London corridor, and expand our position in the highly desirable very market.
So the acquisition, we will also increase the number of memory care units, which are in high demand and this will better position us to serve this growing segment.
With excess land in a quarter of the properties. We also have the option for future development of over 200 suites.
Once the transaction is complete we will act as the manager of the 11 properties, which will deepen an already established relationship et cetera.
Now moving to kind of focus on development. Our growth initiatives also include a significant expansion of our development pipeline.
In December of 2021, we've got a pool for three additional long term care redevelopment projects, including our first office campus located in partnership with Scarborough Health Network.
The campus will come by and Ultimate case community in Rocklin care community in Toronto onto a single site.
Once the 478 bed campus is completed it will support the growing need for seniors and discovery here.
We are also progressing well on several other projects in Ontario.
In North Bay construction start at northern pipe scare commodity last November .
Based on the current 148 older C class beds with 160 new beds.
In addition, we expect to start construction at our communities in Keswick in backward to start during the first half of 2022.
And Catherine we will be replacing the current 60 long term care beds with a 160 bed facility and in Frankfurt, We will replace the current 122 long compared.
With 160, new long term care beds, and add 147 suite retirement residents to create an integrated campus of care.
In total the <unk> long term care projects and on Cedar comprises over 500 beds on approximately two third of Sienna's coffee bets.
Planning for the balance of CNS class B portfolio is well underway.
In addition, construction of the 150 suite retirement residents in the agricultural <unk> Senior housing is a joint venture partner is well underway and we expect to complete this development by the end of 2023.
As part of the continuous review of our portfolio. We completed the sale of 138 suite retirement residents in British Columbia at the end of January .
And they've agreed to also saw a 236 bed <unk> long term care homes in the GTA.
Which is expected to close in the second quarter.
The net proceeds will be reinvested in our recent acquisition.
Staffing remains a key focus as we grow our company and build our team for the future.
Our goal is to become the <unk>, Florida choice in senior living markets, where we operate.
We achieved this by offering a compelling team member experience and by nurturing our purpose driven culture.
We believe it helps differentiate our company and attract and retain a highly engaged workforce and a very tight and competitive labor market.
One of the Differentiators of Salt the <unk> ownership in rewards program. So it will provide company shares to team members slipping to ciena for one year or longer distant.
<unk> initiated the first of its kind in Canadian seniors living and I cannot think of anyone better suited to be invested as owners in our company and our team members.
There are a lot of this program is well underway and is estimated to represent in an initial investment of approximately $3 million.
We're also working on a number of initiatives to support the career growth of our frontline team and to bridge the current labor gap in our sector.
One of the government sponsored program is beginning with support frontline team members in particular P. S. W's, who wanted to further their education in order to become a notes.
We're also participating in programs that offers placement at our residents is going internationally educated nurses would acquire Canadian qualifications.
Anthropologie and University students to finish their education.
Many of them will be offered permanent placements of C&I once they have completed the required practical work experience.
With a team of approximately 12000 employees are our most important asset creating.
Creating a positive experience with them and supporting personal and professional growth a key objectives as we grow our company and our team in the months and years ahead.
With that I'll turn it over to Kevin for an update on our operations and financial results.
Thank you, Matt and good morning, everyone.
I will start on slide 13, our financial results with.
With the operating environment continuing to improve in the fourth quarter, we saw a significant increase in resident move ins across our entire <unk>.
Platform and admissions of record and celebrated at our long term care community.
We are also encouraged by the moderation of pandemic related expenses and the continued pandemic funding support we are receiving from our government.
These positive developments are reflected in our financial results.
In Q4, 2021 revenues increased by three 2% year over year to over $174 million.
Net operating income increased by 16, 7% to $33 4 million this quarter compared to last year.
The carbon same property NOI increased by 2 million to $13 9 million compared to last year, primarily due to occupancy improvement annual rental rate increases in line with market condition and decreases in net and then make expenses.
This was partially offset by higher agency staffing costs utility costs and insurance premiums.
Rent collection levels remained high at approximately 99% consistent with pre pandemic level.
Cna's long term care same property NOI increased by $2 4 million to $18 5 million compared to last year, primarily due to annual inflationary funding increases timing of retroactive pandemic funding and a decrease in pandemic expenses.
This was partially offset by lower optimization revenues from lower occupancy in private and semi private rooms, which are not covered by occupancy protection funding higher utility costs and insurance premiums and increased repairs and maintenance expenses.
For the full year same property NOI increased by 11, 3% or $14 million to $137 5 million compared to last year.
Total net pandemic expenses decreased by $7 6 million to 200000 this quarter compared to last year. The decrease was mainly due to the moderation of pandemic and retroactive government funding of $2 6 million for unfunded expenses, we incurred in 2020 in Q1 2021.
Over the past two years, we have seen significant.
Significant cost pressures on agency casket restock with shortages increased insurance premiums in the senior living sector and rising utility costs in line with the overall market.
We expect a continued occupancy gains and rental rate increases in our retirement portfolio and an improving operating environment will help mitigate these cost pressures and support our operating margins in 2022 and beyond.
We expect pandemic expenses to further moderate as the pandemic subsides.
Related government funding gradually decline.
Moving to slide 14.
During Q4 operating funds from operations increased by 29% to $18 3 million compared to last year, primarily due to higher NOI lower administrative expenses and lower interest expense on long term debt, partially offset by higher current income taxes.
Q4, OSF all per share increased by 28, 9% to 27%.
For the full year OSF will per share increased by 11, 7%.
Adjusted funds from operation increased by 45, 7% to $16 6 million compared to last year, primarily due to the same reasons as the increase in Oss felt.
Partially offset by higher maintenance capital expenditures.
ASF all per share increased by 26% this quarter to $24 seven.
For the full year ASF will per share increased by four 5%.
ASF will payout ratio was 94, 7% for the quarter and 86, 3% for the full year.
Moving onto our debt metrics on slide 15.
Our debt to gross book value improved by 350 basis points to 44, 7% at the end of 2021 compared to 48, 2% at the end of 2020, mainly as a result of reducing the drawdown on our credit facility.
Adjusted EBITDA improved to seven nine years at the end of 2021 compared to $9 four times last year.
Interest coverage ratio improved to three seven times in 2021 compared to two one times last year and we have limited debt maturities over the next two years.
Moving to slide 16, we continue to maintain a strong balance sheet.
This was evidenced in the renewal CBR issuer credit rating, our senior unsecured debenture rating of Triple B with stable trends in October 2021.
We also maintained significant liquidity, which has exceeded $200 million for the past eight quarters.
In connection with our recently announced joint venture acquisition, we have secured $150 million acquisition term loan at 145 basis points over the floating VA rate for a 12 month term to support the financing of the transaction.
We ended the year, well capitalized with $226 million in liquidity and an unencumbered asset pool of $1 1 billion.
<unk> scores, the resiliency and strength of our business and supports our growth plans going forward.
I will turn the call back to Nick now for his closing remarks.
Thanks, Karen recent months have been market optimism at our company and strengthening fundamentals in the Canadian senior living sector.
Demand for the services and care offered in senior living support our optimistic outlook and growth strategy for 2022 and beyond.
Over the next 20 years, the 75, plus population is expected to grow by nearly 4% annually and outpaced candidate auto population growth by five times.
At the same time, the uncertainty caused by the pandemic coupled with rising construction costs has led to a significant decline in new construction activity over time in residences in Canada supporting strong occupancy rates for existing residences.
We intend to capitalize on the improving fundamentals and the growing demand for quality senior living and put into motion several transformational initiatives over the past 18 months, including our joint venture acquisition with Ciber.
We're also pleased about the added momentum in our long term care redevelopment plans and the addition of two retirement residences in Niagara Falls and bandwidth.
Once completed these developments will add approximately 500 long term care beds and over 300, a common suites to our portfolio.
For 2020 to be forecast gradual occupancy improvements in our interface with common portfolio and maintained our forecast for occupancy levels to reach approximately 87%, 89% by the end of 2022.
And our long term care portfolio admissions, a new resident accelerated it for most of the fourth quarter and this resulted in an increase in occupancy during Q4, and we anticipate continued improvements in 2022.
Our strategic initiatives still making transformational changes to our operating platform to ambitious growth plans are expected to be a source of future growth for <unk> <unk>.
And will benefit our team members shareholders partners and ultimately Canadian seniors for years to come.
Strategy 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.
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.
Now please to answer.
So any questions you may have.
Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your telephone.
Your question has been answered or you wish to remove yourself from the queue. Please press the pound key once again to ask a question press star one.
Our first question comes from the line of Jonathan <unk> with TD Securities.
Thanks, Good morning.
Morning, Jonathan Good morning.
First question just on the occupancy you guys had a good quarter and good start to the year.
Yeah.
Youre keeping your forecast for 87% to 89% Youre almost I think youre, just 86% right now so what are the chances do.
Thank you.
The top end of that.
At this stage, we are comfortable with our forecast Jonathan usually January February March are little bit slower we did not see that in January which was great, but February and March slower months.
We are seeing solve that softness from our early indicators. So far for February . So at this stage, we are pretty comfortable with the 87% to 89% and as.
And restriction of that that's coming out where people can now tour again, and if that extra rates obviously will.
Thank you to provide change the guidance and needed to be in the quarters to come but at the current time.
We remain that 87% to 89%.
Okay.
You guys are operating much in the way of.
To help drive occupancy.
So we did that in 2020 as a one time thing that's not really that strategy because.
The unusual incentive comp amongst three and things like that which which is pretty normal but other than that for us. It's really very specific sales and marketing program for each of the different communities because we do have baked.
Very different assets from community to community.
Okay, and then I guess, just switching gears on the new developments of three sorry.
Sorry, the three projects that you got approval for in December .
What are the thoughts on timing for starting those.
So two of those projects that on Scarborough, which one is the Mississauga, obviously would take.
Significant amount of time from municipal approvals.
Assuming that then.
GTA area and difficult municipalities to get approvals. However, this is as good a cause of any so at this stage, we're not really sure of timing and we also.
Our goal is not to exceed 5% to 10% of our asset based on the development.
So even though let's say if you had a pause we don't want to start six projects in the year. So we like the pace. We started one late last year. We are on track to start to this year, one being a campus and you also have a retirement.
Accurate.
No.
Asset in the agriculture like them, so I think to a unit at a good pace for us So we will slot piece.
For 2022 and beyond.
Okay.
The rock clips and ultimate Youre, combining in one location I would assume that the ultimate location.
Does that is that correct thats correct. So we happened to have more than 40 acres of land in Scarborough, which we're really fortunate for and we are doing this in partnership with Chicago Public network and.
We will combine all of that and then we will repurpose the <unk> site.
Okay.
Thats It for me thanks, So I'll turn it back.
Sure.
Thank you.
And our next question comes from the line of Scott <unk> with CIBC.
Thank you and good morning, just wondering what impact all mccrone has had on that employee turnover in other words, what impact on resignation levels.
Not really anything different than the unusual.
I would say from our senior living sector Omnicom was more of a stop in prices has been a health care crisis because.
Thanks for the booster in the mild manner of this variation of Covid.
We did not see huge healthcare issues, whether you did see staffing issue. So we have not seen significant change in employer designation based on <unk> com.
And do you think that your differentiated strategy Youre stock ownership.
Tried an employer of choice programs do you think thats going to.
Okay.
It's going to continue to help you attract employees.
Against other options.
And either seniors housing.
Or other sectors.
Do you think thats going to.
Prevent you from having to incur costs in excess of inflation.
So most of our frontline team members are union ice there'll be follow union contracts.
I'll call that pricing.
For us we believe that there is not going to be one silver bullet, which is the solve all of it. So CN ownership program is one of them.
We've actually contest that was another.
Having a purpose driven culture, because we recently to employee survey, maybe got close to 20000 comments from our team members and being aligned to our purpose of kidney care casinos or the big reason a lot of team members continue to choose this sector. So we don't think it's going to be Watson, which will solve this it's going to be a combination of that how do we take care of a cut.
Team members and how do we attract that and the second is how we actually increased the number of.
People in the sector. So we talked about few government programs, which we are really appreciative of how do we get more immigrants into the healthcare space in the provinces, where we operate so frankly, it's going to be a combination of all of those things and rich is going to need a really different way of thinking than what people have done in the past and partnership but overall.
Second in partnership with government, especially as it relates to integration there'll be more federal and provincial program. So.
This is going to be a crisis for all of us.
And we will obviously do the best we can internally, but we will have to work together to solve it for overall.
Canadians.
Yeah.
And just final question on labor.
Tom.
What mechanisms do you have within the general Union contract.
Frameworks.
To account for inflation index is it can we expect increases above or below.
General inflation.
Yes, it's hard for me to.
To say that each contract is different we have multiple unions and multiple contracts with them.
Usually many of them will have other.
Other providers in it you might have.
You might have a bargaining unit, which have $25 30 properties of different corners and different ownership type.
Usually they stay pretty consistent with inflation, but one or two might change here or there. So it's really it's not really one big contract that I can comment on.
Okay. Thanks very much.
Sure.
Thank you.
Thank you and.
And our next question comes from the line of Joanne <unk> with BMO capital markets.
Hi, good morning.
Good morning Julien.
Yes.
Obviously some of the restrictions are getting lifted.
Okay.
Thank you Ian.
Vaccination passport.
How are you guys managing that.
With.
Great.
Thanks, Tim.
How are you planning on that agenda.
That situations for Eventbrite, yes, great.
So I guess im sorry Joanna.
Make sure we understand the question are you asking.
Omicron wave coming towards and restriction opening how would it impact business is that your question.
Yes, exactly and just to.
We continue to make sure that.
To minimize the number of outbreaks.
For sure. So we have more restrictions on admissions in long term care of our tours and retirement homes.
This is an outbreak.
And even viewing on the Conway.
People could still to a very limited portion of the common suites and they were being admitted to long term care. So for US just opening of restrictions started to hit.
Oh, no sorry, I missed that.
Apologies, yes noise.
So for US I mean this is really.
And really what it means for the resident of team members.
The ability to have their livestock because in many cases people who are confined to their homes. So in many cases for existing residents.
Obviously, a huge improvement in the living experience with team members not being able to not have to wear.
Isolation gowns, and other things, which again will be a huge benefit if you will.
Have a benefit from a pandemic cost perspective, and then from a from a retirement on both long term care, we do anticipate it accelerating admission spoken admission and admissions in both the common long term care.
And we do not anticipate a huge number of move outs from.
From an economy portfolio.
Okay, and maybe just going back on I guess.
Hi, just thinking how should we think about kind of the runway.
Over the near term.
On the staffing side.
Alright, Hi, Joanne.
Slide 28 in Q long term care versus requirements. So while we have significant.
Shopping shortage and therefore pressure on staffing costs, particularly in long term care side. Most of those roles are funded through the government.
On.
Earlier discussions.
Talk to you with that because those are funded at the impact on annualized Walter It's Tom.
It's not going to be materially change.
Changing going into 2022.
So when we look at requirement, we do think that with Omnipod and kind of fighting that we would be able to utilize less of.
Agency staff and as we see our stock also coming back to work that's building costs could moderate.
Okay got it.
Cool.
And maybe just one last one for me.
But going back on the development side.
Obviously, the new projects.
Thank you.
Thank you, ladies and gentlemen, just given that with rising development costs right now and I guess.
Felipe.
Thinking about I guess this was brought up earlier in terms of timing, but how is that.
James.
What youre thinking in terms of when comparing and whatnot.
Yes for sure we are seeing rising development.
Cost we are not at a stage where.
This has given us a pause just yet but.
They are significant changes and escalation and Theres also timing issues.
We are hearing from other companies, where the projects are delayed because of the order windows and demo it will be there for another four months. So currently open a building without them. So at this stage.
<unk> seen rising escalation costs, we've seen supply chain issues, but not enough for us to take a considerable cost.
Got it.
Yes.
That's it from me. Thank you I'll turn it back.
Thank you.
Thank you.
Our next question comes from the line of <unk>.
With National Bank.
Alright, good morning.
Hi, good morning.
In terms of the.
You guys made some investments in marketing over the <unk>.
The pandemic I'm thinking about call center.
So that kind of stuff.
Ed.
Prior to this we sort of haven't seen.
These kind of that kind of occupancy.
The performance lift that Youre seeing right now can you just talk a bit about I.
I recognize the pandemic that things were depressed and that's a bit of a rebound out of the pandemic two but I'm. Just wondering if you can talk a little bit about how you are leasing and marketing function functions are working.
Now versus pre pandemic.
And what some of the differences are that you are seeing right now.
Thank you for that.
I will not get into the details of that because for US. We think that is proprietary to us on the changes we've made and the things we're doing different what I would say is that there's a big focus on community by community rather than the overall because we do have.
Different kind of buildings in different markets and really for us.
In addition to sales and marketing is the whole will review of our platform, which rose to a spirit up because.
We will not going after a name change we were going after what do we stand for as a common platform and that prompted a name change. So there is significant teams were working on in terms of.
Increasing the resident experience moving to personalization more choices, how do we become a bigger part of the community.
For us those are all a bit of a mix of all of those things and hobbies, how do we go to market with those how do we sell hardware and local people summit for.
For us that's that's what we're finding is that.
It has been good for us rather than just one thing making a difference.
Okay, and sorry, just going back before there was a couple of questions ago.
You have been offering some like half month incentives and stuff like that selectively or not.
Those are what I would what I meant to say is that we offer to usual incentives time to time, so usually a half a month's rent will be something unusual debt retirement homes would offer.
Certain markets. So our view has not changed.
In 2020, we offered up some bigger incentives for a short period of time, but we are not the investment spend.
Got it okay.
And then you highlighted the north Bay projects that Youre getting underway I'm, just wondering like for us to understand the economics like.
You are picking up.
Some beds on that say look can you give us a sense of.
What the uplift in NOI off that is.
From adding the new beds like.
I'm still trying to struggle I'm still struggling a bit with like thinking about the redevelopment projects right of how to think about the NOI that you are replacing and what the potential growth opportunity is when you're adding some adding some new beds here.
Sure.
And Thats a great question.
You really have to look at it from two different ways. When you look at your financial obviously, there's a huge operational impact and the huge resident impact of having a new building. So the first one is NOI.
148 long term care beds, and 50 year old buildings. They only have a small number of preferred that's 110% where you can charge for the next $819 because of the C homes can only charge a certain amount of time certain amount of dollars for the private bank.
160 bed long term care home brand New you will have you will have 60% private events, which is instead of having 50%. We have close to 96 now so theres incremental NOI because of that there is an incremental NOI I don't want to because of the 12 additional beds.
There is even a bigger impact at <unk> level, because you have a construction funding from the government that flows into it so.
Pieces of construction funding or at least minimizing the loss of some of those construction fundings are coming off and the last one really is.
Is the quality of the assets, we have NOI coming from our <unk> home.
The market looked at differently. So it might still be getting one dollar, but it has a much higher cap rate versus the dollar from a brand new long term care home.
Go to the newest standard, which we expect those cap rates to be like a 665% or so so for us it is.
Really a player but all of those things when it comes to financial is just not NOI increase.
Okay.
And.
Youre going to close this deal with the Sperry this year.
And you would traditionally grown the retirement portfolio.
Acquisition of generally stabilized stabilized properties.
I'm just wondering as the long term care redevelopment.
Projects get Greenlit.
Assuming the market cooperates, yes, you could grow though you could grow stabilize you could grow.
Through acquisition, and hopefully issue equity at attractive prices to be able to finance that and keep your balance sheet in check.
How we should be expecting you to grow or.
Are you.
Do you start looking maybe more.
Doing more development of retirement homes as well like.
How do you continue to build.
Build momentum in the retiring in the growth of our retirement platform, while you've got the <unk>.
So you have to go through on the long term care side.
Sure.
Us.
Our view is the development.
For our company shouldnt be more than 5% to 10% of our asset base upon a $2 $5 billion. So anywhere from 125 two.
$200 million of development and we do have significant amount of development that we wanted to do in long term care and in some cases, we would add requirements such as the one in Frankfurt.
Our cost to long term care homes, we will do the development with it but not separately so unless we specifically the regions, where we are at and Densification. For example, the four sites. We are buying has some excess land. So we can add some more suites. We have a couple of other at a time in homes, but one that we are looking at and Densification opportunities. So we will look at those.
Developing perspective for retirement homes, but mostly.
Our development is going to be focused on long term care or retirement attached to it.
In our retirement growth is when we're really come organically and second to acquisitions.
And do you think with the asset mix that you've got you're going to be able to compete.
Compete for retirement properties at cap rates continue to trend in the direction of that trending.
We really like the mix of Bulks up long term care undetermined, one provides stability of cash flow, which is an effective <unk> and another one that has the growth aspects built into it from retirement. So we are very comfortable how we are how we are structured in fact, we don't want to be tilting to one side from <unk>.
So for us our focus.
And ports focuses.
Diversified company between both long term care and retirement and for diversity for us it means anywhere.
There is no sign of business less than one turn or so.
Long term care becomes 60% that will be just fine by us and have a common become 60%, but disciplined buying assets just a moment in time.
And given that this is an operating business et cetera.
Youre going to be integrating a fairly chunky acquisition this year and green letting a lot of.
Development projects.
Do you have like the rate.
Do you have enough management resources to continue to function at this pace.
So that was a very.
<unk>.
I think for us to consider and for example in 2021.
There was a period of time, then Amit Colbert Covid was not that severe there were other acquisition opportunities in 2021, but we decided that that was not the time for us our first focus was.
Really starting when I came into the role in June of 2020 is to ensure that we first.
Come out of crisis, so from from our House view. So that was our first focus how do we ensure team members and residents are taken care off the focus right afterwards to ensure that we have the right team at the senior executive team and the leadership level. So.
Did that then the focus change to our platform.
Because we are an operating business that you said.
You cant really be adding things to our platform, which you are not comfortable with so we changed it made significant changes to our platform both retirement and long term care would be launched.
Shortly so we do feel quite optimistic in our growth and the way we have structured our teams is.
People, who are focused on organic operations, let's call. It that we don't really want.
Their focus will be on acquisition. So we are quite diligent in keeping those teams different.
We have to stretch some people if they're looking for opportunities to learn different things, but we want to be very diligent to make sure that we're not focusing on acquisitions.
At the detriment of organic growth because for us that is more important.
Then acquisitions.
Okay. That's great. Thanks, guys. Thank.
Thank you.
Thank you.
And as a reminder to ask a question. Please press star one on your telephone.
Our next question comes from the line of <unk> with RBC capital markets.
Hi, everyone. Good morning, just really one question from me I realize this might be tough just given all the volatility in the maybe the visibility issues and funding.
But are you anticipating any further recoveries in long term care pandemic costs this year.
Your baseline assumption for 2022 does that can we assume that the $17 million of retroactive recoveries.
We see last year.
You should basically just strip that out.
Hi, yes.
Yes.
'twenty one Watson unusual here.
<unk> was released our 2020 and as you pointed out we received $17 million of retroactive pandemic funding relating to 2020.
It is difficult to say, if we would expect additional retroactive funding into 2022, because we are entering into a new funding year.
However, the government has been very supportive.
And so it is difficult to predict whether we would expect anything more than that to be prudent and probably not too accurate.
Other than we do expect still some timing differences between our pandemic expenses first.
The timing of any related pandemic funding.
Okay.
Maybe just a follow up.
How much is left.
To be recovered in terms of maybe what you've spent over the last couple of years I don't know if its still.
Any catch up spending from 2020, but.
What would you say the estimated what has not been recovered.
So if we look at 2021 our total.
The pandemic expenses between retirement and long compared with about $10 million.
And.
Three quarters of that was in long term care.
No.
And the Karma then with harvest, we don't really expect Allen.
Much pandemic funding related to that and if you look at the long term care unfunded balances of $8 million again, it's difficult to say.
We're still going through the process.
And.
That would be the amount.
For 2021, and as we entered into Omnicom that when we look at Q4 long term care and then Nick expenses versus Q3.
We did see some slight moderation however in the second half of December It did go up and it is still early to say.
What those expenses would be for Q1.
And how.
However, the government has come up and announced additional funding support.
Great.
That's it for me that's helpful. Thanks, Karen.
Thanks, Amit.
And I'm showing no further questions so with that I'll turn the call back over to Mr. <unk> for any further remarks. Thank you Andrew and thank you everyone for joining our call on behalf of our management team and our board of directors on the thank you for your continued support and look forward to speaking to you in the next quarter. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
Okay.
[music].
[music].
Ladies and gentlemen, welcome to Sienna Senior living Inc, Q4, 2021 conference call.
Today's call is being hosted by Knits, and Jane President and Chief Executive Officer, and Karen Hahn, Chief Financial Officer of Senior living Inc.
Please be aware that 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 risk factors sections 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 in its MD&A and financial statements for the period, which are posted on SEDAR and can be found on the company's website Sienna living that's D. A.
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 website under events and presentations.
With that I'll now turn the call to Mr. Jain. Please go ahead Mr. Jain.
Thank you Andrew and good morning, everyone and thank you for joining us on our fourth quarter call today.
Recent months have been marked with some exciting developments and important progress.
Our strategic priorities have been focused on enhancing team engagement elevating the quality of medical for residents and advancing our growth initiatives.
This included notable investment operating platform, our properties and the wellbeing of our residents and our team.
Our solid Q4 results reflect the impact of these investments, but also highlight generally improving fundamentals in the senior living sector and put us in a strong position to excellent investments in strategic growth and value creation initiatives.
Under this backdrop, the macro to services and care. We also continued to build in 2021.
This was reflected in our strong Q4 operating results occupancy in our retirement portfolio reached its highest level in nearly two years.
Revenue admissions at our long term care communities continued to accelerate for most of the fourth quarter.
Our economy portfolio benefited from in person tours, and a robust marketing and sales progress. This has resulted in strong lead generation and 140% increase in resident move ins you don't want to Europe in the fourth quarter.
In December average same property occupancy levels reached 85, 3% and further increased to 85% to 9% in January 2022, the eighth consecutive monthly increase.
Since may of 2021 average same property occupancy has improved by a total of 710 basis points.
And I'll also give communities admission for new residents accelerated for most of the fourth quarter.
Excluding the best unavailable due to the capacity limitations in isolation requirements.
Property occupancy reached 95, 3% at the end of 2021.
We anticipate continued occupancy gains throughout 2022, given the long wait list of long term care beds in Ontario, and British Columbia.
In recent months operating environment continued to improve which has led to the easing of restrictions across the residences.
Currently no significant outbreaks at any of Chinas long term care communities or the timing of residences with most of our residents and team members, having received a boost of shops and the majority of it evidenced in team member symptoms have been either mild or moderate.
In 2021, we announced the launch of our new retirement platform SBR and the development of a new long term care platform both to be launched later this year.
These platforms are expected to elevate the quality of life and care for residents and include enhancements to the dining experience activities and programs.
With respect to sphere. Our recent efforts have been concentrated on team member training on new resident experience model marketing initiatives and the rollout of pilot programs on various concepts at selective ton residences.
In addition, we finalized our core brands and marketing elements for the loss of our platform in the second quarter of 2022.
Development of a new long term care platform is well underway and is aimed at providing holistic and integrated care. The platform is expected to be launched in Q3 of 2022.
Now moving to our recent joint venture on February 3rd 2022, we announced that we entered into an agreement to acquire a 50% ownership interest in a portfolio of 11, 11 retirement residences on Ontario, and Saskatchewan with a joint venture partner Sabra Health care REIT for a total of $308 million.
This transaction, which we expect to close in late second quarter will increase the number of our owned and managed retirement suites by 26%.
The portfolio is currently owned by extended care and represent that entire private pay the common portfolio in Canada.
This is a high quality portfolio with an average age of approximately 60 us and it offers extensive amenities, which reflect the changing lifestyle of seniors.
With an approximate 6% unlevered yields in the first 12 months. Following closing the acquisition is expected to be accretive to <unk> and <unk> per share.
The portfolio is located in growing communities among Pedro in Saskatchewan and will provide us with immediate scale a platform for future expansion and entry into new products.
We expect to capitalize on the growing demand for quality senior living in each community.
The Ontario assets are strategically located around the GTA and in southern Ontario.
In our portfolio and increase our footprint in the AGA to London corridor and expand our position in the highly desirable battery market.
Through the acquisition, we will also increase the number of memory care units, which are in high demand and this will better position us to serve this growing segment.
With excess land at Florida properties. We also have the option for future development of over 200 suites and.
And once the transaction is complete you will act as the manager of the 11 properties, which will deepen an already established relationship et cetera.
Now moving to our focus on development our growth initiatives also include a significant expansion of our development pipeline.
In December of 2021, we've got a pool for three additional long term care redevelopment projects, including our first office campus located in partnership with <unk> Health network.
Capex will come by and ultimate care community and Rockwood care community in Toronto onto a single site.
Whilst our 478 bed campus is completed it will support the growing need for seniors and discovery here.
We are also progressing well on several other projects in Ontario.
In North Bay construction start at the northern higher scare commodity last November where you're replacing the current 148 older C class beds with 160 new beds.
In addition, we expect to start construction at our communities in Keswick in Frankfurt to start during the first half of 2022.
And Catherine we will be replacing the current 60 long term care beds with 160 bed facility and in Frankfurt, We will replace the current 122 long compare best with 160, new long term care beds and add 147 suite retirement residents to create an integrated campus of care.
In total these fixed long term care projects and on Cedar comprises over 500 beds on approximately two thirds of <unk> plus the best planning for the balance of CNS class B portfolio is well underway.
In addition, construction of the 150 suites retirement residents in the agricultural <unk> Senior housing is a joint venture partner is well underway and we expect to complete this development by the end of 2023.
As part of the continuous review of our portfolio. We completed the sale of 130 <unk> retirement residence in British Columbia at the end of January and have agreed to also saw a 236 bed <unk> long term care homes in the GTA.
Which is expected to close in the second quarter.
The net proceeds will be reinvested in our recent acquisition.
Staffing remains a key focus as we grow our company and build our team for the future.
Our goal is to become the Florida choice in senior living markets, where we operate we achieved this by offering a compelling team member experience and by nurturing our purpose driven culture.
Believe it helps differentiate our company and attract and retain a highly engaged workforce and a very tight and competitive labor market.
One would be a differentiator to solve the CNR ownership and rewards program.
<unk> will provide company share some team members slipping to ciena for one year or longer.
<unk> initiated the first of its time and Canadian senior living and I cannot think of anyone better suited to be invested as owners in our company and our team members.
There are a lot of this program is well underway and is estimated to represent an additional investment of approximately $3 million.
We're also working on a number of initiatives to support the career growth of our frontline teams aggravate the current labor gap in our sector.
One of the government sponsored program is beginning with support frontline team members in particular, <unk>, who wanted to further their education in order to become a nurse.
We're also participating in programs that office placement of our residents with way internationally educated nurses with required Canadian qualifications.
Anthropologie and University students to finish their education.
Many of them will be offered permanent placements of C&I once they've completed that require practical work experience.
With a team of approximately $12. Our employees are our most important matter, creating a positive experience with them and supporting personal and professional growth our key objectives as we grow our company and our team in the months and years ahead.
With that I'll turn it over to Karen for an update on our operations and financial results.
Thank you and good morning, everyone I'll start on slide 13 for financial results.
With the operating environment continuing to improve in the fourth quarter, we saw a significant increase in resident move ins across our entire.
Platform and admissions of record accelerated at our long term care community.
We are also encouraged by the moderation of pandemic related expenses and the continued pandemic funding support we are receiving from our government.
These positive developments are reflected in our financial results.
In Q4, 2021 revenues increased by three 2% year over year to over $174 million.
Net operating income increased by 16, 7% to $33 4 million this quarter compared to last year.
Retirement same property NOI increased by 2 million <unk> dollars 9 million compared to last year, primarily due to occupancy improvement annual rental rate increases in line with market condition and decreases in net and then make expenses.
This was partially offset by higher agency staffing costs utility costs and insurance premiums.
Rent collection levels remained high at approximately 99% consistent with pre pandemic level.
Cna's long term care same property NOI increased by $2 4 million to $18 5 million compared to last year, primarily due to annual inflationary funding increases timing of retroactive endemic funding and a decrease in pandemic expenses.
This was partially offset by lower preferred optimization revenues from lower occupancy in project and semi private rooms, which are not covered by occupancy protection funding higher utilities carpeting shares premiums and increased repairs and maintenance expenses.
For the full year same property NOI increased by 11, 3% or $14 million to $137 5 million compared to last year.
Total net pandemic expected decreased by $7 6 million to 200000 this quarter compared to last year. The decrease was mainly due to the moderation of pandemic costs and retroactive capex spending of $2 6 million for unfunded expenses, we incurred in 2020 in Q1 2021.
Over the past two years, we have seen significant.
Significant cost pressures on agency casket restock with shortages increased insurance premiums in the senior living sector and rising utility costs in line with the overall market.
We expect a continued occupancy gains and rental rate increases in our retirement portfolio and an improving operating environment will help mitigate these cost pressures and support our operating margins in 2022 and beyond.
We expect pandemic expenses to further moderate as dependent subside, while related government funding gradually decline.
Moving to slide 14.
During Q4 operating funds from operations increased by 29% to $18 3 million compared to last year, primarily due to higher NOI lower administrative expenses and lower interest expense on long term debt, partially offset by higher current income taxes.
Q4, OSF all per share increased by 28, 9% to 27 three.
For the full year <unk> per share increased by 11, 7%.
Adjusted funds from operation increased by 25, 7% to $16 6 million compared to last year, primarily due to the same reasons as the increase in OSA.
Partially offset by higher maintenance capital expenditures.
ASF all per share increased by 26% this quarter to $24 seven.
For the full year ASF Boe per share increased by four 5%.
<unk> payout ratio was 94, 7% for the quarter and 86, 3% for the full year.
Moving onto our debt metrics on slide 15.
Our debt to gross book value improved by 350 basis points to 44, 7% at the end of 2021 compared to 48, 8% at the end of 2020, mainly as a result of reducing the drawdown on our credit facilities.
Debt to adjusted EBITDA and $57 nine years at the end of 2021 compared to $9 four times last year interest coverage ratio improved to three seven times in 2021 compared to three one times last year and we have limited debt maturities over the next two years.
Moving to slide 16, we continue to maintain a strong balance sheet.
This was evidenced in the renewal DVR issuer credit rating, our senior unsecured debenture rating of Triple B with stable trends in October 2021.
We also maintained significant liquidity, which has exceeded $200 million for the past eight quarters.
In connection with our recently announced joint venture acquisition, we have secured a $150 million acquisition term loan at 145 basis points over the floating VA rate for a 12 month term to support the financing of the transaction.
We ended the year, well capitalized with 226 million in liquidity and an unencumbered asset pool of $1 1 billion.
<unk> scores, the resiliency and strength of our business and of course, our clients going forward.
I will turn the call back to net now for his closing remarks.
Karen recent months have been market optimism and our company and strengthening fundamentals in the Canadian senior living sector.
Demand for the services and care offered in senior living support our optimistic outlook and growth strategy for 2022 and beyond.
Over the next 20 years, the 75, plus population is expected to grow by nearly 4% annually and outpaced Canada overall population growth by five times.
At the same time, the uncertainty caused by the pandemic coupled with rising construction costs has led to a significant decline in new construction activity of retirement residences in Canada supporting strong occupancy rates for existing residences.
We intend to capitalize on the improving fundamentals and the growing demand for quality senior living and put into motion several transformational initiatives over the past 18 months, including our joint venture acquisition of Ciber.
We're also pleased about the added momentum and our long term care redevelopment plans and the addition of two retirement residences in Niagara Falls embankments. Once completed these developments will add approximately 500 long term care beds and over 300 common suites to our portfolio.
For 2020 to be forecast, Glasgow occupancy improvements in our interface with common portfolio and maintained our forecast for occupancy levels to reach approximately 87% to 89% by the end of 2022.
In our long term care portfolio admissions, a new resident accelerated for most of the fourth quarter and this resulted in an increase in occupancy during Q4, and we anticipate continued improvements in 2022.
Our strategic initiatives are making transformational changes to our operating platform to ambitious growth plans are expected to be a source of future growth for Sienna and will benefit our team members shareholders partners and ultimately Canadian seniors for years to come.
Our strategies are 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.
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 are now pleased to answer any follow up.
Answer any questions you may have.
Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your telephone.
If your question has been answered or you wish to remove yourself from the queue. Please press the pound key once again to ask a question press star one.
Our first question comes from the line of Jonathan <unk> with TD Securities.
Thanks, Good morning.
Good morning, Jonathan Good morning.
First question just on the occupancy you guys had a good quarter and good start to the year.
But you are keeping your forecast for <unk>, 87% to 89% Youre almost I think youre just that 86% right now so what are the chances do you think you may exceed the top end of that.
At this stage, we are comfortable with our forecast Jonathan usually <unk>.
January February March are little bit slower, we did not see that in January which was great but February and March slower months. So and we will we are seeing solve that softness from our early indicators. So far for February . So at this stage, we are pretty comfortable with the 87% to 89% as.
And recession, that's coming out where people can now tour again, and if that accelerates obviously will.
If you could provide change the guidance and needed to be in the quarters to complex.
Current time.
We remain that 87% to 89%.
Okay.
Are you guys operating much in the way of <unk>.
Incentives to help drive occupancy.
So we did that in 2020 is a one time thing that's not really the strategy because.
The unusual incentive comp amongst three and things like that which which is pretty normal but other than that for us is really very specific sales and marketing program for each of the different communities because we do have.
Very different assets from community to community.
Okay, and then I guess just switching gears on the.
New developments of three sorry the.
Three projects that you got approval for in December .
What are the thoughts on timing for starting those.
So two of those projects on Scarborough, which one is the Mississauga, obviously would take.
Significant amount of time from municipal approvals considering that.
GTA area difficult municipalities to get approval side of our this is as good a cause of any so at this stage, we're not really sure of timing and we also.
Our goal is a market exceed 5% to 10% of our asset base under development. So even though let's say if you had a pause we know how to start six projects in the year. So we like the pace. We started one late last year. We are on track to start to this year, one being a campus and we also have a retirement.
Accurate.
Asset in the agro calls with vitamin So I think to a year at a good pace for us. So we will slot. These three for IMO 2023 and beyond.
Okay.
The rock clips and ultimate Youre, combining in one location I would assume that the ultimate location.
Does that is that correct. That's correct. So we happened to have more than four acres of land in Scarborough, which we're really fortunate.
And we are doing this in partnership with Scarborough Health network.
We will combine all of that and then we will repurpose the current rockledge site.
Okay.
That's it for me thanks, So I'll turn it back.
Thank you.
And our next question comes from the line of Scott <unk> with CIBC.
Thank you and good morning, just wondering what impact <unk> had on that employee turnover in other words, what the impact on resignation levels.
Not really anything different than the unusual.
I would say from our senior living sector Omnicom was more of a stock prices has been a health care crisis because.
Thanks for the booster in the mild manner of this variation of Covid.
We did not see a huge healthcare issues, whether you did see staffing issue. So we have not seen significant change in employer designation based on monochrome.
And do you think that you're differentiated.
Differentiated strategy Youre stock ownership.
Tetra an employer of choice programs do you think thats going to.
Yes.
It's going to continue to help you attract employees.
The other options.
And either seniors housing.
Our other sectors.
Do you think thats going to prevent you from having to incur costs in excess of inflation.
So most of our frontline team members of Union ISO befall Union contracts.
For that pricing.
For us we.
I believe that there is not going to be one silver bullet, which is will solve all fit. So CN ownership program is one of them you had a huge vaccine contest that was another having a purpose driven culture because we just recently to employee survey, maybe got close to 20000 of comments from our team members and be aligned to our purpose of taking care of <unk>.
Those are the big reason what team members continue to choose this sector. So we don't think it's going to be Washington, which will solve this is going to be a combination of that how do we take care of our current team members and how do we factor in the second is how we actually increased the number of.
People in the sector. So we talked about few government programs, which we're really appreciative of how do we get more immigrants into the healthcare space in the provinces, where we operate so frankly, it's going to be a combination of all of those things and rich is going to need a really different way of thinking than what people have done on the top and partnership with overall.
The effective in partnership with government, especially as it relates to integration there'll be more both federal and provincial program. So this.
This is going to be a crisis for all of us.
And we will obviously do the best we can internally, but we will have to work together to solve that for overall.
Canadians.
Yeah.
Thanks, and just final question on labor.
What mechanisms do you have within the general Union contract.
Frameworks.
To account for inflation index is it can we expect increases above or below.
General inflation.
Yes, it's hard for me to.
To say that each contract is different we have multiple unions and multiple contracts with them.
Usually many of them will have other.
Other providers limits you might have.
You might have a bargaining unit, which have $25 30 properties of different owners and different ownership site.
Usually they stay pretty consistent with inflation, but one or two might change here or there. So it's really it's not really one big contract that I can comment on.
Okay, Thanks, very much and I'll turn it over.
Thank you.
Thank you.
And our next question comes from the line of Joanne <unk> with BMO capital markets.
Hi, good morning.
Good morning Julien.
Sure.
Obviously some of the restrictions are lifted.
Thank you Ian.
That's most impactful I guess.
How are you guys managing that.
Alright.
Good luck.
Business.
How are you planning on that agenda.
Hmm.
That situations prevent outbreaks.
So I guess im sorry Joanna.
Just want to make sure we understand the question you're asking.
Omicron wave coming towards and restriction opening how would it impact business is that your question.
Yes, exactly and just.
Continue to make sure that.
To minimize the number of outbreaks.
For sure. So we now have more restrictions on admissions in long term care are relevant to our tours and retirement homes.
This is an outbreak.
And even viewing omicron wave.
People could still to a very limited portion of the commerce suites and they were they were being admitted to long term care. So for US just opening of restrictions started to hit.
Oh, no sorry, I missed that.
I believe that my apologies, yes noise.
So for US I mean this is really.
And really what it means for the revenue of the team members.
The ability to have their livestock because in many cases people who are confined to their homes. So in many cases for existing residents.
Obviously, a huge improvement in the living experience for team members month renewable more hardware.
Isolation gowns, and other things, which again would be a huge benefit it will have a benefit from a pandemic cost perspective, and then from a from a retirement on both long term care, we do anticipate it accelerating admissions broken admission and readmission symbol common long term care.
And we do not anticipate a huge number of move outs.
From an economy portfolio.
Okay.
Just going back on I guess.
Todd.
How should we think about kind of the runway.
In the near term.
On the cost side.
Yeah.
Alright, Hi, Joanne.
<unk> long term care versus retirements, so while we have significant staffing shortages and therefore pressure on staffing costs, particularly in long term care side. Most of those roles are funded through the government.
And on an earlier discussions.
Is that because those are funded at the impact on NOI Walter It's Tom.
It's not going to be.
Poorly.
Changing going into 2020.
So when we look at retirement, we do think that with omicron kind of fighting that we would be able to utilize less.
And as we see our stock also coming back to work that those costs could moderate.
Okay got it.
Cool.
And maybe just one last one for me.
But going back on the development side.
Yes.
Some of the new project development.
Thank you, ladies and gentlemen, just given that with rising development costs right now and I guess.
<unk>.
Thinking about I guess this was brought up earlier in terms of timing, but why is that.
James.
What youre thinking in terms of one third and whatnot.
Yes for sure we are seeing rising development.
Cost we are not at a stage where it.
This has given us a pause just yet but.
They are significant changes and escalation and Theres also timing issues.
We are hearing from other companies, where the projects are delayed because of the order windows and even though it will be there for another four months. So we cant really open a building without them. So at this stage.
Seeing rising escalation costs, we see supply chain issues, but not enough for us to take a considerable cost.
Got it.
Good luck.
That's it from me. Thank you ill turn it back.
Thank you.
Thank you.
Our next question comes from the line of Tao Li with National Bank.
Alright, good morning.
Hi, good morning.
In terms of the.
You guys made some investments in marketing over the.
Of course of the pandemic I'm thinking about call center investments that kind of stuff.
Ed.
To this we sort of haven't seen.
<unk>.
These kind of that's.
Kind of occupancy performance those lift that Youre seeing right now could you just talk a bit about.
I recognize the pandemic like that things were depressed and that's a bit of a rebound out of the pandemic two but I'm. Just wondering if you can talk a little bit about how you are leasing and marketing function functions are working now versus pre pandemic.
And what some of the differences are that you are seeing right now.
Thank you for that Tom.
I will not get into the detail of that because for US. We think that is proprietary to us on the changes we've made and the things we're doing different.
I would say is that there is a big focus on community by community rather than the overall because we do have.
Different kind of buildings in different markets.
And really for us.
In addition to sales and marketing is the whole review of our platform, which rose to a speed up because.
We will not going after the name change we were going after what do we stand for as a retirement platform and that prompted a name change. So there is significant teams were working on in Tromso.
Increasing the resident experience moving to personalization more choices, how do we become a bigger part of the community.
For us those are all a bit of a mix of all of those things and hobbies, how do we go to market with those how do we sell part of our local people solid for.
For us that that's what we're finding is b.
That has been good for us rather than just one thing making a difference.
Okay.
Sorry, just going back before there was a couple of questions ago.
You have been offering some like half month incentives and stuff like that selectively or not.
Those are what I would what I meant to say is that we offer to usual incentives time to time, so usually a half a month's rent will be something unusual debt retirement homes would offer.
Certain markets. So our view has not changed.
In 2020, we offered up some bigger incentives for a short period of time, but we are not an investment spend.
Got it okay.
And then you highlighted the north Bay projects that Youre getting underway.
Im just wondering like for us to understand the economics like.
You are picking up.
<unk>.
Some beds on that say look can you give us a sense of.
What the uplift in NOI off that is.
Adding the new beds.
Still trying to struggle I'm still struggling a bit with like thinking about the redevelopment projects right of how to think about the NOI that you are replacing and what the potential growth opportunity is when you're adding some adding some new beds here for sure.
Thats a great question.
You really have to look at it from two.
Two different ways. When you look at your financial obviously, there's a huge operational impact and the huge resident impact of having a new building. So the first one is NOI and we have one employee long term care beds and 50 year old buildings. They only have a small number of preferred that's 110% where you can charge, an extra $80 $90 because in <unk> homes.
Can only charter certain amount of time.
The amount of $1 four up for the private bank.
60 bed long term care home brand New you will have you will have 60% private events, which is instead of having 15, we have close to 96 now. So there are incremental NOI because of that there is an incremental NOI NOI because of the 12 additional beds.
There is even a bigger impact at <unk> level, because you have a construction funding from the government that flows into us.
The increase in our construction funding or at least minimizing the loss of some of those construction fundings are coming off and the last one really is.
Is the quality of the assets, we have NOI coming from our <unk> home.
The market, we looked at it differently. So it might still be getting a dollar but it has a much higher cap rate versus the dollar from a brand new long term care home.
Go to the newest standard, which we expect those cap rates to be like a 665% or so so for us it is.
Really a player but all of those things when it comes to financial is just mall NOI increase.
Okay.
And.
Youre going to close this deal with the spring this year.
And you would traditionally grown.
The retirement portfolio.
The acquisition of generally stabilized stabilized properties.
I'm just wondering as the long term care redevelopment.
Projects get Greenlit.
Assuming the market cooperates, yes, you could grow though you could grow stabilize you could grow through through acquisition and hopefully issue equity at attractive prices to be able to finance that and keep your balance sheet in check is that how we should be expecting you to grow or.
Are you potentially do you start looking maybe more.
Doing more development of retirement homes as well like.
How do you continue to.
To build momentum in the retiring in the growth of the retirement platform, while you've got this <unk>.
Process you have to go through on the long term care side.
Sure.
Our view is the development.
For our company shouldnt be more than 5% to 10% of our asset base of call. It two 5 billion.
So anywhere from 125 to.
$200 million of development and we do have significant amount of development that we wanted to do in long term care and in some cases, we would add requirements such as the one in Frankfurt.
Our cost to long term care home they will do the development with it but not separately. So unless there are specific regions, where we are at and Densification. For example, the four sites. We are buying has some excess land. So we can add some more suites. We have a couple of other at a time in homes that are owned that we are looking at and Densification opportunities. So we will look at those.
Developing perspective for retirement homes, but mostly.
Our development is going to be focused on long term care or retirement attached to it.
In our retirement growth is when we're really come organically and second through acquisitions.
And do you think with the asset mix that you've got you're going to be able to compete.
Compete for retirement properties at cap rates continue to trend in the direction of trending.
We really like the mix of both soft long compared undetermined wanted to provide stability of cash flow, which is reflected in our debt trading and another one that has the growth aspects built into it from retirement. So we are very comfortable how we are how we are structured in fact, we don't want to be tilting to one side from <unk>.
So for us our focus.
And <unk> focus is.
Diversified company between both long term care and determined and for diversity for us it means anywhere.
There is no sign of business less than one turn or so.
Long term care becomes 60% that will be just fine by us and have a common become 60%. That's just fine by us. It's just a moment in time.
And given that.
As an operating business et cetera.
Youre going to be integrating a fairly chunky acquisition this year and green letting a lot of.
Development projects.
Do you have like the rate.
Do you have enough management resources to continue to function at this pace.
So that was a very.
<unk>.
I think for us to consider and for example in 2021.
There was a period of time when Army Corps, where COVID-19 was not that severe and there were other acquisition opportunities in 2021, but we decided that that was not the time for us our first focus was.
Really starting when I came into the role in June of 2020 is to ensure that we first.
Come out of crisis, so from from our House view. So that was our first focus how do we ensure team members and residents are taken care off focus right. Afterwards to ensure that we have the right team at the senior executive team and the leadership level. So we did that then the focus change to our platform.
Because we are an operating business as you said and you.
You can't really be adding things to our platform, which youre not comfortable with so we changed it made significant changes to our platform both retirement and long term care would be launched.
Shortly so we do feel quite optimistic in our growth and the way we have structured our teams is.
People, who are focused on organic operations, let's call. It that you don't really want.
Their focus to be on acquisition. So we are quite diligent in keeping those teams different.
We have to stretch some people if they're looking for opportunities to learn different things, but we want to be very diligent to make sure that we're not focusing on acquisitions.
At the detriment of our organic growth because for us that is more important.
And then acquisitions.
Okay. That's great. Thanks, guys.
Thank you.
Thank you.
And as a reminder to ask a question. Please press star one on your telephone.
Our next question comes from the line of <unk> <unk> with RBC capital markets.
Hi, everyone. Good morning, just really one question for me I realize this might be tough just given all the volatility in the maybe the visibility issues and funding.
But are you anticipating any further recoveries in long term care pandemic costs this year.
Your baseline assumption for 2022 to effectively assume that the $17 million of retroactive recoveries.
Received last year.
Basically just strip that out.
Hi, Tommy.
Yes, So 2021 was an unusual year.
<unk> was related to our 2020 and as you pointed out.
We received $17 million of retroactive pandemic funding relating to 2020.
Thanks, Dave.
It is difficult to say, if we would expect additional retroactive funding into 2022, because we are entering into a new funding year.
However, the government has been very supportive of the sector and so it is difficult to predict whether we would expect anything more than that.
And to be prudent and probably not as accurate.
Note that other than we do expect still some timing differences between our pandemic expenses versus the timing of any related pandemic funding.
Okay.
Maybe just a follow up the how much is left.
To be recovered in terms of maybe what you've spent over the last couple of years I don't know if its still.
Any catch up blending from 2020, but.
What would you say the estimated what has not been recovered.
So if we look at 2021, our total unfunded pandemic expenses between retirement and long compared with about $10 million.
And.
Three quarters of that was in long term care.
And requirement then we probably don't want to make too much.
Much pandemic funding related to that and if you look at the long term care unfunded.
As of $8 million again, it's difficult to say, because we're still going through the process.
And.
That would be the amount.
For 2020.
And as we entered into Omnicom that when we look at Q4 long term care pandemic expenses versus Q3.
We did see some slight moderation however in the second half of December It did go up and it is still early to say.
What those expenses would be for Q1.
And how.
However, the government has announced.
Announced additional funding support.
Great.
That's it for me that's helpful. Thanks, Karen.
Thanks, Amit.
And I'm showing no further questions so with that I'll turn the call back over to Mr. <unk> for any further remarks. Thank you Andrew and thank you everyone for joining our call on behalf of our management team and our board of directors on but thank you for your continued support and look forward to speaking to you in the next quarter. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.