Q3 2022 Chartwell Retirement Residences Earnings Call
All participants please continue to standby the conference will begin momentarily. Once again. Please continue to standby we thank you for your patience.
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All participants please standby your conference is now ready to begin.
Good morning, ladies and gentlemen.
Welcome to the Chartwell retirement residences Q3, 2022 financial results conference call.
I would now like turn the meeting over to the CEO Rod Bulgar ski.
Please go ahead.
Thank you Paul.
Good morning, and thank you for joining US today, there is a slide presentation to accompany this conference call available on our website at <unk> Dot com under the Investor Relations tab.
Turning me are Karen Sullivan, our President and Chief operating Officer, Sherry Harris, Chief Financial Officer, Jonathan Blackout, Chief investment and Chief Legal Officer.
Before we begin I direct you to the cautionary statements on slide two because during this call. We will make statements containing forward looking information and non-GAAP and other financial measures.
Our MD&A and other securities filings contain information about the assumptions risks and uncertainties inherent in such forward looking statements and details of such non-GAAP and other financial matters.
More specifically I direct you to the disclosures in our 2021 MD&A under the heading <unk> 2022 outlook and COVID-19 business impacts and related risks and in our Q1 Q2, and Q3 2022 N DNA as under the heading 2022 hours for a discussion of risks and uncertainties relating to the pandemic and its all in.
Going effect on our business.
These documents can be found on our website or at SEDAR Dot com.
Turning to slide three I believe the third quarter of 2022 marks a turning point in our recovery from the impact of this long lasting and unfortunately still ongoing pandemic. It's.
This recovery has not yet being as robust as we had hoped for it's been slow laborers and uneven.
Having said that we are making progress.
Our same property retirement occupancy increased 60 basis points in Q3 compared to Q2 of this year with another 40 basis points increase in October from April to September our residences in 11 of our top 15 markets gained 280 basis points of occupancy.
Residences in for most competitive markets auto would do what I'm region Calgary in Quebec City continues to experience occupancy declined 130 basis points.
While November and December occupancy forecast is flat based on the known leases and notices on hand, we have consistently outperformed our forecast due to mid months move ins not accounted in the current forecast our initial contacts and personalized tours, leading sales indicators continue to trend positively.
There is no question that the economic environment is challenging with rising inflation and interest rates slowdown in the housing sales declining housing prices and the threat of a potential recession.
We believe our business can withstand these challenges as the majority of our move ins are needs driven people. We serve have accumulated significant equity in their primary residences over decades living there. So we've been substantial declines in house prices would leave them with sufficient capital to finance their access to retirement living.
In addition, seniors are likely more conservative investors and now they are making much better returns from their investments in interest bearing accounts and instruments like G. I see it on T. Bills also enhancing their ability to finance our retirement living.
In the last three months I visited over 30 of our residents has shrunk back to Alberta meeting with our residents managers and staff. These visits reinforce my confidence that we are on the right path first and foremost our dedicated teams are fully committed to delivering exceptional experiences to their residents even when some residents who are.
Their concerns to me always always they took time to recognize and praised our people who serve them care for them every day.
Second it was very clear to me that our focus on occupancy recovery and growth is shared by everyone at Chartwell. Our residents as teams know what they need to do and how to do it using this opportunity I want to give a shot out to our team of Charleston, Albert who last week celebrated their achievement of 100% occupancy they problem.
They would do it when I saw them in August and it did not take them very long to deliver.
Last but not least I'm, calling for that that operationally, we have all ingredients motivated people deep expertise innovative strategies and processes in place to accelerate our recovery and growth.
There are two key priorities that our organization has recover occupancy and solve staffing challenges. Our teams are working collaboratively and effectively on delivering on these priorities.
I will now turn this call to Karen to talk about specifics of this work Karen Thanks a lot.
Moving to slide four in September we had a sales call blips encouraging prospects to attend our September National Open House and take advantage of a variety of move in offers specifically chosen by our homes from a toolkit of options to meet their unique needs.
This event, which also included VIP experiences for our local business partners to familiarize them with our products and services to promote to their clients was highly successful with over a thousand new prospects based on this success and in an effort to continue to encourage prospects to come to out to our residences.
We decided to add another two day open house event in November .
We have coincide this with an upgrade to our customer relationship management system that was launched this week our sales force across the country is not only excited about the new features of the system, but they're also using this as an opportunity to test that with these new features by contacting prospects and their database to attend the November I was open.
In house or that we expect that this strategy, which also includes enhanced commissions for our retirement living consultants.
So stuffed with move ins in Q1 2023.
Our agile and adaptable our marketing team put together a multichannel campaign to support the open house, including over a million direct marketing invitations delivered in our communities across the country overall, our marketing efforts, which include organic and paid web search social media marketing radio T V newsprint.
Billboards and bus shelter ads have shifted towards individual residences and regional advertising from generic brand awareness campaigns.
Local campaigns.
<unk> features service offerings pricing and promotions available at specific residences.
Our advertising campaigns are designed to drive traffic traffic to our website, which saw growth in visits up over 25% over the past three months and a 56% increase year over year.
We're also expanding our relationship with paid referrals in Quebec and have recruited additional retirement living consultants in our larger properties as well as corporately to assist residences that have RLC vacancies or large volumes our volume of activities.
We now have 12 business development managers assigned to geographic clusters of residents, who are responsible for increasing referrals brand awareness and grass roots business development, including interacting with hospital discharge planners within their regions.
D M referrals have the highest closing ratio after resident referrals and have steadily increased over the last three years.
Just about mint referrals continually account for a significant portion of our overall prospect traffic and even higher portion of our permanent business.
As part of our agile and scalable approach to operations, we've streamlined our brand standards and corporate processes to become more responsive to the needs of our residences.
We also completed a reorganization of our Quebec operations platform in order to provide additional focus on sales efforts as well as to repossessions specific homes in their local markets. This is on the heels of a similar reorganization in Ontario in Q2.
We are also in the final stages of developing and operating model for our smaller properties to improve personalization of services to residents in a more cost effective manner, which will be rolled out to approximately 20 homes throughout 2023.
Turning to slide five our other main focus has been and will continue to be recruitment and retention of staff and controlling the use of staffing agency workers.
This latter.
The latter included a comprehensive RFP to reduce the number of agencies. We are working with in Ontario from 30 agencies, which accounted for 80% of our Ontario spend to just nine agencies. This has allowed us to negotiate better rates reduce surge pricing and introduce standard contract language, including a formula to move into.
Employee from agency status to full time employment.
Their process is now underway in Quebec.
We have also introduced new accountability processes for utilizing agency workers in our homes.
We've expanded our recruitment team by adding four professional recruiters to support our retirement residences, including a dedicated experienced recruiter in Quebec City, where we have our highest agency use we continue to hold a number of hiring events in key locations across the country and our marketing team is assisting us with unemployment marketing.
Campaign, which includes expanded digital marketing outreach for care and dietary rules.
We're using new tools for our online interviewing and shift call out software and have revamped our postings for frontline positions in order to ensure competitive compensation in our homes, where appropriate we are working with our employees and their union representatives on compensation enhancements.
Unlike our resident referral program some of our best New hires come from recommendations from our current staff to date, we have hired 300, new staff as a result of our paid employee referral program. We're now taking a page from our sales team and holding a hiring blitz in the coming months with enhanced payments for employee referrals that join us by the end of Q1.
Other recruitment efforts include the development of programs and partnerships to attract students new immigrants in people with special needs as well as investigating a foreign workers program. Finally, we're also focused on retaining our employees, which starts with making day, one and the overall orientation process welcoming effective.
And enjoyable.
I would like to turn it over to Sherri to discuss our financial results. Thank.
Thank you Karen.
As shown on slide six in Q3 2022, net income was $4 3 million compared to 0.1 million in Q3 2021.
We use groupings of properties to evaluate and monitor our financial and operating performance and we believe that this additional disclosure enhances the ability to understand and assess our results of operations and particularly to compare such results from period to period.
In Q3, 2022, we changed our portfolio groupings to present separately our properties acquired subsequent to January one of the preceding fiscal year and development properties not yet achieving stabilization by January one of the preceding year from properties that we have definitive plans to either.
Sal reposition or otherwise make significant capacity changes due within the next year.
As the financial and operating performance trends in these two types of properties very.
The group's now presented in our MD&A are as follows.
Acquisitions and development dispositions repositioning and other and same property with same property now only our retirement operations.
Further details of the composition of our portfolio can be found in our Q3 MD&A.
For Q3, 2022 F F O from continuing operations was $28 3 million or 12 cents per unit compared to $28 8 million or 13 cents per unit in Q3 2021.
The decrease in F. F O from continuing operations was primarily due to higher G&A expenses of $1 6 million due to higher severance cloud based information technology system implementations education, and travel expenses, partially offset by lower performance based compensation expense.
We also had higher finance costs of $1 5 million.
This was offset by contributions from our continuing operations NOI, which increased $2 $3 million. This is comprised of changes as follows higher adjusted NOI of $4 6 million due to contributions from our acquisitions and development portfolio.
Lower same property adjusted NOI of 0.5 million and lower NOI of $1 8 million from our dispositions repositioning and other portfolio.
Total F. F O was $31 9 million or 13 cents per unit for Q3, 2022, compared to $33 9 million or 15 cents per unit in Q3, 2021.
Long term care discontinued operations contributed one cent per unit to total F. F O for Q3 2022.
A decrease of one cent per unit compared to Q3 2021 due to lower preferred accommodation revenue timing.
Timing of blow through funding envelope expenditures and incremental pandemic expense funding, which was partially offset by higher retirement of accommodation and ancillary revenue.
Slide seven summarizes our same property operating platforms results.
Our same property adjusted NOI decreased by zero point $5 million or one 1% in Q3 2022 compared to Q3 2021 primarily due to the following factors.
We had hired and that pandemic expenses of $3 7 million.
Due to lower government reimbursement as most government programs for retirement residences have come to an end.
In addition, we continue to have elevated pandemic expenses due to increased agency staffing used to augment vacancies due to isolation requirements and continued staff shortages in select markets in Ontario, and Quebec.
We also had higher utilities and food expenses in Q3 2022.
Our same property revenue growth was $7 3 million or four 8% primarily due to higher revenue from regular annual end market based rental and service rate increases combined with higher occupancy.
Same property occupancy was 77, 6% for Q3 2022 compared to 77, 1% for Q3 2021.
Or an increase of 0.5 percentage points or western platform achieved strong growth of three four percentage points, and Ontario increased 0.9 percentage points.
Tibet, which had continued to decline through 2021 and into the spring of 2022 decreased one five percentage points.
Compared to Q3, 2021 move ins were higher by 6% and move outs were lower by three 3%.
All platforms experienced occupancy gains in Q3 2022 compared to Q2 2022.
Turning to slide eight you will see our monthly same property retirement occupancies.
Same property occupancy increased to 77, 7%, whereas 0.2 percentage points in September 'twenty two.
And a further 0.4 percentage point gain in seven to 78, 1% in October of 2022.
In November and December 2020 to occupancy based on known leases and notices on hand are forecasted to be higher than October 2022 by 0.1 percentage points we.
We have consistently experienced mid month move in particularly in our Ontario platform. These mid month move ins are not accounted for in our forecast and May result in better than currently forecasted occupancy over the next two months.
Moving on to slide nine our trend on retirement operations snapped pandemic expenses remained elevated in part due to significantly reduced to get government support.
Not pandemic expenses relate to temporary costs associated with restrictions or requirements imposed by public health authorities on residences with outbreaks that.
That typically results in additional staffing requirements, including agency staffing to fill some of these gaps along with additional PPE costs.
During the course of the pandemic. These expenses have ranged from a peak of $5 million per month in the early days too.
Two 0.9 million per month in the fall of 2021 prior to the OMA omicron driven pandemic waves.
Currently these expenses are trending at one 5 million per month, and we estimate that for Q4 of 2022, our pandemic expenses could range from $3 million to $5 million for the quarter, depending on outbreak activity and labor markets.
As Karen outlined in her remarks, we continue to focus on reducing our reliance on agencies through our staffing optimization and recruitment initiatives as well as new technology solutions.
We expect G&A for Q4, 'twenty to 'twenty, two will be approximately 10 million to $11 million.
Turning to slide 10.
Our mortgage maturities remain well staggered with an average term to maturity of six two years at September 30 of 2022 at September 30 in 2022 we had $30 6 million in remaining mortgage maturities in 2022.
Subsequent to September 30 of 2022, we refinanced $6 6 million dollar mortgage with seeming to see insured debt bearing interest at 4.28 per cent and assure them to maturity of five years as of November nine 2022, the remaining maturities of 24 million are expected to be refinanced in the normal course.
10 year C N H the insured mortgage rates are estimated at approximately four 5% and five year conventional mortgage financing is available.
6% presently.
At November 19, 2022 liquidity amounted to $182 million, which included 25 million of cash and cash equivalents and $157 5 million of borrowing capacity on our credit facilities.
In addition, our share of cash and cash equivalents held at our equity accounted J DS was $11 million I will now turn the call back to flat from it.
Thank you Sherry.
Throughout the pandemic, we prioritized the needs of our residents and support for our employees why balancing interests of our stakeholders, including unit holders and chose to maintain our distributions the.
The impact of the pandemic on our Occupancies N O I S. F. On cash flows has been significant as a result, our current cash flow from operating activity does not fully cover our finance cost capital investments and distributions.
We believe that operational sales marketing and portfolio optimization strategies, we have put in place will result in improvements in our Occupancies in cash flows in 2023 and beyond we believe that with the available capacity on our credit facilities access to CMA seen short in other financing sources and they expected proceeds from the previously announced sale.
Of assets are in D C and our Ontario long term care platform, we have sufficient liquidity to finance, our planned business activities and distributions.
The lessons, we learned over the last two and a half years.
Invaluable we learned that we must be bolder in our operating strategies and faster and execution not only in crisis, but always we learned the think that served us well during the peak of the pandemic decision, making centralized strategies and broad corporate support provided to our residents is teams must be better balanced with stronger in power.
Element and autonomy of our people closest to the customer a resident's managers in front of the lifestyle.
Applying our learnings from the pandemic, yes, we are building on the strength of our management platform to create an even more agile and scalable organisation, which can successfully support growth of our portfolio of the future.
These efforts are already delivering results Karen provided you with some examples of this that agility I want to highlight another one our team has just rolled out our new customer relationships management system, you already see our EM normally of Cherwell a system implementation of this scale would take six to 12 months our multidisciplinary project.
Team delivered this tremendous value to the business in less than four months, we're clearly putting our learnings to good use.
Our real estate group has refocused their efforts on putting in place concrete portfolio optimization and asset management strategies, our decision to transition, our Ontario long term care portfolio into British Columbia long term care homes are examples of that repositioning and potential divestiture plans for four other residences.
With 625 suites are being executed and several other properties are currently under review for the development and execution of property specific strategies, which may include service model changes capital upgrades asset class repositioning or dispositions.
The rise in construction costs and uncertainty created by the pandemic resulted in a slowdown in our development and acquisition activities. In recent years, we believe that our national management platform will continue to be our competitive advantage in pursuing new growth opportunities through acquisitions and development in the future we have a number of potential acquisition opportunities.
Our newly developed residents is through our partnership with basketball in Quebec, and continue to evaluate a number of development opportunities on the land we control.
We are working to build new relationships with reputable developers and investors to avail ourselves of future growth opportunities that are complementary to our portfolio.
We would now be pleased to answer your questions.
Paul.
Thank you Mr. Vollmer scheme, we will now take questions from the telephone lines that you will have a question and you're using a speaker phone. Please lift the handset before making a selection.
A question. Please press star one on the devices keypad.
There will be a brief pause while the participants register.
Thank you for your patience.
Okay.
The first question is from Jonathan culture from T. D Securities. Please go ahead.
Your line is open.
Good morning.
Mike.
Just.
Starting on the operations.
In your MD&A, where you talked about.
Western Canada not being.
It's impacted with with regard to agencies, such as Ontario, Quebec could you maybe just.
Tell us the difference between like why why Western Canada isn't being a good market.
I think Ah Ah.
A piece of it has to do with how much care we provide.
We do have a more independent IL properties. So one of the hardest types of employees to get our our care staff and nurses and nurses are the most expensive so that would that would have something to do with it and I think it also depends on.
And the location of where our homes or so.
You know, Quebec City as an example was struggling even before the pandemic so.
It is our most difficult.
City for finding stuff.
And that's just been a historical norm.
Yeah, I mean, I don't want to suggest it's been going on forever, but for sure for a couple of years, even before the pandemic yes.
Okay, and then in the fall.
Our weaker markets out of 15 that you.
You cited.
First so glad when you said it was plus 280 basis points I Miss that's from since the end of Q1 or year to date a good start.
It was from April to September .
Okay, and what is the sort of delta in occupancy between the sort of 11.
Other markets in the core weaker markets.
We'll have to get back to you Jonathan cause that it it varies market to market.
But it's substantial.
Okay, I think if I recall last quarter I think the.
The weaker markets were in the sixties.
We're well into the Eighty's. So that's all good.
Right Yep Yep Okay.
Okay, and then lastly for me on the can you just remind us what you expect.
The LTC portfolio sale to close in and your expected net.
Net proceeds from that.
We still expect both of those transactions to close more or less.
We announced so the BC LTC fail.
[noise] is expected to close this year and the Ontario, LTC sales expected to close in the first half of next year.
And then combined approaches.
Including Valley Cliff sale that we'll have a probably Q3 of next year is 330, 265.8, plus D C plus D C.
334.
Yes.
Okay. Thanks, I'll turn it back.
Thank you.
The next question is from Tal Woolley from National Bank Financial. Please go ahead. Your line is open.
Hi, good morning, everyone Alright, though.
Just don't meet our service price hike that was.
Implemented in August was there any significant pushback from tenants or anyone decides to change service packages.
As a result.
No I think the current environment and in terms of what our residents would be.
Hearing on the news and talking about gives us Ah you know.
The opportunity to be able to have increases that are maybe higher than typical why it has gone quite.
Quite well actually.
Okay.
And then just thinking about the next couple of quarters. You know it seems like you know we're going to have a flu season.
This year and obviously, there was oh with upgrades and you know been accelerating a little bit.
Should we expect maybe like a little bit more in return so those sort of more normal seasonality you would have seen.
Pre COVID-19.
You know as we move through the winter.
Yeah, I I think historically as you know we've always had some winter depth in some years, it's more some years, it's less in terms of the occupancy changes and this is primarily because fewer people are looking for retirement accommodation during winter months, because the weather is not very conducive to that Karen spoke about a number.
Of initiatives that we've put in place to try to change that pattern and we do believe that there is pent up demand in the system majority of our move ins are me, it's driven and our hope that between that pent up demand and the initiatives that we're putting in place to help people to make that move.
We should see if there is a dip then it's smaller than what we've historically seen.
Okay.
Okay.
Sort of a broader question, obviously hindsight is 2020.
You know in your preamble, you sort of discuss sort of debate.
Slower grind higher occupancy than maybe you would've liked to seen.
Go back and looks like you know.
Now is there anything.
Yeah.
Did you do differently.
Over the last year since the market started to open up again.
I think the initiatives that again, Kevin spoke about and I touched on them those are the ones that exactly what their iphones could have we done them earlier, maybe maybe not that's really hard to talk about this with a 2020 hindsight I do believe that what we have in place now are putting in place now and it's going to.
Help us to recover this occupancy faster and move towards golf and getting to our targets of 95% and by the way 95% is not the end of it the real target is for every call them to be at 100% with a long waiting list and our people are driving towards that the example, I gave of Charleston and Albert.
As an example of one of those.
Okay and then.
You know in your press release, you had sort of mentioned four things you know that you were evaluating with gene Youre looking at service model changes capital upgrades changes in us maybe some more dispositions.
I'm just wondering about the service model changes and the changes in use.
Just add a little more detail about what you might be contemplating there.
Sure So the first.
Why do you imagine was targeted capital investments and again I go back to Charleston in Alberta that I mentioned Oh. This called out two times. This will be the third time, we've actually put quite a bit of capital renovating that building in the last couple of years and we now are seeing resolves and it running at full occupancy. So these targeted capital investments, we should've done quite.
A bit over the years and will continue to do part of that analysis that the properties are going through would include additional of that capital to upgrade homes.
Service model changes includes anything from Karen spoke about small homes strategies that we're implementing where we're going to target to deliver kind of more intimate personalized services to our residents and at a more cost effective manner that is more conducive to the sizes of these homes.
We're looking at some potential conversions to apartments and some of them are homes four phases of the homes that are on and large campuses and the other change might be the further implementation of the care services that we might not have everywhere just yet, but this care assist programs that we spoke about it for a couple of quarters now to you that care.
His team put together is really making a difference in terms of our ability to serve our residents as needs them when they live with US and also attract new ones, who have additional care needs and we do believe that these needs will continue to grow as there's continues to be a shortage of long term care beds across the country and the hospitals are looking to.
To you know free up their beds for people, who need hospital type of care.
So those service model changes is what we mean when we talk about that part and alternative users I just mentioned to you it could be conversions to other uses of the properties that we consider non core that we either can dispose as retirement residences or dispose as an alternative use or potentially redevelop answer.
Right.
Okay. That's great. Thank you.
Thank you.
The next question is from months Hu <unk> from Scotiabank. Please go ahead. Your line is open.
Thank you and good morning.
He said.
So let me get expensive when agencies thoughtful.
I think Joe you mentioned, something like $3 million to $5 million in Q4.
But just somewhat similar to Q3.
What do you see the first half of the next several also look very similar in both spend and it expenses.
I think it could be himanshu and in terms of.
Just making sure that we have the resources in place to deliver operationally in that flu outbreak season.
Okay, so and like in terms of any expectation of NOI margin recovery.
We should've been a pushout the more like second half of the Oh.
Before.
And maybe in a related question is even if I add these horrible half two high minimum dull.
Two N y in this quarter.
Imagine its total would be more likely.
So so basically the question is that even if this expenses goes I mean, how do you get back to even need to do better on margin side.
Well, it's a function of occupancy right that every incremental unit that we rent the revenue from that falls almost fully to the to the bottom line. Once you pass the costs over the threshold and at occupancy was 77% were pretty close to that where you could start actually seeing the incremental revenues just go on to the bottom.
So that will drive margins back up.
Clearly the cost escalation than we have seen in the last year in particular.
Agency costs contributing to that a lot as well.
So as these costs are taken out of the system again through all of the strategies that parents spoke to you about on the recruitment side as well that will add to the improving margins and then the other component of this is a revenue growth I mean, clearly it costs us more to deliver services to our residents and as Karen spoke there was a good level.
My understanding from the residents about that and in my remarks, I talked to you about how much I appreciate that our staff efforts to deliver that that are delivering services to them and so there.
There will be a probably a bit higher than our usual rent increases.
Two I rather than end market rates over time as our occupancy recovers. So all of these things will over time contributed to improvements in margins.
Got it fair enough.
Where are your Occupancies are key.
Maybe let's talk about occupancy so occupancy top 11 markets that look more like 280 basis point, though as you previously mentioned.
Tom I think you had talked to.
September so was it in line or above or below your internal expectations.
Well, we all wanted everything to move a lot faster and a lot higher. So I think you can maybe sense from this call and discussions that we had before that we are looking to drive our occupancy faster and.
Pretty good numbers to it two out of the 80 basis points and since April to September we're looking to do more and I think the environment out there with the pent up demand the growth of seniors population the slower construction starts and all the strategies that can spoke about and our.
Are people out there are being focused on this occupancy recovery like they've never been before I think will help us together.
Got it okay and I do a lot in your prepared remarks, you did mention about distributions.
And obviously you have the sufficient liquidity to play as a team.
Are you expecting a certain level of occupancy gains next year, I mean is that tied to any sort of distribution strategy.
Well for sure I mean, we are watching our progress on the recovery. Our occupancies are cash flows the liquidity situation and that that certainly drives the decisions on distributions that the board makes we looked at it quarterly we'll continue to do so our expectation is that as our occupancies continue to recover.
With the changes that we're gonna be making to our staffing levels into homes and a reduction of agency costs that we'll be able to sustain the distributions and continue going down the path of recovery in occupancy and cash flow growth.
Got it Okay fair enough.
And then the rollout again, you also mentioned about your portfolio optimization strategy, which could include potential Douglas Sherk program.
Question is how advanced you are in that conversation. So I mean, it is just starting.
Have you identified southern properties are basically getting a sense that when or how should we expect some kind of mix would you shouldn't call them digitally.
Well they the long term care dispositions, that's clearly been announced and that's that's ongoing the other properties that we've identified that there is four properties that we moved into this repositioning disposition and other buckets. Some of them may be sold as is some of them will require additional efforts there was one property.
We're just renovating and upgrading and changing capacity, while we're doing that and the analysis of the rest of the portfolio continues in depth to deliver to develop specific strategies for specific assets. So these are a bit too early to talk about just that.
Sure.
Would you look to exit some markets as well.
It's more of a property by property basis, So the program.
So we're getting a lot more sophisticated in how we're looking at our portfolio again early days, we are analyzing property specific situation right. Now we will also expand this analysis to a broader market at this point of time, there is no intent to exit any specific markets.
Oh. Thank you. Thank you guys.
But.
Thank you.
Once again as a reminder, please press star one on your devices keypad. If you have a question.
The next question is from Toni beer from RBC capital markets. Please go ahead. Your line is open.
Thanks, Good morning.
You mentioned Q3 marked a turning point and your remarks can you maybe just.
Expand on that I mean is it based on occupancy.
Maybe not so much on margins, but have a phone or some other metrics that you were looking at.
I'm talking about the occupancy primarily but sort of the cash flow is also very high on the agenda and my comments were driven by a couple of factors. One is we began to see more.
Tangible I would say occupancy recovery in Q3, we continue seeing very good traction in our leading indicators and I think this is a direct result of the strategies that Ken spoke about that we might have talked to you about in some ways before now they're firmly in place or.
A lot of them are firmly in place and we believe that they are producing results. So my comments are coming from from those three areas.
Got it.
Just on the use of more I guess debate.
Referrals and Quebec, what sort of impact do you think this could have.
Next year in <unk>.
And I'm just curious if you've used them in the past and what success you've had.
The paid referrals in Quebec that Carol spoke about it wasn't just cut back it was on the employee side I think yeah I know this is.
Paid referrals for residents and we have used them in the past but.
I'm always a bit sparingly and more so for needs based on.
Referrals and we're more open now to using them a little bit more broadly for sure.
And sorry, what was that on sort of using these peripheral agencies or somewhat recommend referrals.
Their agencies.
Alright.
Yeah resident referral resident referrals are resident here for agency and they you then pay typically.
Months' rent for that.
Got it okay.
And then just on the dispositions.
The dispositions that you mentioned the four properties.
Which markets are those properties in and I, just would be occupancy would be in that sort of 60% range and then I guess within that that new line item that you've disclosed.
These these are primarily Ontario properties that occupancies will be a very low in these properties right now so there are being marketed.
Marketed either as existing user maybe alternative use.
And is this something that may transact.
In your mind sort of in the next within the next 12 months or possibly even sooner.
Within the next 12 months, yes.
Okay.
And then just on the on the basketball agreements.
Some of the language, there and I guess a couple of more couple.
More properties are stabilized.
Are you expecting to actually acquire any of these properties in the next few quarters.
We we continue conversations with our partner on.
All of these particular properties and at this point of time I cannot give you the timeline for acquisition.
But if you did what would sort of be the well I guess you do have you know good.
Proceeds coming back on the dispositions I presume that would be the primary source of funding for those.
Yes.
Yep.
Yeah.
And then just lastly on the B the Covenant Amendment that you have in place where they've done. So far. This this year are those expected to be extended into 2023.
Many of those are already extended to the end of 2023.
Yeah.
Yeah.
Okay.
Are you anticipating any other covenants that would need to be adjusted.
Adjusted.
I mean, there's a need and there is a sort of protection just in case and so that there may be additional covenant protection not that we are based on our forecast would require it but just to be safe. So that's we're not calling them and close to those we might have some additional extensions and additional amendments we've been working.
Very closely with our lenders since there.
I'm very clear on the path that we're on and our projections and where we think we're going to get to and that closer relationships is very positive and continuous and we're grateful to our partners for being understanding.
Got it thanks, very much I'll turn it back.
Thank you.
There are no further questions registered at this time I will turn the call back to Mr volatile dogs ski.
Yeah.
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Yeah.