Q1 2025 Chartwell Retirement Residences Earnings Call
Unknown Executive: This conference is being recorded. Cette conférence est enregistrée.
This conference is being recorded.
The homes that don't have as you say.
Unknown Executive: All participants, please stand by.
Speaker Change: All participants please standby your conference is ready to begin good morning, ladies and gentlemen, and welcome to the Chartwell retirement residence with Q1 2025 financial results Conference call I would now like to turn the meeting over to the CEO of <unk>. Please go ahead Sir.
Unknown Executive: Your conference is ready to begin.
Vlad Volodarski: Good morning, ladies and gentlemen, and welcome to the Chartwell Retirement Residences Q1 2025 Financial Results Conference Call.
Vlad Volodarski: I would now like to turn the meeting over to the CEO, Vlad Volodarski. Please go ahead, sir. Thank you, Maud.
Speaker Change: Thank you Mark 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.
Vlad Volodarski: Good morning, and thank you for joining us today.
Vlad Volodarski: There is a slide presentation to accompany this conference call available on our website at chartwell.com under the Investor Relations tab.
Vlad Volodarski: Joining me are Karen Sullivan, President and Chief Operating Officer, Jeffrey Brown, Chief Financial Officer, and Jonathan Boulakia, Chief Investment Officer and Chief Legal Officer.
Joining me are Kevin Sullivan, President and Chief operating Officer, Jeffrey Brown, Chief Financial Officer, and Jonathan Black Chief Investment Officer, and Chief Legal Officer.
Vlad Volodarski: Before we begin, I direct you to the cautionary statements on slide 2, because during this call we will make statements containing forward-looking information and non-GAAP and other financial measures. RMDNA and other securities filings contain information about the risks, assumptions, and uncertainties inherent in such forward-looking statements, and details of such non-GAAP and other financial measures.
Speaker Change: Before we begin I'd direct you to the cautionary statements on slides two 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 risks assumptions and uncertainties inherent in such forward looking.
Speaker Change: Basements and details of such non-GAAP and other financial matters more specifically are there at you to the disclosures in our Q1 2025, MD&A under the heading risks and uncertainties and forward looking information for a discussion.
Vlad Volodarski: For more information visit www.rmdna.gov More specifically, I direct you to the disclosures in our Q1 2025 MD&A under the heading Risks and Uncertainties and forward-looking information for discussion of such risks and uncertainties. These documents can be found on our website or on CDERplus website.
Speaker Change: Such risks or uncertainties. These documents can be found on our website or SEDAR plus websites.
Vlad Volodarski: Turning to slide three, the streak of solid operating and financial results continued in Q1 2025, and I cannot be more proud and grateful to our teams for their outstanding work. Their consistent focus on creating exceptional resident experiences, combined with innovative sales and marketing strategies, generated strong increases in occupancy, driving at 400 basis points operating margin expansion, and 21.3% same property net operating income growth. Our continuing investments in our management platform, portfolio optimization, and most importantly, the strength and dedication of our people have positioned us to capitalize on unprecedented market dynamics in seniors housing, where demand is accelerating and new supply remains limited.
Speaker Change: Turning to slide three.
Speaker Change: Streak of solid operating and financial results continued in Q1, 2025, and I cannot be more proud and grateful to our teams for their outstanding work, they're consistent focus on creating exceptional resident experiences combined with innovative sales and marketing strategies generated strong increases in occupancy drive.
Speaker Change: At 400 basis points of operating margin expansion and 21, 3% same property net operating income growth.
Speaker Change: Our continued investments in our management platform portfolio optimization, and most importantly, the strength and dedication of our people have positioned us to capitalize on unprecedented market dynamics and seniors housing where demand is accelerating and new supply remains limited.
Vlad Volodarski: We will work hard to maintain this momentum of occupancy and cash flow growth for the remainder of 2025 and beyond.
Speaker Change: We will work hard to maintain this momentum build occupancy and cash flow growth for the remainder of 2025 and beyond.
Vlad Volodarski: My partners will provide you with more color on various aspects of our business.
Speaker Change: Partners will provide you with more color on various aspects of our business care will do an operating updates Jeff will dive deeper into our Q1 financial results and Jonathan will discuss our portfolio optimization and growth activities will start with Karen Karen over to you.
Vlad Volodarski: Karen will do an operating update, Jeff will dive deeper into our Q1 financial results, and Jonathan will discuss our portfolio optimization and growth activities. We'll start with Karen.
Karen Sullivan: Karen, over to you. Thanks. Thanks, Vlad. We achieved a strong 110 basis points sequential quarter occupancy gain in our same property portfolio. With Q1 2025 occupancy reaching 91.5%, we reversed historical seasonal trends of occupancy declines in the.
Karen: Thanks, Brad.
Karen: We achieved a strong 110 basis points sequential quarter, our occupancy gain in our same property portfolio with Q1.
Karen: 2025 occupancy, reaching 91, 5%, we reversed historical seasonal trends of occupancy declines in the winter months.
Karen Sullivan: Importantly with strong leasing activity and somewhat lower than historical notices, we are now forecasting to reach 92.2% occupancy in June 2020. We held a two day open house event in January, which brought in over 900 initial initial contacts. This is a 6% increase in initial contacts compared to January 2024 open house.
Karen: Accordingly, with strong leasing activity and somewhat lower than historical notices we are now forecasting to reach 92, 2% occupancy in June 2025.
Karen: We held a two day open house event in January which brought in over 900 initial initial contacts. This was a 6% increase in initial contacts compared to January 2024 open house, but held another successful open house in April and our teams are busy nurturing these prospects by bringing them back.
Karen Sullivan: We held another successful open house in April, and our teams are busy nurturing these prospects by bringing them back for follow-up tours and events at our homes. We recently introduced a new automated post tour survey to gather valuable feedback from our prospects about their experience and to continue to uncover conversion potential.
Karen: For follow up tours and events at our homes. We've recently introduced a new automated post tour survey to gather valuable feedback from our prospects about their experience and to continue to uncover uncover conversion potential as.
Karen Sullivan: As part of our enhanced approach to business development, we have launched a Professionals Webinar Series. Over the course of the year, we will deliver six recorded webinars tailored to real estate agents, health care professionals, and finance professionals. In the first quarter, this allowed us to connect with over 1,000 clients.
Karen: As part of our enhanced approach to business development, we have launched our professionals a webinar series over the course of the year, we will deliver six recorded webinars tailored to real estate agents health care professionals and finance professionals in the first quarter. This allowed us allowed us to connect with over 1000 professionals.
Karen Sullivan: To further leverage resident referrals as an initial contacts generator, we launched a housewarming party initiative encouraging new residents to invite friends and family to visit them in their new home. This initiative fosters a welcoming atmosphere while organically introducing potential new prospects to our Turning to slide five, we reduced our staffing agency cost by 50% in Q1 2025 compared to Q1 for through our continued focus on recruitment and retention. The agency usage across our portfolio is now well below pre pandemic.
Karen: To further leverage resident referrals as an initial contacts generator, we launched a housewarming party initiative encouraging new residents to invite friends and family.
Karen: Visit them in their new home. This initiative fosters a welcoming atmosphere, while organically introducing potential new prospects to our communities.
Karen: Turning to slide five we reduced our staffing agency costs by 50% in Q1 2025 compared to Q1 'twenty 'twenty four through our continued focus on recruitment and retention activities. The agency usage across our portfolio is now well below pre pandemic levels.
Karen Sullivan: The final step of our operational reorganization was completed in March with our Quebec team moving to the new structure designed to enhance agility and responsiveness and empower and support our general managers and management teams to drive results. The Quebec team also focused on integrating our newest acquisition, Chartwell-Rosemont, 632 suite complex on the island in Montreal.
Karen: The final step of our operational reorganization was completed in March with our Quebec team moving to the new structure designed to enhance agility and responsiveness in empower and support our general managers and management teams to drive results.
Karen: But Quebec team has also focused on integrating our newest acquisition Chartwell Rosemont 106 hundred 32 suite complex on the island and Montreal.
Karen Sullivan: We completed the repositioning of the underperforming Duke of Devonshire residence in the oversupplied Ottawa market by entering into a long-term lease with the Ottawa hospital.
Karen: We completed the repositioning of the underperforming Duke of Devon Shire residents in the oversupplied Ottawa market by entering into a long term lease with the Ottawa Hospital. The building will be used by the hospital for transitional care, adding much needed capacity each of the regions health care system, we've been working with our residents in there.
Karen Sullivan: The building will be used by the hospital for transitional care, adding much needed capacity to the region's health care system. We have been working with our residents and their families to find alternative accommodations, with over half of them choosing to move to other Chartwell homes in the Ottawa area.
Karen: Families to find alternative accommodations with over half of them choosing to move to other chartwell holds in the Ottawa area.
Karen Sullivan: Finally, I wanted to share another example of our ongoing efforts to develop individual property-specific strategies to better meet the needs of our local residents. Chartwell Lansing is an older home in Toronto with smaller studio. We combined some of these into one-bedroom units, reducing the overall unit count from 100 to 90, while introducing changes to our operating model to reduce management costs. We are also investing capital in common area upgrades. In April of 2024, the occupancy at Lansing was 64%.
Karen: Finally, I wanted to share. Another example of our ongoing efforts to develop individual property specific strategies to better meet the needs of our local communities.
Karen: Lansing is an older home in Toronto with smaller studio suites, we combine some of these into one bedroom units, reducing the overall unit count from 100 to 90, while introducing changes to our operating model to reduce management costs. We are also investing capital and common area upgrades at this home in APE.
Karen: For all of 'twenty 'twenty four the occupancy at laughing with 64% today. It is 89% and is on track to surpass 90% in Q2.
Jeffrey Brown: Today, it is 89% and is on track to surpass I will now turn it over to Jeff to take you through our finance.
Karen: I will now turn it over to Jeff to take you through our financial results. Thank.
Jeffrey Brown: Thank you, Karen.
Jeff: Thank you Karen.
Jeffrey Brown: As shown on slide six, in Q1 2025, net income was $33.2 million compared to a net loss of $2 million in Q1 2024. FFO grew to $56.2 million in Q1 2025, an increase of 43.1% compared to Q1 2024. Our reported FFO does not include $2.1 million or 0.9 cents per unit of income guarantee. related to recently acquired property. Q1 2025 FFO growth benefited from higher adjusted NOI of 27.4%. Higher Adjusted Interest Income of $0.5 million. Higher Other Income of 0.5%. and Lower Depreciation of PP&E and Amortization of Intangible Assets Used for Administrative of 0.2 million.
Jeff: As shown on slide six in Q1 2025, net income was $33 2 million compared to a net loss of $2 million in Q1 2024.
Jeff: F F O reached $56 2 million in Q1 2025, an increase of 43, 1% compared to Q1 2024, our reported <unk> does not include $2 1 million or 0.9 cents per unit of income guarantees related to recently acquired properties.
Jeff: Q1, 2025, <unk> growth benefited from higher adjusted NOI of $27 4 million higher adjusted interest income 0.5 million higher other income zero point $5 million and lower depreciation of PP&E and amortization of intangible assets used for.
Jeff: Administrative purposes, a zero point $2 million.
Jeffrey Brown: partially offset by higher adjusted finance costs of $8 million, higher G&A expenses of $2.6 million, and lower management of 1.1 million. In Q1 2025, our same property occupancy increased 530 basements. to 91.5% and our same property adjusted NOI increased $12.4 million or 21.3%.
Jeff: Partially offset by higher adjusted finance costs of $8 million higher G&A expenses of $2 6 million and lower management fees of $1 1 million.
Jeff: In Q1 2025, our same property occupancy increased 530 basis points to 91, 5% and our same property adjusted NOI increased $12 4 million or 21, 3%.
Jeff: Slide seven summarizes our same property operating results for each platform.
Jeffrey Brown: Slide 7 summarizes our same property operating results for each platform. All of our platforms posted occupancy gains in Q1 2025 compared to Q1 2024, which positively impacted our results. Our Western Canada platform same property adjusted NOI increased 2.8 million or 14.4%. Our Ontario platform same property adjusted NOI increased 7.6 million or 23.3%.
Jeff: All of our platforms posted occupancy gains in Q1, 2025, compared to Q1, 'twenty 'twenty, four which positively impacted our results.
Jeff: Our Western Canada platform same property adjusted NOI increased $2 8 million or 14, 4%.
Jeff: Our Ontario platform same property adjusted NOI increased $7 6 million or 23, 3%.
Jeffrey Brown: And our Quebec platform, same property adjusted NOI increased $2 million, or $32.1 million.
Jeff: Our Quebec platform same property adjusted NOI increased 2 million or 32, 1%.
Jeffrey Brown: Turning to slide 8, at May 8, 2025, liquidity amounted to approximately $450 million, which included $55 million of cash and cash equivalents and $395 million of borrowing capacity on our credit fund.
Jeff: Turning to slide eight had may eight 2025 liquidity amounted to approximately $450 million, which included $55 million of cash and cash equivalents and $395 million of borrowing capacity on our credit facilities.
Jeffrey Brown: During the quarter, we raised $400 million into ventures and $93.3 million of equity through our ATM program, which helps support debt refinancing and our transaction equity And we continue to improve our leverage metrics, with interest coverage ratio growing to 2.8 times and our net debt to adjusted EBITDA ratio declining to 8.2 times. For the remainder of 2025, our debt maturities include $416.4 million of mortgages. with a weighted average interest rate of 4.96%.
Jeff: During the quarter, we raised 400 million in debentures, and $93 3 million of equity through our ATM program, which helped support debt refinancing and our transaction activity.
Jeff: And we continue to improve our leverage metrics with interest coverage ratio growing to two eight times and our net debt to adjusted EBITDA ratio declined to 8.2 types.
Jeff: For the remainder of 2025, our debt maturities include $416 4 million of mortgages with a weighted average interest rate of.
Jeff: 96%.
Jeffrey Brown: As of May 8, 2025, we estimate the 10-year CMHC insured mortgage rate to be approximately 3.97% and the five-year unsecured debenture rate to be approximately 4.36%.
Jeff: As of May eight 2025, we estimate the 10 year CMA sea insured mortgage rate to be approximately 397% and the five year unsecured debenture rate to be approximately $4 three 6%.
Jeffrey Brown: Moving to slide nine. With a continuing strong prospect traffic and leasing activity, we now forecast same property occupancy to reach 92.2% by June of this year and continue to grow to our 95% target by the end of 2025.
Jeff: Moving to slide nine.
Jeff: With the continuing strong prospect traffic and leasing activity. We now forecast same property occupancy to reach 92, 2% by June of this year and continue to grow to a 95% target by the end of 2025.
Jonathan Boulakia: I will now turn the call to Jonathan to discuss our recent acquisitions and portfolio optimization Thank you, Jeff. Turning to slide 10.
Jonathan: I will now turn the call to Jonathan to discuss our recent acquisitions and portfolio optimization activities.
Jonathan: Thank you Jeff.
Jonathan: Turning to slide 10 in January we acquired an upscale newly built 131 suite <unk> retirement residence in Victoria, BC renamed Chartwell, Victoria Harbour retirement residence for a purchase price of $75 million.
Jonathan Boulakia: In January, we acquired an upscale, newly built, 131 suite ISL retirement residence in Victoria, BC, renamed Chartwell Victoria Harbor Retirement Residence for a purchase price of $75 million. This acquisition is our fourth property on Vancouver Island, adding critical mass in the region.
Jonathan: Acquisition is our fourth property on Vancouver Island, adding critical mass in the region.
Jonathan Boulakia: We also acquired a newly built 632 suite retirement residence renamed Chartwell-Rosemont-les-Quartiers in Montreal, Quebec for $136 million, including $6 million in a deferred payment due in 2028.
Jonathan: We also acquired a newly built 632 suite retirement residents renamed Chartwell Rosemont be a cup of tea and luxury I'll go back for $136 million, including $6 million and defer in a deferred payment due in 2028.
Jonathan Boulakia: Finally, this quarter we acquired a 100% interest in each of Chartwell Le Florilege and Chartwell L'Envol as well as the 15% of Chartwell Tres Carrés that we did not already own, all in Quebec City and its surroundings from our development partner, Badamo, for an aggregate price of $248 million. All of these newer, high-quality assets are located in strong markets and in great locations within those markets. We acquired these premium residences at attractive pricing, significantly below replacement.
Jonathan: Finally, this quarter, we acquired a 100% interest in Egypt, Chartwell look nobody knows and chartwell logo as well as the 15% of chartwell kick out of it but we did not already own all in Quebec City and its surroundings from our development partner about them for an aggregate price of $248 million.
Jonathan: All of these newer high quality assets are located in strong markets and in great locations within those markets. We acquired these premium residences at attractive pricing significantly below replacement cost.
Jonathan Boulakia: We hope to continue this momentum throughout 2025, with more exciting strategic acquisitions being evaluated and at various stages of negotiation. We are also actively engaged in discussions with local and national developers across the country to restart our development program and create a meaningful pipeline of state-of-the-art assets to bring into our portfolio. We will pursue such developments in a prudent manner, with a preference for off-balance sheet development similar to our arrangement in Quebec.
Jonathan: We hope to continue this momentum through 2025 with more exciting strategic acquisitions being evaluated and at various stages of negotiation.
Jonathan: We are also actively engaged in discussions with local and national developers across the country to restart a development program and create a meaningful pipeline of state of your assets to bring into our portfolio.
Jonathan: We will pursue such developments in a prudent manner.
Jonathan: With a preference for off balance sheet development similar to our arrangement in Quebec.
Jonathan Boulakia: We also continue the path of portfolio optimization with several residences that we no longer consider core to our portfolio being repositioned, sold or planned for sale. This process will continue throughout 2025 and into 2026.
Jonathan: We also continue the path of portfolio optimization with several residences that we no longer consider core to our portfolio being repositioned or sold or planned for sale. This process will continue throughout 2025 and into 2026.
Jonathan Boulakia: An example of our work to maximize value and optimize our assets is the repositioning of the underperforming Duke of Devonshire residence in the competitive Ottawa market. Recently, we entered into a lease agreement for this asset with Yarwa Hospital. The lease term is 15 years with annual payments of $2.25 million subject to annual escalation.
Jonathan: An example of our work to maximize value and optimize our assets is the repositioning of the underperforming Duke with Devon Shire residents in the competitive Ottawa market.
Jonathan: Recently, we entered into a lease agreement for this asset with the Ottawa Hospital.
Jonathan: The lease term is 15 years with annual payments of $2 million to $5 million subject to annual escalators.
Jonathan Boulakia: We are also pleased that the new use of this asset will contribute in a meaningful way to the Ottawa community by creating additional capacity for alternative care delivery by the hospital.
Jonathan: We're also pleased that the new use of this asset will contribute in a meaningful way to the Ottawa community by creating additional capacity for alternative care delivery by the hospital.
Jonathan Boulakia: This position of non-core properties will lower the average age of our portfolio, position our portfolio more strategically, and free up capital to pursue strategic growth.
Jonathan: Disposition of noncore properties will lower the average age of our portfolio position our portfolio almost more strategically and free up capital to pursue strategic growth opportunities I will turn the call back to Robert I'll turn the call back to glad to wrap it up.
Vlad Volodarski: I'll turn the call back to Vlad to wrap Thank you, Jonathan. Moving to slide 11, we believe we are at the front end of what is going to be a multi-year period of growth and retirement living in Canada. Demand for our services should continue to grow for decades, driven by the strong population growth and lack of long-term care accommodation. Forecasts show that to maintain supply-demand balance the sector would need to build 200,000 suites in the next 10 years, which is almost three times the number of suites built in the previous 10 years. With the persistently high cost of construction, new development has been virtually non-existent, which combined with the obsolescence of some of the existing inventory will continue to exacerbate supply shortages.
Speaker Change: Thank you Jonathan moving to Slide 11, we believe we are the front end of what is going to be a multiyear period of growth in retirement living in Canada.
Speaker Change: For our services should continue to grow for decades, driven by the strong population growth and lack of long term care accommodation.
Speaker Change: Forecasts show that to maintain supply demand balance the fact that would need to build 200000 suites in the next 10 years, which is almost three times the number of suites built in the previous 10 years.
Speaker Change: With the persistently high cost of construction your development has been virtually nonexistent, which combined with the obsolescence of some of the existing inventory will continue to exacerbate supply shortage.
Vlad Volodarski: These dynamics will support growing occupancies, higher market rates, and profitability of the existing operators. As one of the largest participants in the senior living sector, Chartwell stands to benefit.
Speaker Change: These dynamics will support the occupancies higher market rates and profitability of the existing operators. It was one of the largest participants in the senior living sector Charles stands to benefit from them.
Vlad Volodarski: Turning to slide 12, this year marks the last year of our strategy period that started in 2018. Back then, we set ambitious goals to grow our employee engagement score from 49% highly engaged to 55%, to grow our resident satisfaction score from 58% to 67% very satisfied, and to grow same property portfolio occupancy from then 90.5% to 95%. The two and a half year of hiatus called by the COVID-19 pandemic made the achievement of these targets much harder. Pandemic related restrictions and negative media had a negative impact on our residents. There undoubtedly was post pandemic exhaustion and fatigue of our employees and our occupancy is declining to below 77 percent in 2021.
Speaker Change: Turning to slide 12, this year marks the last year of our strategy P area that started in 2018 back then was that ambitious goals to grow our employee engagement score from 49% highly engaged of 55 to grow our resident satisfaction score from 58% to 67% of their satisfies and to grow same property portfolio.
Speaker Change: The occupancy from 94, 5% to 95%.
Speaker Change: Two and a half year, a fiat is caused by the COVID-19 pandemic made the achievement of these targets much harder pandemic related restrictions and negative media had a negative impact on our residents. There undoubtedly was post pandemic exhaustion and fatigue of our employees and our occupancies declining to below 77% in <unk>.
Speaker Change: 'twenty one.
Vlad Volodarski: Yet our teams persevered. And while we cannot celebrate the success just yet, we feel we're firmly on our way to achieving these targets.
Speaker Change: Yet our teams persevered and while we cannot celebrate the success just yet we feel we're firmly on our way to achieving these targets.
Vlad Volodarski: We have been working on the development of our post 2025 strategy, and while the final details of it are still being worked on, undoubtedly, its focus will continue to be on resident and employee experience, operational excellence and efficiency, including the implementation of new technologies, strategic portfolio optimization and growth, and prudent capital management.
Speaker Change: We have been working on the development of our post 2025 strategy and while the final details of it are still being worked on undoubtedly it focus will continue to be on resident and employee experience operational excellence and efficiency, including the implementation of new technologies strategy strategic portfolio optimization and growth and prudent.
Speaker Change: Capital management, we will be sharing more details on these priorities with you in the fall of this year.
Vlad Volodarski: We will be sharing more details on these priorities with you in the fall of this year. All of us at Chartwell are optimistic about the future and united in our drive to continue delivering strong results for all our key stakeholders for many years to come.
Speaker Change: All of US are Charles are optimistic about the future and United in our drive to continue to deliver strong results for all our key stakeholders for many years to come.
Vlad Volodarski: I will now close our prepared remarks with a story from one of our residences, as pictured on slide 13.
Speaker Change: I will now close our prepared remarks with a story from one of our residences as fixed charge on slide 13.
Vlad Volodarski: Every year at our leadership conference, we recognize six residences across the country that achieve outstanding results based on resident satisfaction, employee engagement, occupancy, and net operating income. We call these our Circle of Excellence Awards. From among the six, one residence is selected as Chartwell's Residence of the Year, an honor awarded to the home with the best overall performance across these metrics.
Speaker Change: Every year at our leadership conference, we recognized six residents as across the country that achieve outstanding results based on resident satisfaction and employee engagement occupancy and net operating income.
Speaker Change: We call. These our circle of Excellence awards from among the six one residents is selected as Charles residents of the year and all are awarded to the home with the best overall performance across these metrics in.
Vlad Volodarski: In 2024, this prestigious distinction went to Chartwell-Colonel Belcher Retirement Residence in Calgary. Earlier this month, Karen, Jonathan, Jeff, and I, along with several of our operations leaders, visited the residence to celebrate this incredible achievement with the team. We shared lunch with some of the frontline team members and were warmly greeted by many residents as we toured the community.
Speaker Change: In 2020 for this prestigious distinction went to chartwell Cardinal voucher retirement residence in Calgary.
Speaker Change: Earlier, this month, Karen Jonathan Jeff and I, along with several of our operations leaders visited the residents to celebrate this incredible achievement for the team will share at launch with some of the frontline team members and were warmly greeted by many residents as we toured the community.
Vlad Volodarski: The highlight of the visit, however, was the resident town hall. We opened by explaining the reasons for our visit and then invited residents to share their thoughts and questions. What followed was something truly unexpected, an outpouring of emotion, praise, and heartfelt gratitude for the team members who served this community with such dedication.
Speaker Change: Highlight of the visit however, it was a resident Townhall, we opened by explaining the reasons for our visit and then invited residents to share their thoughts and questions. What followed was something truly unexpected an outpouring of emotion praise and heartfelt gratitude for the team members who serve this community with such dedicate.
Speaker Change: <unk> here just a few moments that stood out one resident declared 90 years old in the past two years living is currently Boucher have been the best years of my life.
Vlad Volodarski: Here are just a few moments that stood out. One resident declared, I'm 90 years old and the past two years living at Colonel Belcher have been the best years of my life. to which another resident quickly added excitedly, that's because he's an excellent ballroom dancer.
Speaker Change: The which another rather they quickly added excitement that's because he's an excellent ballroom dancer.
Vlad Volodarski: His wife, sitting quietly until nearly the end, eventually spoke up, tears in her eyes. She said, My husband was diagnosed with dementia two years ago. We had to move here from British Columbia and I resented it. I was grumpy and I did not behave well. But with the patience of the staff and the camaraderie among the residents changed that. Now I know this is the best place we could be. We truly love it here.
Speaker Change: His wife sitting quietly until nearly the end eventually spoke up tears in her eyes.
Speaker Change: She said my husband was diagnosed with dementia two years ago, we had to move here from British Columbia, and I presented it I was grumpy and I did not behave well.
Speaker Change: The patients have the staff and the come Ratterree amongst the residents change that now.
Speaker Change: Now I know this is the best place, we could be with truly love it here.
Vlad Volodarski: Then there was Bertha, spirited resident who at 99 doesn't look a day over 80. She told us, Christine, the general manager, is absolutely amazing. And when I asked what made Christine so exceptional, Bertha said, she listens carefully, communicates clearly, and gets things done quickly. She's not just respected, she's admired by everyone here.
Then there was Bertha steroid is resident who at 19 nine doesn't look a day over 80, she told US Kristine the general manager is absolutely amazing and when I asked what made pristine. So exceptional Bertha said, she listened carefully communicates clearly and get things done quickly she's not just respect that she is admired by everyone here.
Speaker Change: Sure.
Vlad Volodarski: And in one of the more light-hearted but memorable moments, a resident shared this, I hate onions. The smell, the taste, everything. When I moved in, it only took the staff a few meals to figure it out. Ever since, I've never had to ask whether there are onions in my food. It's amazing how well they remember not just what we like, but also what we can't stand.
Speaker Change: And then one of the more lighthearted, but memorable moments rather than share this I hate to audience.
Speaker Change: The smell to taste everything what I moved in it only took this stuff a few meals to figure it out ever since I've never had to ask whether their audience in my food, it's amazing how well they remembered and I'll just walk through life, but also what we can't stand.
Vlad Volodarski: All of us walked out of that town hall with misty eyes and full hearts. It's no wonder Chartwell Colonel Belcher was named Residence of the Year. What we experienced once again reminded us why we do what we do and the tremendous positive impact our teams have on the lives of so many. And that, more than any metric, is what defines the Chartwell experience.
Speaker Change: All of US walked out of that town Hall, with Misty eyes, and full Hearts. It's no Wonder chart will tell the voucher was named the residents of the year, where we experienced once again reminded us why we do what we do and a tremendous positive impact our teams have on the lives of so many and that more than any metric is what defines the charter will expire.
Speaker Change: Yes.
Vlad Volodarski: Thank you for your attention this morning.
Speaker Change: Thank you for your attention. This morning, we would now be pleased to answer your questions.
Vlad Volodarski: We would now be pleased to answer your questions. Thank you.
Speaker Change: Thank you.
Unknown Executive: We will now take questions from the telephone lines. If you have a question, please press star 1. You may cancel your question at any time by pressing star 2.
Speaker Change: We will now take questions from the telephone lines. If you have a question. Please press star one you.
Speaker Change: So on your question at any time by pressing star two.
Unknown Executive: Please press star 1 at this time if you have a question. There will be a brief pause while participants register for questions. We thank you for your patience.
Speaker Change: Please press star one at this time, if you have any questions.
Speaker Change: That will be a brief pause for all participants register for questions. We thank you for your patience.
Jonathan Kelcher: Our first question is from Jonathan Kelcher from TD Cowen. Please go ahead. Thanks. Good morning. And always good to hear stories like that, Vlad. First question, just on the occupancy, I think people are pretty comfortable that you guys are going to hit or be very close to your 95% target by the end of the year. As we look forward, what do you think the portfolio could get to? What's sort of the limit that you see? Well, there are homes in our portfolio, Jonathan, that's been running at 100% occupancy and some of them for many years in a row without a day of revenue loss.
Speaker Change: Our first question is from Jonathan Chang from TD Cowen. Please go ahead.
Jonathan Chang: Thanks, Good morning, and always good to hear stories like that blood.
Jonathan Chang: First question first question just on on the occupancy I think people are pretty comfortable that you guys are going to hit or be very close to your 95% target by the end of the year.
Jonathan Chang: As we look forward, what what do you think need the portfolio could get to it what's sort of the sort of the limit that you see.
Jonathan Chang: Well there are homes in our portfolio, Jonathan that's been running at 100% occupancy and some of them for.
Jonathan Chang: Many years in a row without a day of revenue loss. So it's possible to do not to pretend that it's achievable across 150 residents. This is probably too ambitious, but you know theoretically that portfolio can be running at a higher than 95% occupancy how much higher I don't know our focus right now.
Vlad Volodarski: So it's possible to do. Now to pretend that it's achievable across 150 residences is probably too ambitious. But you know, theoretically, the portfolio can be running at a higher than 95% occupancy. How much higher? I think our focus right now is getting to that 95% and then we'll go from there. Okay, fair enough.
Jonathan Chang: I was getting to that 95 and that will go from there.
Jonathan Chang: Okay Fair enough and then just on the Duke of Devon Shire.
Vlad Volodarski: And then just on the Duke of Devonshire, how does the rent you're getting from the hospital compared to the NOI that property was producing? The property has been underperforming for many years, and it hasn't been producing much of NOI. There was a bit of a parking lease revenue that was coming that's helping the operations, but the lease from the, or rental payments from the hospital will far exceed the NOI that this property ever produced.
Jonathan Chang: How does the rent you're getting from the the hospital compare to the you Gotta why that.
Jonathan Chang: Property was producing.
Jonathan Chang: The property has been underperforming for many years and it hasnt been producing much of NOI.
Jonathan Chang: There was a bit of a parking lease revenue that's less common that's helping the operations, but the lease from the rental payments from the hospital will far exceed that the otherwise at this property ever produced.
Vlad Volodarski: Okay, good to hear.
Jonathan Chang: Okay good to hear.
Vlad Volodarski: And then just lastly, I know Jonathan talked about it a little bit, but how close are you to seeing developments potentially pencil out here?
Jonathan Chang: And then just lastly, I know trying to talk about a little bit, but how close are you to seeing developments are potentially pencil out here.
Vlad Volodarski: We have a number of developments in our pipeline that we're looking at, and we're reworking our models on, and we think we're pretty close on a few of them. Some of them work naturally because of the specificity of the site. So some sites are easier to work because they could be excess land on existing residences that we have, so those will be easier. But even those that are not, we don't think we're far off from coming on site and making them work.
Jonathan Chang: We have a number of developments in our pipeline, but we're looking at and we're reworking our models on and we think we're pretty close on a few of them some of them work naturally because of the specificity of the site. So some sites are easier to work because.
Jonathan Chang: It could be you know excess land on interesting.
Jonathan Chang: Residences that we have.
Jonathan Chang: It will be easier, but even those that are not we don't think we're far off from coming on one side and making them work of course, we're trying to as much as possible pursue these developments off balance sheet. So we are talking to and working with.
Vlad Volodarski: Of course, we're trying to, as much as possible, pursue these developments off balance sheets. So we are talking to and working with local and national developers that could take these developments on for us with a similar model to what we have. And maybe just to add to that, Jonathan, it's not, you know, the massive amount of developments that's still pencil in. There's very few that we are seeing that potentially could be making sense in the next year or so. Others are still pretty far away in terms of the difference between the rents that need to be generated and construction costs that we're seeing right now.
Jonathan Chang: Local and national developers that could take these developments on for us with a similar model to what we do in Quebec.
Jonathan Chang: And maybe just to add to that Jonathan it's not.
Jonathan Chang: Massive amount of development, that's still pencil and there's very few that we are seeing that potentially could be making sense in the next year or so others are still pretty far away in terms of the difference between the rents that need to be generated in construction costs that we're seeing right now.
Vlad Volodarski: Okay, thanks for that.
Speaker Change: Okay. That's thanks for that I'll turn it back.
Vlad Volodarski: I'll turn it back. Thank you.
Jonathan Chang: Thank you.
Lorne Kalmar: Our following question is from Lorne Kalmar from Desjardins. Please go ahead. Thanks. Good morning. On the margins, you guys had a pretty good showing this quarter. I think around 41 percent. And I believe the target put out earlier was 40 percent.
Speaker Change: Our following question is from Lorne Kalmar from dish All day. Please go ahead.
Speaker Change: Thanks, Good morning all.
Speaker Change: On the margin side, you guys had a pretty good showing this quarter I think around 41%.
Speaker Change: And I believe the target.
Speaker Change: <unk> put out earlier was 40% are you expecting the margins to trend down over the balance of the year or do you think you can still keep pushing the margins higher in the spring and summer months.
Lorne Kalmar: Are you expecting the margins to trend down over the balance of the year? Do you think you can still keep pushing the margins higher in the spring and summer months?
Lorne Kalmar: Good morning, Lorne. We think we can stay in this 40 to low 40% range through the balance of the year. This is given we're seeing higher flow-through of revenue now to NOI as we push into these higher occupancy levels.
Lauren: Hey, good morning Lauren.
Speaker Change: We think we can.
Speaker Change: Stay in this 40 to low 40% range through the balance of the year.
Speaker Change: Given we're seeing higher flow through of revenue now to NOI as we.
Speaker Change: Push into these higher occupancy levels.
Lorne Kalmar: Okay, that was kind of my next question. That's sort of an occupancy factor. Okay. Thank you.
Speaker Change: Okay that was kind of my next question about sort of bed occupancy factor okay.
Speaker Change: Thank you and then just a quick one on the carbon tax any impact there.
Lorne Kalmar: And then just a quick one on the carbon tax, any impact there? We don't think it's going to be a meaningful impact. given overall utility costs, a small portion overall utility costs, which in itself is a smaller portion of our overall DOE. Fair enough. Okay.
Speaker Change: We don't think it's gonna be a meaningful impact.
Speaker Change: Given overall utility costs as smart small portion of overall utility costs, which in itself is a smaller portion of our overall daily.
Speaker Change: Fair enough okay.
Lorne Kalmar: And then maybe just last one from me. You talked a little bit about the disposition side. Do you guys have a rough idea of where you'd like to be for the year? Or is it sort of just opportunistic at this point? It will be opportunistic, Lorne. We, as we talked about before, these are different types of properties that usually attract different types of buyers, so the timing of execution is not certain. We certainly know properties that were identified for the potential disposition, some of them we are still doing work to drive a bit more value and occupancy.
Speaker Change: And then maybe just last one from me you talked a little bit about the disposition side you guys have a rough idea of where you'd like to be for the year or is it sort of just opportunistic at this point.
Speaker Change: It will be up artistic Lauren we are as we talked about before these are different types of properties that are usually attract different types of buyers. So the timing of execution.
Speaker Change: It is not certain but certainly.
Speaker Change: No properties that were identified for the potential disposition of some of them. We are still doing work to drive a bit more value in occupancy so it'll be hard to predict today, the exact timing of that and if we have any more ideas or knowledge about the timing that we can share with well at this point in time, we can.
Lorne Kalmar: So it would be hard to predict today the exact timing of that. And if we have any more ideas or knowledge about the timing that we can share, we will. At this point in time, we can.
Speaker Change: Yes.
Lorne Kalmar: Can you maybe give a rough idea in terms of the dollar value of what's sort of been classified or what you're targeting, assets you're targeting for sale? It's less than 10% of our suite count and a lot less on the value because these are obviously smaller properties and not as valuable as the other ones that we have in our portfolio. Okay, fair enough. Thank you very much.
Speaker Change: Can you maybe give a rough idea in terms of the dollar value of what's sort of been classified or what you're targeting assets you're targeting for sale.
Speaker Change: It's less than 10% of our suite count and a lot less on the value.
Speaker Change: Obviously, the smaller properties and it's not as valuable as the other ones that we have in our portfolio.
Speaker Change: Okay Fair enough. Thank you very much I'll turn it back.
Lorne Kalmar: I'll turn it back.
Speaker Change: Thank you. Our following question is from <unk> from Scotiabank. Please go ahead.
Himanshu Gupta: Our following question is from Himanshu Gupta from Scotiabank. Please go ahead.
Himanshu Gupta: Thank you and good morning. So just looking at the growth bucket here, and, you know, thanks for providing color on same property occupancy and same property margins. So question is on the growth bucket, how should we think about occupancy and margin upside in this category? And are there any specific properties within the growth bucket which you think should drive the occupancy of occupancy? Yeah, I mean, the growth bucket changes during the year. We keep adding properties to that bucket because we're buying new properties. So, you know, comparing them period over period on a consolidated basis is difficult.
Speaker Change: Thank you and good morning.
Speaker Change: So just looking at the growth bucket.
Speaker Change: And you know thanks for providing color on same property occupancy and same property margins.
Speaker Change: So question is on the growth bucket, how should we think about occupancy and margin upside in this category and are there any specific properties within the growth bucket, which you think could drive the occupancy of watches.
Speaker Change: Yeah, I mean, the growth bucket changes during the year, we keep adding properties to that bucket because we're buying new properties. So you know comparing them period over period.
Speaker Change: On a consolidated basis its difficult that's why they're in that separate bucket generally these properties that we've been buying and a part of this market are newer so we expect the rent increases could be higher than the rest of our portfolio plus we have a few properties suddenly the Vancouver Island was that we bought that are not stabilized.
Himanshu Gupta: That's why they're in that separate bucket. Generally, these properties that we've been buying and are part of this bucket are newer, so we expect the rent increases could be higher than the rest of our portfolio. Plus, we have a few properties, certainly the Vancouver Island ones that we bought that are not stabilized that should generate significantly higher occupancy gains over time compared to the rest of our portfolio that now runs at over 91% occupancy. All right, and will I just to confirm the Vista and Victoria Harbor, are they in growth or are they in repositioning bucket?
Speaker Change: That should generate significantly higher occupancy gains over time compared to the rest of our portfolio that now runs at over 91% occupancy.
Speaker Change: Got it and just to confirm the Vista and Victoria Harbour are they in growth or are they just can you bucket.
Himanshu Gupta: They're in the growth bucket. And how are their vacancy, how are their occupancy? I think they were around like 28 percent at the time of acquisition. Are they still in that ballpark? Yeah, so we I mean, it's still very early days that we've taken them on. just a few months. We are seeing a positive trajectory on occupancy. So they've ticked up a little bit. But we are still in the thick of implementing policies and ways of doing things in these properties and Chartwellizing. We expect that positive momentum to continue, but it's still early. All right.
Speaker Change: Alright and growth pockets.
Speaker Change: Okay, and how long do they can how are their occupancy I think they were only like 28% of the time of acquisition are they still in that.
Speaker Change: Ballpark, yes.
Speaker Change: I mean, it's still very early days, but we've taken them on you know just.
Speaker Change: Just a few months.
Speaker Change: We are seeing a positive trajectory on occupancy so they've ticked up a little bit, but we are still in the thick of implementing our policies and ways of doing things in these properties and short realizing them. So we expect that positive momentum to continue but it's still early days.
Speaker Change: And sorry, just to clarify Victoria Harbour. There is no income guarantee but which tells me you obviously had that in Gabon due coming in.
Himanshu Gupta: And so just to clarify, Victoria Harbour, there is no income guarantee, but Vista, we obviously have that income guarantee coming in. That's correct. Okay. Fantastic. Last question on the occupancy. I mean, obviously, you know, momentum continues there. Are there markets which you think are strong? Are there markets you think they're still taking a bit longer time to recover? And I think you did alluded to Ottawa being in competitive. Ottawa remains to be competitive market. It's interesting there. When we look at last year trajectory and compare kind of platform by platform, every one of our platforms delivered almost similar increases in occupancy.
Speaker Change: Correct, Okay, Okay fantastic.
Speaker Change: Last question on the Occupancies I mean, obviously you know momentum continues here.
Speaker Change: Are there market, which you would think are stronger.
Speaker Change: Because you would think this is taking a bit longer time to recover and I think you did alluded to Ottawa being in competitive market.
Speaker Change: Ottawa remains to be competitive market, it's interesting there.
When we look at last year trajectory and compare it kind of platform by platform every one of our platforms delivered almost similar increases in occupancy. So at this point in terms of the ability to grow occupancy. It's hard to talk about markets. You know auto will continues to be maybe a but.
Himanshu Gupta: So at this point, in terms of the ability to grow occupancy, it's hard to talk about markets, you know, Ottawa continues to be maybe But I think there's a difference in the starting point. So some of the markets starting at a much lower occupancy and they have a longer kind of, or steeper hill to climb than others. So in terms of the sort of environment and dynamics out there, they're very similar across the country and all markets that we operate, we are seeing strong occupancy gains everywhere or markets that are now at stabilized level, they continue to inch up or remain in those stabilized levels.
Speaker Change: But I think there's a difference in the starting point so some of the market starting at a much lower occupancy and they have a longer kind of lora steeper hill to climb than others. So in terms of the sort of environment in dynamics out there that are very similar across the country in all markets that we operate we are seeing strong occupancy.
James: James everywhere are markets that are now stabilized level, they continue to in shop or remain in those stabilized levels.
Himanshu Gupta: Got it. And maybe just to follow up, when the construction cycle, you know, kicks in again, you know, construction starts, start becoming higher. Are there markets which you think will be able to pencil out development faster or much quicker? I mean, like, which market do you think will come first on the table as this, you know, new construction cycle? I don't know, it would be hard to tell. I mean, the construction costs in Quebec are a little easier. I mean, I can tell you our experience, so our expectation is that we will start a couple of projects in Quebec this year.
James: Got it and maybe just a follow up when the construction cycle.
Speaker Change: And again, if you look at such a stop start becoming higher.
Speaker Change: Are there markets, which you would think wouldn't be able to pencil out development faster or much quicker I mean, like which market do you think.
Speaker Change: <unk> will come first on the table that says.
Speaker Change: New construction sector.
Speaker Change: I thought it'd be hard to tell I mean, the construction costs in Quebec, Carla Lisa I mean, I can tell you our experience. So our expectation is that we'll start a couple of projects in Quebec. This year at these projects are additions to the existing properties, where we operate and so we already have infrastructure and operate.
Himanshu Gupta: These projects are additions to the existing properties where we operate, and so we already have infrastructure and operating teams in place to run it, so the incremental contribution from these additional units is a lot higher than you would normally see on the development of a new project, and that is what makes those couple of projects feasible for us today. But in terms of which market is going to go faster than the others, it's kind of hard to comment at this time.
Speaker Change: <unk> teams in place to run it so the incremental contribution from these additional units is a lot higher than you would normally see on the development of a new project and that that is what makes those couple of projects feasible for us today.
Speaker Change: But in terms of which market is going to grow faster than the others. It's kind of hard to call that at this time, it's kind of a site specific yeah.
Himanshu Gupta: Okay, fair enough. I'll join the queue. Thank you guys. Thank you.
Speaker Change: Okay fair enough. Thank you guys.
Ann Guiliano: Thank you all following question is from Ann Guiliano torn heal from National Bank Financial. Please go ahead.
Himanshu Gupta: Good morning, guys. Maybe just going back to Lorne's line and questioning on the margin front, just wondering kind of what percentage of homes reach that inflection point of, you know, higher profitability? Like, how many are at that above 90% within the same property bucket? And how much of an impact did it have on that margin improvement? Yeah, we don't have like that percentage breakdown, but just maybe to answer the question indirectly, the larger homes in strong markets with high rents at 90% occupancy, they are running at a lot higher margins. We do have homes in our portfolio that are smaller or that provide a lot more care than others.
Speaker Change: Good morning, guys.
Speaker Change: Maybe just going back to Lauren's line of questioning on the margin front, just wondering kind of what percentage of homes reached that inflection point.
Speaker Change: Higher profitability.
Speaker Change: How many are at above 90% within the same property bucket.
Speaker Change: And how much of an impact did that have on the margin improvement.
Speaker Change: Yeah, we don't have like that percentage breakdown, but just maybe to answer the question indirectly that a larger homes in strong markets with high rents at 90% occupancy. They are running at a lot higher margins, we do have homes in our portfolio that are smaller.
Speaker Change: Or that provide a lot more care than others those home withdrawn at lower margin because that's just their model of operations.
Himanshu Gupta: Those home would run at lower margin because that's just their model of operations. And so it's really a function of one occupancy and two service model. And did the reduction in agency costs, was that substantial, kind of quarter over quarter or year over year? Agency costs did get down by about 50%. We're now well below pre-pandemic levels. There's not probably a lot of more room to gain from agency reductions. We are using agency for registered staff for some less desirable shifts, like night shifts or weekend shifts. And we continue to use agency in markets where there's just not enough labor, Quebec City being one.
Speaker Change: And so it's really a function of what occupancy and to service model.
Speaker Change: And that the reduction in agency costs was that substantial kind of quarter over quarter or year over year.
Speaker Change: So it just it costs did go down by about 50%, we're now well below pre pandemic levels, there's not probably a lot of more room to gain from agency reductions where are using agency for registered staff for some less desirable chefs like night shifts or weekend shifts and yeah.
Speaker Change: We continue to use agency in markets, where there's just not enough labor, Quebec city being one of them, but other than that a little labor agency usage has come down significantly across our portfolio.
Himanshu Gupta: But other than that, agency usage has come down significantly across our portfolio.
Himanshu Gupta: Okay, and then just on capital allocation, you've acquired a fair amount of product in Quebec City. I'm just wondering why that market's been a focus for you over the past kind of year. And yeah, if there's any kind of other movements we can expect in that market going forward. This was just a function of opportunities that we had to acquire high quality, newly built properties in the strong markets, and by the way, they're operating at very high occupancies, about 95% for sure. And so we executed on those opportunities, Quebec City is a very strong market with a very high penetration rate, I think it's over 20% in that market.
Speaker Change: Okay, and then just on capital allocation, you've acquired a fair amount of product in Quebec City I'm, just wondering why that market's been a focus for you over the past kind of year end.
Speaker Change: But if there's any kind of other movements. So we can expect in that market going forward.
Speaker Change: This was just a function of opportunities that we had to acquire a high quality newly built properties in the strong markets and by the way, they're operating at very high Occupancies above 95% for sure.
Speaker Change: And so we've executed on those opportunities, Quebec City is a very strong market with a very high penetration rate I think it's all about 20% and that market and so we're happy to be present, there are at larger scale.
Himanshu Gupta: And so we're happy to be present there at larger scale.
Himanshu Gupta: In terms of the focus, you know, we're looking to acquire properties everywhere we operate in all four provinces, with maybe a bit more focus on Western Canada. Okay, thanks. We'll turn back. Thank you.
Speaker Change: In terms of the focus you know, we're looking to acquire properties everywhere, where we operate in all four provinces with maybe more focus on Western Canada.
Speaker Change: Okay. Thanks, I'll turn it back.
Speaker Change: Thank you.
Mark Rothschild: The following question is from Mark Rothschild from Canaccord Genuity. Please go ahead. Thanks. Good morning, everyone. Vlad, in regards to the demand you're seeing, to what extent does a slowing housing market and less transaction activity, and maybe for some people who are looking to move into properties, it's more difficult to sell their homes now. Does that have a potential to impact the demand and move-ins over the next year? And obviously, it's a unique time, both in the housing market slowing and in such strong demand. But obviously, it's a unique time, both in the housing market slowing and in such strong demand.
Speaker Change: Following question is from Mark Rothschild from.
Speaker Change: From Canaccord Genuity. Please go ahead.
Speaker Change: Thanks, and good morning, everyone.
Speaker Change: And in regards to the demand you're seeing to what extent does the slowing housing market and less transaction activity and maybe for some people who are looking to move into properties, it's more difficult to sell their homes now does that.
Speaker Change: I have a potential to impact the.
Speaker Change: The demand in move ins over the next year and obviously, it's a unique time both in the housing market slowing down and such strong demand, but maybe if you can talk about also in prior cycles, how that happens how it has affected it.
Vlad Volodarski: But Sure, I think our experience and there are some of the studies that we've seen over the years coming out of the US correlated the occupancy in retirement living with the velocity of housing sales, not so much with pricing. So the way we read it is to the extent people are able to sell their home, they still move, even if the prices have come down. We did see a disruption in our ability to to replace people on turnover or grow occupancy in the U.S. when we operated there a long time ago now. But during the financial crisis, there were certain areas where there were no housing sales happening at all.
Speaker Change: Sure.
Speaker Change: Our experience there are some of the studies that we've seen over the years coming out of the U S are correlated the occupancy in our retirement living with the velocity of housing sales not so much with pricing. So the way we read it is to the extent people are able to sell their home they still move even if the prices.
Speaker Change: It comes down.
Speaker Change: We did see a disruption in our ability to.
Speaker Change: To replace people on turnover or grow occupancy in the U S where we operate is there a long time ago now, but during the financial crisis. There were certain areas, where there were no housing sales happening at all the market freeze.
Vlad Volodarski: The market freeze or froze, and at that point of time, we did see the impact on our occupancies there. And interestingly, on the recovery side, the prices were continuing to come down, but the sales picked up and we instantly saw very strong occupancy recovery in those markets back then. Now, that was now 15 years ago, so past history. So does it have the potential to slow down? Absolutely, it does. Because if people cannot sell their homes and the move, we are a needs-driven business, but at any given point in time, the move to retirement living is discretionary.
Speaker Change: Rose and and at that point of time, we did see the impact on our occupancy there and interestingly on the recovery side the prices will continue to come down.
Speaker Change: But the sales picked up and we instantly solved very strong occupancy recovery.
Speaker Change: In those markets that that now that was 15 years ago, So our past history.
Speaker Change: So does it have the potential to slow down absolutely it does.
Speaker Change: Because if people cannot sell their homes and you know the.
Speaker Change: The move we are needs driven business, but at any given point in time. They move to retirement living is discretionary people will choose may choose to stay longer in their home and get care somewhere else and so part of that family. So that's potentially have an impact as you mentioned, it's probably is offset by the significant growth in Democrat.
Vlad Volodarski: People may choose to stay longer in their home and get care somewhere else and support their family. So that potentially has an impact. As you mentioned, it probably is offset by the significant growth in demographic and And so right now, we have not been seeing a significant impact. Having said that, it does have the potential to slow down. Okay, great. Thanks.
Again population and so right now we have not been seeing a significant impact.
Speaker Change: He said that it does have the potential to slow down.
Speaker Change: Okay, great. Thanks, maybe just one more in regards to new development. It sounds like it's getting to the point, where some more projects will make sense, but.
Vlad Volodarski: Maybe just one more in regards to new development. It sounds like it's getting to the point where some more projects will make sense. But what's your expectation on the private developers who maybe have different costs of capital and different ways of evaluating returns and accretion? Are you seeing that start to pick up? And maybe do you expect that to happen with such strong demand and rent growth?
But what's your expectation on the private developers, who maybe have different cost of capital and different ways of evaluating returns that accretion are you are you seeing that start to pick up and maybe do you expect that to happen with such strong demand and rent growth.
Vlad Volodarski: No, and yes, so we haven't started, we haven't seen it happening yet. And I do expect that there will probably be more development going on both from private developers and institutional developers over time. And my hope is that our sector now being more recognized as a investable sector and will attract more capital and liquidity to it, including developers. Okay, great. Thanks so much. Thank you.
Speaker Change: No and yes. So we haven't started we haven't seen that happening yet and I do expect that there will probably be more development going on both from private developers and an institutional developers overtime and my hope is that.
Speaker Change: Our sector.
Speaker Change: More recognized as a investable sector, I will attract more capital and liquidity to it including development.
Speaker Change: Okay, great. Thanks, so much.
Speaker Change: Thank you once again, please press star one at this time, if you have any questions.
Tom Galahan: Once again, please press star 1 at this time if you have a question. The following question is from Tom Galahan from BMO Capital Markets. Please go ahead. Thanks, morning guys.
Speaker Change: Following question is from Tom Gallaher from BMO capital markets. Please go ahead.
Tom Gallaher: Thanks morning, guys, maybe just a quick follow up on the development side once again, but glad you you did mention kind of a large number of projects are still a little ways off in terms of Pennsylvania, and just wondering if you could kind of talk ballpark a GAAP wise what the rents are in terms of where we are today versus what you'd need to.
Tom Galahan: Maybe just a quick follow up on the development side once again, but Vlad, you did mention kind of a large number of projects are still a little ways off in terms of penciling and just wondering if you could kind of talk ballpark gap wise, what the rents are in terms of where we are today versus what you'd need to potentially pencil those. And then just as a follow on, I guess, given the industry backdrop, you know, demographics and construction timelines, what are you comfortable kind of underwriting today in terms of rent growth on an annual basis?
Tom Gallaher: Potentially pass all those in and then just as a follow on that I guess, given the industry backdrop demographics and construction time lines. What are you comfortable kind of underwriting are today in terms of rent growth on an annual basis.
Tom Galahan: Yeah, that's a great question, Thomas. So again, it's site specific, and it depends on the market. And some markets will maybe more aggressive in underwriting rent growth than in the others. I still feel that for the most projects, there's 20, maybe 25% gap between the rents, the market rents today and the rents that need to be achieved to justify development. So if you think about that, you make more of these projects feasible, at least on paper.
Tom Gallaher: Yeah. That's a great question. So again at site specific and it depends on the market and some markets will may be more aggressive in underwriting rent growth than in the others.
Tom Gallaher: I still feel that for the most projects Theres 20, maybe 25% gap between the rents the market rents today in the rents that need to be achieved to justify development. Sorry. If you think about that you know four or five years of five 6% rental rate growth would probably help to to make more of these projects.
Tom Gallaher: Feasible at least on paper.
Unknown Executive: Great, next I'll pass it back. Thank you. We have no further questions, but oh, I'm so sorry.
Tom Gallaher: Great. Thanks ill pass it back.
Tom Gallaher: Thank you.
Speaker Change: We have no further questions Smith, Oh, I'm, so sorry, we do have a.
Himanshu Gupta: We do have a question from Himanshu Gupta from Scotiabank. Please go ahead. Yes, thank you and sorry for coming back again. Quick question on balance sheet. I think you paid $150 million unsecured debenture in April. So just wondering, did you use CMSE debt financing or any other source of funds to pay off? Yeah, Himanshu, we closed just $180 million of CMHC financing at the end of April. We'll use proceeds from that to repay the debentors. OK, and what was the rate on that CMC? who's approximately 4.15.
Speaker Change: Question from Himanshu Gupta from Scotiabank. Please go ahead.
Himanshu Gupta: Yes, Thank you and sorry for coming back again, a quick question on balance sheet.
Himanshu Gupta: I think you paid $150 million unsecured debenture in April.
Himanshu Gupta: So just wondering do you see it must be debt financing or any other source of funds to pay off debt.
Matthew: Matthew we closed.
Matthew: $180 million of CME cheap financing at the end of April we used proceeds from that to repay the debenture.
Speaker Change: Okay, and what was the need to own that seamlessly.
Matthew: It was approximately $4 one 5% open.
Himanshu Gupta: open world purposes. And would you say that now CMSE is becoming more attractive than unsecured at this point of time? Yeah, we've seen that rate drop a little bit around 4%. And we've seen the unsecured debenture market widen. by 30 to 50 basis points from where we did our transaction in March, so CMHC is becoming relatively more attractive. Awesome.
Speaker Change: And when you talk with them.
Speaker Change: What do you see that now C. M. A C is becoming more attractive than unsecured at this point of time.
Speaker Change: Yeah, we've seen that rate dropped a little bit to around 4% and we've seen the unsecured debenture market wide in.
Speaker Change: By 30 to 50 basis points from where we did our transaction in March. So you may see us, becoming you know relatively more attractive.
Himanshu Gupta: Thank you and I'll turn it back. Thank you so much. Thank you.
Speaker Change: Awesome. Thank you. Thank you so much.
Speaker Change: Thank you.
Unknown Executive: We have no further questions registered at this time. I would now like to turn the meeting back over to you, Mr. Volodarski. Thank you everybody for joining us. As always, if you have any further questions, please do not hesitate to give any one of us a call. Goodbye. Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation. This conference is no longer being recorded. Cette conférence n'est plus enregistrée.
Speaker Change: And we have no further questions, but just so at this time I would now like to turn the meeting back over to you Mr. Hu.
Speaker Change: Thank you everybody for joining us as always if you have any further questions. Please do not hesitate to give any one of us a call goodbye.
Speaker Change: Thank you.
Speaker Change: The conference has now ended.
Speaker Change: Please disconnect your lines at this time and we thank you for your participation.
Speaker Change: This conference is no longer being recorded so it.
Speaker Change: Closely Hosni. Please also as you say.