Sienna Senior Living Inc., a prominent provider of senior living options, reported robust financial results for the second quarter of 2024. The company's strategic initiatives and favorable demographic trends have led to significant year-over-year growth in both its long-term care and retirement segments. With an increase in occupancy rates and a strong financial position, Sienna Senior Living is poised for continued growth, supported by a solid balance sheet and a focus on diversification.
Key Takeaways
- Sienna Senior Living Inc. achieved year-over-year growth in Q2 2024, with increased occupancy rates in retirement homes.
- The company expects a stabilized occupancy rate of 95% and has seen growing demand for long-term care beds.
- Financial highlights include a rise in total adjusted revenues and same-property net operating income.
- Development projects are underway, with a focus on team member engagement and retention.
- Sienna Senior Living anticipates low double-digit percentage growth in long-term care NOI and high single-digit growth in retirement operations NOI for the full year of 2024.
- The company is actively seeking acquisition opportunities and expects growth in the next 12 to 18 months.
- Marketing efforts are concentrated on driving occupancy in homes with lower rates, with significant revenue and margin impact per percentage increase in occupancy.
Company Outlook
- Sienna Senior Living Inc. did not provide a specific outlook for 2025.
- The company continues to pursue CMHC financing due to its attractive rates.
- Demand for Sienna's properties is strong in both smaller and larger markets.
Bearish Highlights
- Some homes within the portfolio have lower occupancy rates, with 8-10 sites ranging from 75% to 85% due to market conditions and internal factors.
- The company is cautious about offering significant incentives, which could negatively impact margins over time.
Bullish Highlights
- The majority of the portfolio boasts high occupancy rates of 95% or higher.
- For every 1% increase in occupancy, approximately $2 million in revenue is expected, with a 75-85% margin.
- Retroactive adjustments from the government may provide additional financial benefits in the future.
Misses
- The company has not changed its incentive strategy, maintaining the common incentive of one month of free rent to avoid margin impact.
Q&A Highlights
- Nitin Jain commented on portfolio occupancy, noting that over half is stabilized at 95% or higher, with about 25-30% close to that level.
- GoC rates and spreads have decreased to around 5.25% and are expected to decrease further in the second half of the year.
Sienna Senior Living Inc. (SIA.TO), through its strategic initiatives and focus on both long-term care and retirement segments, has demonstrated a strong ability to capitalize on the favorable demographic trends. The company's efforts to increase occupancy rates, prudent financial management, and targeted marketing spend are expected to further strengthen its market position. With a careful balance between growth and operational efficiency, Sienna Senior Living Inc. remains a significant player in the senior living industry.
Full transcript - None (LWSCF) Q2 2024:
Operator: Ladies and gentlemen, welcome to Sienna Senior Living Inc.’s Q2 2024 Conference Call. Today’s call is hosted by Nitin Jain, President and Chief Executive Officer, and David Hung, Chief Financial Officer of Sienna Senior Living Inc. Please be aware that certain statements or information discussed today are forward-looking, and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to the forward-looking information and Risk Factors section of the company’s public filings, including in its most recent MD&A and AIF, for more information. You will also find a more fulsome discussion of the company’s results in its MD&A and financial statements for the period, which are posted on SEDAR+ and can be found on the company’s website, siennaliving.ca. Today’s call is being recorded, and a replay will be available. Instructions for accessing the call are posted on the company’s website and the details are provided in the company’s news release. The company has posted slides which accompany the host’s remarks on the company’s website under events and presentations. With that, I will now turn the call over to Mr. Jain. Please go ahead, Mr. Jain.
Nitin Jain: Thank you, Brianna. Good morning, everyone, and thank you for joining us on our call today. Our second quarter demonstrates the strength and tremendous potential of our company. The effectiveness of our strategic initiatives to improve and expand our operations and the favorable demographics of an aging population is evident in our results. But most importantly, our strong performance is a reflection of the commitment of our 12,500 team members. They are the key reason behind our operational strength. For the past six quarters, we have consistently achieved year-over-year growth in our operating results across both lines of our businesses. Supporting our long-term care results this quarter are fully occupied homes with higher revenues from preferred accommodations and the increased government funding in Ontario which offsets high inflation in recent years. On the retirement side, growing demand and limited new supply, combined with our targeting marketing and sales campaigns at homes with lower occupancy levels, were key drivers of improved occupancy and rate increases. Further supporting our results are an enhancement to our leadership team and ongoing improvements to our operations that are focused on our residents experience, including dining care. As a result, our total same-property NOI increased by $7.2 million to $46.1 million year-over-year in the second quarter. This is an increase of 18.5%. During the second quarter, we continued to make steady progress towards a goal of stabilized retirement occupancy of 95%. Same property occupancy grew to 88.6%, which is an improvement of 180 basis points year-over-year since last year. Occupancy continued to strengthen in July and increased to 89%. This is the highest monthly occupancy rate in over 5 years. Our marketing and sales initiatives included new digital and print campaigns. We also continued with our targeted on-site marketing and sales initiatives and focused on community outreach at homes with lower occupancy levels. Our success in driving occupancy, coupled with rate increases, added to the strength of our second quarter results. Moving to Slide 6. Further adding to our results are the demographic tailwinds in Canadian Senior Living. We are starting to see the first wave of baby boomers considering retirement living, a trend that will only intensify in the coming years as the number of seniors over the age of 85 is expected to reach approximately 1 million by 2026 and further grow by 65% over the following 10 years. Waitlist for long-term care beds continue to grow. In Ontario alone, the current wait list for bed is approximately 43,000. And in British Columbia, the average wait time for the long-term care bed is over 100 days. At the same time, construction starts of new retirement residences remain at all-time lows. These exceptional tailwinds are also starting to resonate with a growing investor base. At Sienna, we have seen a significant increase in investor interest, both from first-time investors and those returning to senior living, being at the intersection of healthcare, hospitality and real estate makes our company attractive to a broad range of investors. We believe that maintaining our strategy of owning a diversified portfolio of long-term care communities and retirement residences contributed to our sector-leading stock market performance and investor interested this year. Diversification adds to the financial strength of our business as it allows us to capture higher operating margins in our retirement portfolio while benefiting from stable government-funded long-term care operations. We are also increasingly leveraging the programs and insights gained at our retirement operations in our long-term care communities and vice versa, all with the goals to better serve our residents and meet their evolving needs. For example, we are always looking for ways to add more hospitality elements to our long-term care operations while expanding care programs at our retirement residences to meet the changing demographics of our residents. We believe that this approach will further help us to distinguish our company as a senior living provider of choice. Moving to Slide 8. We are pleased with the development progress we have made over the past year at our two projects under construction in North Bay and Brantford, which we expect to complete in the second half of 2025. With respect to our most recent development, redevelopment in Keswick work for the new long-term care community is out for tender, and we expect to start construction later this year. The expected development yield for the 160-bed home which will replace the current 60 beds and add 100 new long-term care beds, is approximately 8.5%. Combined, these developments will support the government’s important goal of rebuilding Ontario’s older long-term care homes and benefit the fast-growing senior’s population. Team member engagement and retention remains a core focus of our initiatives. Our share ownership program is one of many ways we drive alignment. It fosters a deeper sense of ownership and commitment to a shared purpose and values and creates alignment between our team members and our shareholders. During the second quarter, we issued shares to 1,400 of our new team members, bringing the total number of active participants to nearly 7,000. This is just one of many initiatives that we introduced at Sienna in recent years to ensure we are aligned with our team members. Our signature program SPARK, which is a version of Dragon’s Den, also remained very successful. During the quarter, we announced the winners of the second round of SPARK, which received 175 submissions. The winning idea came from two members in Long-Term Care Home in Cremo, Ontario, who came up with a tool that supports team members in reducing resident falls. In a pilot for study using this tool, residence falls were reduced by 68%. We are now planning the rollout of the falls prevention tool across our Long-Term Care platform, and we could not be more proud of Martina, who’s an Associate Director of Care and Taylor, a PSW. And this idea earned them $15,000 in the first prize. With that, I will turn it over to David for an update on our results.
David Hung: Thank you, Nitin, and good morning, everyone. I will start on Slide 11 for financial results. In Q2 2024, total adjusted revenues increased by 10.7% year-over-year to $219.5 million. This increase was largely due to rental rate and occupancy growth as well as increased care revenue in our Retirement segment and a government funding increase, higher preferred accommodation revenue and a WSIB refund primarily in our Long-Term Care segment. Total same property net operating income increased by 18.5% in Q2 2024 to $46.1 million compared to $38.9 million in Q2 2023. NOI in our Long-Term Care segment increased by $5.5 million, largely due to higher revenues offset by inflationary expense increases. One area where we were able to consistently achieve cost reductions is in agency staffing. We were able to reduce costs by 1/3 from approximately $6 million in Q2 2023 to $4 million in Q2 2024. Minimizing agency stopping remains a key objective for Sienna. In our Retirement segment, same-property NOI increased by $1.6 million in Q2 2024 compared to the last year, primarily as a result of rate growth as well as improved occupancy. Moving to Slide 12. During Q2 2024, operating funds from operations increased by 21.6% to $26.1 million compared to last year, primarily due to higher NOI, OFFO per share increased by 21.4% to $0.357 in Q2 2024. Adjusted funds from operations increased by 14.6% to $22.4 million compared to last year. The increase was due to higher OFFO, offset by a decrease in construction funding income and increased maintenance capital expenditures. AFFO per share increased by 14.6% to $0.37 in Q2 2024. In line with our strong results, we continue to improve Sienna’s AFFO payout ratio lowering it to 76.2% in Q2 2024. This was an 11.1 percentage point decrease compared to the year prior. With respect to our debt metrics, we have seen notable improvements and further strengthened our balance sheet. We maintained ample liquidity with $297 million at the end of Q2 2024, and we extended the weighted average term to maturity of our debt to 5.5 years from 5.1 years in Q2 2023. Our debt-to-adjusted EBITDA was 6.8x at the end of Q2 2024 compared to 8x at the end of Q2 2023, and our interest coverage ratio increased to 3.7x in Q2 2024 compared to 3.5x in Q2 2023. We ended Q2 2024 with debt to adjusted gross book value of 43.7% and $1 billion of unencumbered assets. This provides financial flexibility and supports our refinancing initiatives at attractive rates, in particular, as we actively explore opportunities to refinance our upcoming debt expiry in the fourth quarter of 2024. We have the ability to refinance a portion of our expiring debt with proceeds from a new financing or up-financing of assets with CMHC insured mortgages at interest rates significantly below those of other financing options. Our strong financial position will also support our growth initiatives, including the redevelopment of our older long-term care homes. We will continue to prudently manage our capital and staggered construction starts to ensure our debt ratios would remain strong as we support the Ontario government in this important initiative. With that, I will turn the call back to Nitin for his closing remarks.
Nitin Jain: Thank you, David. As a company, we play an important role in bringing residents, team members, families and our community partners together to make life better for one another. Some of our most impactful initiatives are highlighted on the latest ESG report we published yesterday. The theme of the report is to create community, which is one of Sienna’s core values. Our report includes numerous inspiring examples of team members and residents who exemplify Sienna’s purpose and values. Like our team members in British Columbia, who have implemented sector-leading emergency preparedness strategies this year based on their firsthand experience and outstanding efforts during last year’s wildfire season. On there is a print of Sienna’s Sparkle Award, which recognizes residents who go above and beyond to cultivate happiness at their communities. One such recipient is Elaine Lee bold, the 93-year-old Resident Council President at our North Bay Long-term Care Home. Elaine was the first to sign the legacy wall at our Northern Heights redevelopment site. Along with team members, she has been a champion of the new home by keeping her fellow residents informed and engaged with the project. As we look into the second half of 2024, we have never felt more confident upon Sienna’s ability to create value for our stakeholders. As a result of the numerous strategic initiatives we put in place alongside a generally improving macro environment, we expect the long-term care NOI for the full year of 2024 to grow in the low double-digit percentage range compared to last year. With respect to our retirement operations, we expect same-property NOI to benefit from continued occupancy and rental rate growth as well as other initiatives to optimize revenue and grow in the high single-digit percentage range. Further adding to our optimistic outlook is the strength of our balance sheet and improving capital markets. Combined, they will continue to support our efforts to add value through capital improvements, redevelopment and select opportunities to grow our asset base. But more than anything, our success depends on our team members and the strong alignment with Sienna’s purpose, vision and values. On behalf of our management team and our Board of Directors, I want to thank all of you for your continued support and commitment. We’re now pleased to answer any questions you may have.
Operator: [Operator Instructions] Our first question today comes from Lorne Kalmar with Desjardins. Please go ahead.
Lorne Kalmar: Thanks. Good morning and congrats on another solid quarter. Maybe just on the retirement side, it looked like you guys were able to get the same property margins flat year-over-year, which was a nice improvement versus the prior quarter. Do you expect this trend to kind of continue or do you think you can start pushing the same property margins even higher in the back half of the year?
Nitin Jain: Thank you, Lorne. Our view, we have been focused on same-property NOI growth. So that’s the outlook that we will provide, which we have provided. But frankly, it will come really only from two places, which is occupancy and from margin growth. I think this is – we like the trend which we are in, but one quarter doesn’t really constitute a trend for us. Our focus is to grow margin. And one of the things we’re realizing is that providing more care, obviously, keep residents in homes but also comes at low margin, and in some cases, no margin. that’s what we are resolving for at the moment. So we do expect our margin to grow over time, but just we haven’t provided any outlook or timing for it.
Lorne Kalmar: Okay. Fair enough. And then maybe sticking with the same-property theme on the LTC front. Obviously, you guys increased the guidance range. Was the WSIB payment the big factor there? Or was there something else that you weren’t seeing at the beginning of the year that you’re seeing now that drove the increase?
David Hung: Yes. No, thanks for that question, Lorne. So I mean the WSIB refund was part of our increase in guidance. But also what increased our guidance was really just the stability of our long-term care operations, the increase in the OA funding which has given us the confidence to increase our guidance versus the last quarter.
Lorne Kalmar: Okay. And then – so – but with the OA funding, like that was, I guess, already known last quarter. So is now that it’s been implemented, you’re seeing something different? I’m just trying to get a better idea here.
David Hung: No. I mean, we knew that – we did know that last quarter. I think in addition to that, just the continued stability within our long-term care operations, the fact that we’ve also been able to maintain our agency costs well under control has helped with the increase in our guidance.
Lorne Kalmar: Okay. Perfect. Thanks for that. And then last quick one for me. Obviously, one of your peers is pretty active on the acquisition front. I was wondering if you’re seeing anything out there that has sparked your interest.
Nitin Jain: We continue to look for opportunities. And one of the things that is unique about us is that we can acquire both in long-term care and retirement, and including campuses. So it puts us in an enviable position. I think we’ll continue for opportunities, even though in the last 2 years, we have not made a big announcement. We have nearly $250 million in active construction and then another one shortly. And our development projects are quite unique because the day they open, you get a contract from government, which frankly, reduces the cost on our balance sheet from an $80 million project to $25 million. And specifically to acquisitions, I think we’ll continue to look for opportunities, and we do expect to grow in the next 12 to 18 months.
Lorne Kalmar: Okay. Great. Thank you so much for the color. I will turn it back.
Nitin Jain: Thank you.
Operator: Our next question comes from Jonathan Kelcher with TD Cowen. Please go ahead.
Jonathan Kelcher: Thanks. Good morning. Just going back to the retirement same property, the same property expenses were up 10% year-over-year. And I think you maybe touched on this a little bit, Nitin, but could you maybe give us a little bit of color on what drove that? Was that simply just more care for in-place residents? Or there elevated marketing to drive occupancy?
Nitin Jain: Yes. I think both of those things, exactly, Jonathan. It is more care expenses, it is also more marketing spend. And our – when we look at – just based even the previous question, our margin has been a bit all over the place in the last quarter. In Q1, we were at 35.6% last year, and we ended up 34.9%, average of 36%, we started lower this quarter. We do know that we have an opportunity to increase margin and that’s the work our team is doing. We have a pretty good insight where the margin can be. We just not reached at a point where we can give that outlook you should expect our margin to continue to grow. Because we have to do two things, one is making sure we are spending marketing in the right place and secondly, when we have the expenses for care that we are charging for it appropriately.
Jonathan Kelcher: Fair enough. If I look back pre-pandemic, and I know your portfolio is a lot different now, but you were in the low to mid-40s. Is that – if you’re sort of targeting towards 95% over time and not really – I’m not holding you to any time frame on that. But if you get to 95%, should we be thinking low to mid-40s? Is that the right way to think about it?
Nitin Jain: It is quite a bit out there in terms of timing. What I would say is the portfolio has changed. So for example, in 2019, we made it on 45% margin. But at that time, the proportion of care was a bit lower, and care would never have that higher margin. So I don’t think we’ll get to 44%. But could it get closer to 40% and a little bit up? Yes, that is possible. But again, I’m just speculating at this time because we really haven’t given out any guidance on it specifically.
Jonathan Kelcher: Okay. And then just on the G&A, is Q2 a good run rate? Or were there any onetime things in there?
David Hung: Yes. No. I think that Q2 would be a relatively good run rate. We did see a little bit of uptick in our stock comp. But generally speaking, I think that would be a good run rate going forward for the rest of the year.
Jonathan Kelcher: Okay, thanks, guys. I will turn it back.
David Hung: Thank you.
Operator: Our next question comes from Himanshu Gupta with Scotiabank. Please go ahead.
Himanshu Gupta: Thanks you and good morning. So just on LTC guidance increased to double-digits. Obviously, it includes the benefit of one-time WSIB fund. I mean, is it fair to say that your Q3 and Q4 NOI expectations are unchanged from last quarter?
David Hung: Yes. I mean, generally speaking, they would be relatively unchanged, maybe uptick by a little bit. But our overall guidance, excluding the one-time funding and the retro, would be in the low double-digit range overall.
Nitin Jain: I think there are few things, Himanshu, that changed from Q1. And again, some – Jonathan asked the same question – or Lorne, sorry. And so when the last quarter when we released results the OE funding just came out, we were just making sure that we are not missing any expenses that relates to it. We had a whole strategy on driving preferred accommodation, which the team has done an exceptional job. So we did not factor it enough. And the third one, just on the agency one, we made a lot of progress last year, and we just wanted to make sure that progress is sustainable. And the team has proven, after four quarters that it is sustainable. So that gave us more comfort in upping our guidance.
Himanshu Gupta: Awesome. Okay, thank you. And then just moving to retirement homes. And thanks for providing the move-ins and move-outs data in Q2. I mean, how does the move-in, move-out compared to the last year? I mean is there a theme, any trend? You’re seeing higher movements or lower move-outs or anything for you to elaborate there?
Nitin Jain: Yes. So in the past, we have seen a pretty consistent number of move-outs. And really, our occupancy is fluctuated because of move-in. This quarter, we saw a little bit lower number of move-outs. So we are cautiously optimistic that we are headed in the right direction. And I guess no surprise there. The math here is more move-ins than move-outs would drive occupancy. And we are now getting into the fall season, which is usually stronger, so we are expecting that occupancy will grow as we move forward. And the focus for us has been, as we talked about before, rather than just looking at move-in, move-outs in total is really looking at the homes which with a lower occupancy. Because – since we are close to 89% occupancy, we have many homes in our portfolio, which are 95% plus, some of them are at 100%. So the ones we are really – and the – in the ones which are 95% plus, they have good waitlist for kind of rooms that people are looking for. So the area we are focused on is per home the homes with lower occupancy, that’s where the move-in, move-out our bigger focus, including how many leads we get in a week, how many conversions we have, because that’s eventually is what will drive occupancy home. And 95% might go to 95.5% and 96%, that would not really make such a difference versus if something is at 70%, we’re going to 85%, 90% because that’s the focus for a few homes.
Himanshu Gupta: Yes. Okay, thank you. And are there homes which are like 80%, less occupancy?
Nitin Jain: Yes. We have a handful of homes which would be in that range, but I would say a very small handful.
Himanshu Gupta: Okay. Thank you. And then just sticking to the Diamond Home same-property NOI, I mean obviously, high-single digit growth in 2024, I mean given your commentary around occupancy gains and margins, do you think it is repeatable in 2025 as well?
Nitin Jain: We haven’t really given any outlook for 2025, but good for you to try, Himanshu. So, I think that’s something you will have to make a guess yourself.
Himanshu Gupta: Okay. Maybe I will ask this question, a simpler one. Is there a thumb rule here, as for every 100 basis point of occupancy increase, as we head towards 95%, is there like an NOI margin, it should go up, or is there a desirable NOI margin?
David Hung: Yes. That’s – it’s a good question, Himanshu. So, broadly speaking, for every 1 percentage point we go up in occupancy, that would be about $2 million of revenue and about 75% or 85% of that would be margin. The reason being it’s pretty high margin because the only incremental cost would be some additional food, maybe some extra housekeeping, laundry staff, etcetera.
Himanshu Gupta: That’s great color. Thank you, David. Thank you, Nitin. I will jump back.
David Hung: Thank you.
Nitin Jain: Thank you.
Operator: Our next question comes from Giuliano Thornhill with National Bank Financial. Please go ahead.
Giuliano Thornhill: Hey. Good morning guys. Maybe just on the marketing spend that you guys mentioned earlier. Could you provide some color just on the geography or like suite type that requires this higher investment?
Nitin Jain: Thank you. There is really no – it’s not focused on suite type or geography. And we don’t really do any national campaigns because our focus is very local. End of the day, retirement, people make a choice very locally. So, no one is moving from Vancouver to Muskoka just because we will have a different brand. So, the focus is very, very specific, and the spend is more focused on driving occupancy at the lower-occupancy homes. The question was around homes which are around 80%, 85%, lower. And that’s where we are spending money to ensure we have the right focus and the right opportunity to drive that occupancy.
Giuliano Thornhill: And then just do you think like the return to kind of pre-COVID activities may have like affected demand for some of your properties or like even the occupancy trends that you have seen to-date?
Nitin Jain: I am not sure I follow. Can you just maybe expand a bit more…?
Giuliano Thornhill: Like the more secondary markets that your sites are located within. Just I feel like more people are looking to move towards the cities versus away. And have you noticed that within your retirement occupancy?
Nitin Jain: Actually not at all, many of our sites which are in smaller markets continue very well, and the reverse is also true. So, I don’t think it is specific to specific areas because the – in a macro level, what remains true is that the demand is higher than supply of retirement homes. And only in a couple of markets, the supply is higher, but that will only get absorbed shortly. So, I don’t think it’s an issue of demand and supply because we think demand is higher. It is more an issue of, if there are three retirement homes, they all will be full eventually. The idea is who will get full first.
Giuliano Thornhill: Okay. And then just last one on the Series A maturing, have your plans or intentions maybe changes now that spreads have come down and the rate path outlook’s a little more certain than before?
David Hung: Yes. So, I mean we continue to look at all options right now. Because of our conservative balance sheet, we continue to actively pursue CMHC financing because that continues to be the lowest rates available out of our options. But we would also have other options as well, including drawing on our unsecured revolver, conventional mortgages, as well as possibly another issuance of unsecured bonds.
Giuliano Thornhill: Alright. Okay. Thank you, guys.
Operator: Our next question comes from Dean Wilkinson with CIBC. Please go ahead.
Dean Wilkinson: Thanks. Good morning guys. Most of my questions have been answered. Just as it comes down to sort of these retroactive adjustments and things like that, do you guys have any expectations of more stuff coming in future quarters? Like do you have any line of sight in terms of perhaps appeals or things around different payments that may still yet come in?
Nitin Jain: I think the WSIB, one that’s a bit unique. But from a government perspective, they are becoming more common, and different provinces have a different view where the funding would reflect, one thing, but they understand their cost is always higher. And I think one of you talked about that in the past, that because the funding was not there, we were punitive. So, the fact that the funding has come up, we should not be punitive again. So, I do think time-to-time, we would see these retroactive adjustments because the last 4 years or 5 years were very challenging, and I think different governments took a different approach in how to fix that. So, I don’t think it will be that unusual for us to once a year get some funding correction in one of the provinces.
Dean Wilkinson: Got it. So, it’s kind of like it was sort of before we even knew what COVID was, you are kind of going back to that situation, I suppose.
Nitin Jain: Yes. I just think not only that things have changed in the last 4 years where government is focused on ensuring the sectors remains viable. We need to build more homes, and that only happens with the appropriate funding.
Dean Wilkinson: Got it. And then maybe, David, I mean you are obviously talking to lenders and syndicates. Where do you think pricing would come in right now if you were to say, go to the unsecured market, which there is a tremendous amount of demand on that side for product?
David Hung: Yes. No. So, you are absolutely right. There has been a tremendous amount. We have seen a lot of demand. We stayed very close to the market right now. Rates right now might range in the 5.25% yield. And they have come down significantly. A year ago, we might have been looking closer to 7%. So, both GoC rates and spreads have come down quite significantly. And right now, it might be around 5.25%.
Dean Wilkinson: Yes, that probably gets lower by the time we get to the back half of the year. That’s it for me. Thanks guys.
Nitin Jain: Thank you.
David Hung: Thank you.
Operator: Our next question comes from Pammi Bir with RBC Capital Markets. Please go ahead.
Pammi Bir: Thanks. Good morning. I just wanted to come back to the comment on the lower occupied assets. Do you have an estimate of maybe what portion of the portfolio that they currently represent? And if you had to estimate, on average, where is the occupancy in that segment versus, say, the rest of the retirement portfolio?
Nitin Jain: I don’t have to guess. I have the numbers. We just haven’t got into that level of detail, Pammi, before. But just to maybe build a bit of context, I would say more than half of our portfolio would be what we call stabilized, which is 95%-plus or right in that range. And then if you break the portfolio further, the other 25%, 30% of it would be getting very close to it or we have line of sight to get to that. And then probably 8 or 10 sites which will be anywhere from, some could be as low as 75% as a way all the way up to 85%. So, that will be the quantum of it. In some cases, it is external. So, if you are in the Aspira market, your occupancy is lower because there is more supply in that market. In other cases, we had a home which was not performing well, and with the right leadership structure change and occupancy – and the right sales and marketing, we saw occupancy change by nearly 1,000 basis points in the last eight months. So, I just think there is – out of those seven or eight homes, a couple of would be market-driven. The other five or six is, frankly, we have to do things differently to drive occupancy, and the team is all over that to deliver on it.
Pammi Bir: Okay. That’s very helpful. Thanks. Maybe just coming back to the comment on retirement margins, and it kind of ties into what you just said on maybe more focused strategies on some of these lower-occupied assets. But maybe can you comment on the use of incentives? Are you offered really much at this point, just given how – where the backdrop sits? And if there are, do you see that maybe burning off and maybe helping margins in the year ahead?
Nitin Jain: Our incentive strategy has not really changed. So, the common incentive in usual markets is around a month free rent. And I think that incentive is pretty common. We are seeing some development projects offering significant incentives and those eventually come back to haunt you in later years. So – and since we are not a developer or trying to flip our assets, we have no intention of doing that. So, for example, we are leasing up our asset in Niagara Falls. And giving significant incentives would be a good way to drive occupancy. But again, we are not after occupancy, we are about margin dollars. So, we have not taken any aggressive approach in that.
Pammi Bir: That’s great. Thanks very much. I will turn it back.
Operator: We have no further questions at this time. With that, this will conclude today’s conference call. Thank you all for your participation. You may now disconnect.
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