Good morning, ladies and gentlemen. Welcome to the Chartwell
Thank you, Melanie. Good morning and thank you for joining us today. There is a slide presentation to accompany this conference call available on our website at chartwell.com under the Investor Relations tab. Joining me today are Karen Sullivan, President and Chief Operating Officer Sherry Harris, Chief Financial Officer and Jonathan Balakia, Chief Investment and Chief Legal Officer. Let me remind everyone that Retailer.
During this call, we may make statements containing forward looking information and other non GAAP measures. I direct you to our MD and A and other securities filings Retailer. For information about the assumptions, risks, uncertainties inherent in such forward looking information and details of such non GAAP measures. Retail. More specifically, I direct you to the added disclosures in our Q2 2021 MD and A under the heading COVID-nineteen Business Impact and Related Risks Retail Retail Retail Center for a discussion of risks
and uncertainties related to the pandemic.
These documents can be found on our website or at sedar.com. For the last 17 months, our focus has been on keeping our residents, their families and our staff safe during the most significant public health challenge of our lives, With the new variants of the virus still posing heightened risk, this pandemic is not over and we continue to be vigilant and careful. Having said that, it is refreshing to see that high vaccination rates in the Canadian society overall and in our residences specifically contributed to a We have already begun to see the signs of this upcoming recovery. Our leading indicators, website traffic, initial contacts and personalized tours as well as the volume of move ins have been gradually improving for several months Retail and Now Reaching Pre Pandemic Levels. I'm also confident that numerous initiatives our operations, marketing and sales teams are putting in place Retailer.
Across the country, we'll continue to position Chartwell as the national leader in our sector, manifest and better services and care delivered to our residents Retail and ultimately translate to improving financial results. Karen and Sherry will provide you more color on these trends and initiatives,
Retirement Residences in outbreak. This has been made possible due to the high vaccination rates Retailer and the efficacy and effectiveness of the vaccines. I'm also pleased to report that 96% of our residents have received one dose Retired Care staff lead the way with a vaccination rate of 90% with at least one dose Retired and 86% of our retirement residents and staff have had at least one shot. Quebec staff vaccination rates are slightly lower Retailer Program at 79% because these essential workers got access to the vaccines later than in the rest of Canada. We expect these percentages to continue to increase Retailer and are currently implementing a policy whereby staff who are not vaccinated will be tested prior to every shift and will have to wear additional PPE.
Retail Homes as well as high immunization rates in society overall have led to a significant reduction in restrictions Retailer for our residences across the country. We are now able to have residents eat in larger groups in our dining rooms, resume group activities, return to a more normal resident experience Retail Retail and Company. We will no doubt assist us in improving the number of resident referrals that we receive, which have the highest conversion rates of any of our initial contacts. Retail. To support this, we've developed a comprehensive new referral program called Club Chartwell.
It is directed at residents, family members and Retirement Residence. Our call to action, Make a Friend a Neighbor, is focused on earning referrals, not buying them. Retail. We strongly believe, given the product and service we are offering to our residents, that this is a much more genuine and compelling approach. Retail.
The easing of restrictions has allowed us to open up to offer in person personalized tours across the country, which more and more of our prospects are taking advantage of. Retail. All of this has led to improvements in our leading indicators, including a 14% increase in initial contacts in Q2 compared to Q1 Retail and 141% increase compared to Q2 2020. Overall in Q2, we have had the highest initial contact since Retailer before the pandemic, and we have seen 3 straight quarters of growth. In addition, our personalized tours are up substantially compared to last year.
Retail. Our permanent move ins were close to double that of Q1 and are at 70% of Q2 2019 volumes. Retail. Our move outs in Q2 decreased by 9% compared to Q1 and are 18% lower than Q2 2019. Retail.
Our occupancy remained flat in July and is forecasted to grow slightly in August, and we expect based on these leading indicators that we will Retail Homes. Turning to Slide 5, to support our recovery efforts, our marketing campaign remains multifaceted and agile. Retail. This includes our It's Time to Live Again multimedia campaign, which will be followed by a new campaign beginning the last week of August and running until mid November, Retail, which is our peak leasing season. Our customer experience strategy continues to roll out, including recently produced online and virtual training sessions on the Chartwell experience to augment our in person sessions delivered by our directors of customer experience.
Retail. Throughout the pandemic, we believe this focused effort has helped us to stand out from the competition, as evidenced by our increasing number of Google reviews Retailer and an increase in our score from 4.56 out of 5 in 2019 to 4.7 in 2021, with an increase in 5 star reviews from 83% to 88% in that same period. Finally, turning to Slide 6, Retail and to welcome more residents who need these services. With the launch of our new Care Assist program in Ontario earlier this year, we are now better positioned to deliver more much needed Retail Retail Care and Assistance to our residents, and as a result, we are beginning to see steady growth in care revenue month over month. Retail project in order to create more full time positions in our residences across the country and better align staff based on occupancy and care service offerings in each home.
Retail. Finally, we're beginning to see a reduction in some of our expenses, such as PPE and additional staffing that was previously required to deliver meals to Retreats and provide additional meal seatings in our dining rooms based on reduced capacity requirements. Overall, Retailer. With the success of the vaccination program in our sector combined with the easing of its restrictions, we believe we are now on the road to recovery. Retail.
I'd now like to turn it over to Sherry to discuss our financial results.
Thank you, Karen. As shown on Slide Retail Retail. In Q2 2021, net loss was $4,600,000 compared to a net loss of $1,900,000 in Q2 2020. Retail. For Q2 twenty twenty one, FFO was $34,800,000 or $0.16 per unit Retail Retail
Retail Retail Retail, compared to $39,000,000 or
$0.18 per unit in Q2 2020. The decrease is primarily due to lower occupancy, continued investments in resident care and infection prevention and control measures and lower interest income, Retail, which were partially offset by lower finance costs and general and administrative and trust expenses. Retail. Turning to Slide 8, I will discuss our same property operating platform results. Our same property Retail.
Adjusted NOI decreased $4,400,000 or 6.5 percent in Q2 2021 compared to Q2 2020. Retirement Occupancy was 77.5 percent in Q2 2021 compared to 85.6% in Q2 2020. Retirement Occupancy was 76.6 percent for Q2 2021 compared to 84.5% Retailer Q2 2020 or a decline of 7.9 percentage points, which resulted in lower revenue of approximately $14,500,000 Retail Retail Retail. We are pleased that with the continued lifting of pandemic related restrictions, Retailer. Move ins have significantly rebounded compared to Q2 2020 Retired and approved since Q1 2021.
Move outs remained slightly below pre pandemic levels. Retail. Move ins still remained lower than move outs in Q2 2021, which resulted in declining occupancy for the quarter overall. Retail. In addition to the impact of lower occupancies on our Q2 2021 results, the following factors affected our same property retirement operations results.
Retail. We continue to make investments and initiatives to enhance residents and staff safety. We have maintained and enhanced our staffing levels, Retail and we have experienced higher repairs and maintenance and insurance expenses. We partially offset these negative impacts Retailer by generating increased revenue from inflationary and market based rental and service increases and also from the provision of additional care and services Retail Retail Retail Retail Retail Retail. With fewer departures during the pandemic to long term care, their needs have increased.
Retailer. Our food and supplies costs also continue to be lower due to lower occupancies. Our net pandemic expense recoveries were Retail Retail Retail Retail Retail Retail and the Company's Q2 2021 compared to net pandemic expenses of $4,600,000 in Q2 2020. Retail. Our same property long term care home occupancy was 83.1% compared to 92.6% in Q2 Retail 2020, a decrease of 9.5 percentage points as a result of reduced move in activity during the pandemic, Retailer, as well as government interest of limiting occupancy in our Class B and Seabed Long Term Care Homes.
Retailer. Occupancy protection provided by the Ontario government remains in place until the end of August 2021. Retail. There continue to be significant waiting lists for admission with approximately 38,000 people on the waiting list for long term care Retirement requirements requiring these essential services that is about 8.6% higher than pre pandemic levels. Retail Retail.
Compared to Q1 2021, our long term care occupancy increased by 4.3 percentage points Retailer with June 2021 occupancy at 85.2 percent of total capacity. Retail Retail. For Q2, 2021, same property adjusted long term care NOI increased Retail Retail Retail Retail Retail Retail Retail and Retail Retail and Company. This was partially offset by lower preferred accommodation revenues
Retailer.
Restrictions can be gradually lifted without exceeding hospital capacity this fall. Retailer. Through July 2021, restrictions have been significantly reduced in all four provinces in which we operate, Retail and we've seen a corresponding increase in personal tour bookings, lease signings and permanent move ins, which are approaching pre pandemic levels. Retail. And as a result, occupancy stabilized in June 2021 at 76.3%.
We believe that if pandemic related restrictions Retail Retail. Continue to ease as expected, move ins and occupancy in our retirement residences will begin to rebound in the fall. Retail. As restrictions and direction are lifted, government support has also begun to decline, and this is likely to result in Retire Direct Property Operating Expenses in the short term, while we gradually phase out the associated additional staffing and supply costs. Retail.
We collected substantially all rent and service fees for July August, consistent with our past experience. Retail. As you can see on Slide 10, our interest coverage ratio was 2.8x at June 30, 2021. Retail. Our debt to gross book value calculated using the historical cost of our assets Retail Retail with 52.8 percent at June 30, 2021.
Our net debt to adjusted EBITDA ratio was 10.2 times. Retail. Turning to Slide 11, at August 5, 2021, liquidity amounted to 439 Retail Retail Retail, which included $75,400,000 of cash and cash equivalents and $364,400,000 return of borrowing capacity on our credit facilities. In addition, our share of cash and cash equivalents within our equity accounted JVs was 15 point Retirement. As of August 5, 2021, we have $48,200,000 of mortgage maturities remaining in 20 21 that are proceeding in the normal course.
In addition, Chartwell's share of remaining mortgage maturities held in its equity accounted Retail JVs as at August 5, 2021 is $15,100,000 refinancing of which is also proceeding in the normal course. Retail. Our mortgage maturities remain well staggered with an average term to maturity of 6.5 years at June 30, 2021. Retail. At June 30, 2021, our unencumbered assets had a value of approximately $1,000,000,000 Retail.
We currently have 4 projects under construction, which are budgeted to require an additional $100,200,000 as noted on Slide 12. Retail. We are recommencing our construction of the 90 suite addition to Ridge Point Retirement Residence in Kamloops, BC. Retail. In addition, we regularly reinvest capital in our owned property portfolio with the goal of growing our property NOI and protecting and maintaining our properties.
Return. We expect to continue to be selective in our capital allocations in 2021. Retail. As noted on Slide 13, our distribution reinvestment program, the DRIP, which was temporarily suspended in March 2020, was reinstated Retailer. Our participation rate for the June 30, 2021 distribution paid on July 15 with 24%.
Retail. I will now turn the call back to Vlad to wrap up. Thank you, Sherry. I'm proud of how Chartwell responded and persevered through this pandemic. This response, which continues to date, is a clear testament to our people and our culture.
Making people's lives better is our purpose. It is why we exist. The heroism with which our people have been living our culture and our values through these trying times has been extraordinary. We are now ready and excited to welcome new residents to Chartwell Properties across the country and create personalized memorable experiences for each one of them. Our culture and our people give me confidence that we will overcome this pandemic and we'll emerge from it stronger than before.
I'm optimistic that we have begun our path recovery with the strong leading indicators and numerous initiatives being put in place in our homes. Retail. The long term prospects of our sector remain bright. We deliver much needed services and care to Canada seniors. This need has not gone away.
Likely, it has been exacerbated by the pandemic, creating a pent up demand for our services, which will support continuing occupancy recovery. Retail. The growth in population of people over the age of 75 is beginning to accelerate with 2022 growth projected at 5.3%. Retail. In the medium term, the slowdown of new construction starts during the pandemic will result in fewer new residence openings in 20222023, Retailer.
Further supporting occupancy recovery. Housing markets remain robust across the country, which makes it easier for our prospective residents to sell their homes and Finance Day Retirement Living. I want to finish by thanking our employees in our residences and corporate offices Retailer. Thank you for your courage and sacrifice, for your kindness and empathy, for your resilience and tenacity and for doing the right thing all the time, every time. Thank you for everything.
Thank you for your time and attention this morning, and we would now be pleased to answer your questions. Melanie, over to you.
Thank you. We will now take questions from the telephone lines.
Retail. Thanks. Good morning. Good morning, John. First question, just I guess to lead off on the retirement, do you expect to get any more government funding in the back half of the year?
Jonathan, I think it will be significantly reduced as the directives have lifted. There are reduced supports some of those incremental expenses. We do expect those to come down through Q3 and Q4 and not be material into 2022. Retirement.
Okay. And I guess just sticking with costs on the retirement side, you guys in the MD and A, you talked about them remaining elevated Retail Retail Retail. But I guess, Karen, in your remarks, you were talking about expenses coming down. Could you maybe Walk us through what you expect and I think what I'm really trying to get at is if we look forward to 2022 How far do we have to look forward to you think you can sort of get back to 2019 cost levels?
So, the expenses Retailers. We are already reducing our PPE because when you have outbreaks, you just use so much more of that. So that we've seen Reducing over the last number of weeks, several weeks, but we haven't had an outbreak. And then the other big change with the restrictions Retailer. So where we were having to have people sit at a table for 2 instead of the typical 4, That meant we had to add additional shifts to cover that off.
We don't have to do that anymore. And so we're starting to It's slightly down in terms of requirements, although it's still higher than what we would have done pre pandemic.
I think it's fair to say that the expenses will remain elevated in 2021. We will be gradually bringing them down, but we will not do anything to compromise safety Retailer. So the expectation should be that they're gradually coming down throughout 2021 and assuming there's no other waves or other outbreaks,
That is helpful. And then just lastly on the long term care, I guess the funding guarantee runs out the end of this month. And in June, you said you guys said you were at 85% or so occupancy. Do think you get most of your homes to 97% by the end of this month?
Yes. They're mostly on track to do that.
Retail. Thank you. We will take the next question. Please go ahead.
Himanshu Gupta. Thank you and good morning. So just on retirement home occupancy, so August occupancy is expected to be flat Retail. Any markets or province where you think August occupancy is tracking higher in the previous 2 months. I mean, the question is, are there any regions which are leading the recovery charge?
So as we would have expected, the Western Canada platform is leading the way on recovery, Retailer, Quebec is a little slower due to the more independent nature of our Retirement, which makes it somewhat more discretionary. So, it's going in that order.
Yes. And would you say Western Canada or British Columbia or Alberta, have they seen like positive month over month in August versus July, for example? Retail. Yes. Okay.
That's great. And then on the same lines, I mean, if we look at the Retail. You know, operators have seen some recovery in Q2 over Q1. So any read across for Canada, like what needs to happen here to see that kind of recovery?
Retail. I think it's as we expected Himanshu. We knew that we would be sort of in that 3 to 4 month lag behind the U. S. In the summer months in Canada, which is Retail Retail.
We felt that occupancy recovery for Canada was going to really start in the fall of 2021. I think our expectation continues
restriction side. I mean, we understand most of the restrictions have been lifted. Any new restriction expected with respect to Delta variant? Anything you have heard from public health which was further delayed the recovery share?
Not at this time. They have been reduced. We still have some isolation requirements, but most everything else
Got it. Okay. And maybe just final question on Quebec. I mean, obviously, you saw bigger occupancy declines quarter over quarter, Retailer. Bigger C and OI declines as well compared to the other provinces.
Anything specific? Although you did mention that
I don't think that there's anything specific to Quebec market outside of this larger occupancy declines than anywhere else and that is driven by the independent nature of the residents there and The severity of restrictions that were put on them during the pandemic. And so other than that, I don't think there's anything specific to Quebec.
Retail. We will take the next question. Please go ahead.
First name is Tal, t a l, and the last name is
Retail. I wanted
to talk maybe a bit of first just on labor. Retail. It was a pressure point pre COVID. It became very much a pressure point during COVID. Can the labor picture get better coming out of it?
How are you thinking about how the labor market is going to transform for your business going forward?
I think it's a great question. I think it will take time for the labor market to stabilize. As you pointed out, there were issues pre pandemic. Pandemic exacerbated them Retailer. Significantly, the issues are just pure shortage of staff.
Now the exacerbation that pandemic caused It was primarily because of the single side orders. Those, once they're lifted, will help to kind of balance out, I guess, the labor situation in some homes. But generally, it will have to take time and we are putting a number of initiatives in place at Chartwell to make sure that we're as Well positioned as possible to compete in this labor market, including creating more full time jobs through the staffing project that we have ongoing in our retirement homes and long term care homes, putting some systems in place that would make recruitment easier Retribution policy where we start bringing more people in that would be willing to work in these settings, and that will take time.
Retail. Okay. And then I'm just wondering too now that everyone's kind of starting to reemerge into a more normal Retailer. The surge of demand, but occupancies are low. People have been hurting.
Do you think like are we going to see a consolidation phase here? Are we going to Retail. Maybe a little bit more aggressive pricing to try and get occupancies moving in the right direction. What's your sort of Retail. If you survey the market, what do you think you're probably going to see over the next year or 2?
So we already are seeing Retailer. There's some discounting going on across the country by our competitors, and we've been pretty clear Retail. With respect to our approach to that, we want to understand what matters to the prospects and try to deliver that to Retailer. To the extent possible as opposed to doing blanket discounting for everybody else. That's not Chartwell approach.
Retail. Our approach is personalized experience, and it starts before people become our residents. We need to understand what matters to them, and they'll try to deliver that, and that's how we are competing. Retail. In terms of overall market consolidation, it remains to be seen that a lot of Good quality properties already concentrated in institutional hands and those as far as I know are not for sale.
And so Consolidation has been happening in this sector for the last 10 years. I expect it will continue.
Okay. And one thing we used to talk about a lot pre pandemic and sort of fell to the wayside was also development Retail. You took some steps during the pandemic to kind of manage your balance sheet exposure and pull some projects off the board and Sort of rejiggered things a little bit. Your balance sheet is a little bit more levered now. How are you thinking about sort of restarting that going forward?
Yes, I can take that. So as Sherry mentioned in the presentation, We are recommencing construction on Ridge Point. Out west, it's still a good project and in a good market. So we are Restarting that, and we are starting to reevaluate the other projects that we had in pre construction, But had put a pause button on. So we are looking at them.
We have 1 long term care rebuild in construction And we have others in pre construction in the planning phases. And as Karen mentioned and as you said, We think we're on the road to recovery and so now we can look at this through that lens, but we're still looking at it cautiously.
Okay. And just lastly on the credit rating, obviously, the unsecured market is not your biggest source of capital Retailer. But just with the credit rating agencies starting to pipe up over the last Retail Retail. Couple of quarters across the real estate sector. Where do you think you need to get your leverage ratios and by what sort of time horizon to Any sort of further action?
Yes. So we certainly came into the pandemic with a strong balance sheet and able to weather storms. Return. We've continued to work with our rating agency to ensure that we've continued our relationships. So Retailer.
The pandemic has affected our earnings. We are pleased with the stabilization in our occupancies recently and the uptick in our leading indicators. We continue to closely monitor our debt metrics. They were in line with our expectations for Q2, And we will continue to over time very closely monitor
that. And is there like is there a mark you have to hit with respect to a Retail. Given ratio by a certain
time point or? I think there is not a specific timeframe. Certainly in our discussions, There's an understanding that this is our occupancies are expected to recover with pent up demand and the reopening of lifting of restrictions and reopening. That's in line with what our expectations were. So very consistent with what our expectations have been in So we're pleased that things are trending where we had expected.
And if I could just pivot back to the development pipeline again to you. Like Your preconstruction projects that you had prior to the pandemic, like as you start to reevaluate these, Do the deals look a lot different in this sort of new environment or do you know from what you can sort of tell like it's like, yeah, yeah, these You still kind of hold up and offer us potentially the same returns.
Yes. So we're going to look at them on a case by case basis. And they're not going to be, I don't think, the same as they were pre pandemic for a couple of reasons. One is We may rethink the programming in these developments in light of what we've learned over the pandemic Retail and what we think the market wants. And as I think everyone knows, construction costs have gone up Redo our analysis taking those increased costs into consideration, but it will be done on a project by project basis.
Retail. There are no further questions registered at this time. I'll turn the meeting back over to Mr. Volodarsky.
Thank you. That wraps up today's conference call. Thanks again to everybody for joining us. As always, if you have any further questions, please do not hesitate
Retail Retail Partners.