Good morning, ladies and gentlemen, and welcome to the Chartwell Retirement Residences Q4 Year End 2020 Financial Results Conference Call. I would now like to turn the meeting over to the CEO, Vlad Volodarsky. Please go ahead.
Thank you, Louise. Good morning and thank you for joining us today. There is a slide presentation to accompany this Call available on our website at chartwell.com under the Investor Relations tab. Joining me are Karen Sullivan, President and Chief Operating Officer Sherry Harris, Chief Financial Officer and Jonathan Blakya, Chief Investment and Chief Legal Officer. Let me remind everyone Research.
I direct you to our MD and A and other security filings for information about the assumptions, risks and uncertainties inherent in such forward looking information and details of such non GAAP measures. More specifically, I direct you to the added disclosures in our Q4 2020 MD and A under the heading COVID-nineteen Business Impact and Related Risks for a discussion of risks and uncertainties related to the pandemic. These documents can be found on our website or at sedar.com. The COVID-nineteen pandemic has had a profound impact on the lives of our residents, their families and our employees. I am extremely proud of how our people from our residents Safety and well-being of our residents above anything else.
Despite these extraordinary efforts, the virus tragically claimed lives of some of our residents. Our thoughts are with those who lost loved ones to this disease. The impact of this pandemic on our business has been significant. The large declines in occupancy and the extraordinary investments incurred to protect our residents resulted in elevated debt levels and reduced capital allocation to our Initiatives. Yet, I remain optimistic about long term prospects of Chartwell.
The accelerating growth of the seniors population, The slowdown of new construction starts and the pent up demand for our services will support occupancy recovery once various restrictions are eased. Most of all, I am confident in the ingenuity drive and commitment of our staff who are ready to welcome new residents and create exceptional personalized experiences for them and their families. It was inspiring to see that despite the pandemic and related stress, 44% of Chartwell employees who responded to our employee engagement survey strongly agreed that they're very satisfied with Chartwell as a place to work, Risk, a 2 percentage points increase from 2019. It is also not a coincidence that 96% of our residents and 95% The family members who responded to our Listening to Serve You Better survey stated that Chartwell took important measures to keep residents safe during COVID-nineteen 94% of family members felt that their loved ones were safe at Chartwell. We are pleased The pace of vaccination rollouts to our residents and staff has recently increased.
As of March 3, 2021, In our Ontario long term care homes, 90% of our residents and 59% of our staff received first doses of vaccines 84% of residents and 46% of staff received second doses. In our retirement residences, 74% of residents and 34% of staff received the 1st doses of vaccines and 23% of residents and 22% of staff received 2nd doses of vaccines. In recent weeks, we have also seen a decline in the number of outbreaks in our residences and a decline in residents and staff case counts. As of March 3, 2021, 12 of our residents retirement residences and 4 long term care homes were in outbreaks with a total resident case count of 25 with no active resident cases in our Ontario long term care homes. As more seniors are vaccinated in our residences and in the community at large, with the expansion of rapid testing and the gradual easing of restrictions, we expect the pace of new residents move ins and occupancies to begin to recover.
I will now turn the call over to Karen to provide you more insight on our operations. Karen?
Thank you, Vlad. Turning to Slide 5. I want to begin by talking about the measures that we put in place in Q4 and the early part of 2021 to respond to Wave 2 of the pandemic in our properties across the country. Our focus on infection prevention and control practices was augmented with additional senior level resources with both formal expertise and practical experience to support the long term care and retirement platforms. These leaders were able to assist individual homes and residences that were in outbreak and develop enhanced education and compliance material to support all of our homes.
This included improved auditing tools and clear expectations with respect to appropriate use of PPE, hand hygiene and surface cleaning. This is particularly important with the introduction of new variants of the virus and the delay in the vaccine rollout. The other key ingredient to managing effectively through the pandemic has been our centralized recruitment campaign to assist us to have appropriate staffing levels and to minimize the use of agency staff. These initiatives included working for Chartwell Wednesday, virtual hiring events and reassigning some of our corporate staff to assist Resume reviews, interviews, etcetera, all of which resulted in our ability to hire nearly 6,000 employees since mid March. We also put in place a centralized hub to assist our long term care homes to quickly access agency staff that had already received a negative COVID-nineteen test and had received mandatory Chartwell training.
The long term care team in Ontario as well as our properties in Alberta are also putting in place pan bioantigen testing, which is an additional screening tool for staff, family members and visitors in these homes with the most at risk residents. We also continue to provide daily support through our critical incident command to ensure We are meeting the various and evolving directives in all four provinces where we operate. In addition, our 20 fourseven hotline operated by Registered Nursing staff fielded almost 10,000 calls from our homes throughout 2020. We also continue to provide a consistent supply of approved personal protective equipment to our homes through both our regular supplier as well as sourcing our own products so that we can ensure timely distribution and take advantage of more stabilized prices as production improved. I'm pleased to say that based on all of these efforts, we have significantly reduced Research.
I'm especially proud of our long term care team in Ontario, who worked closely partners from local hospitals and public health units and received many compliments about their response, including one ministry official, who in the early and most crucial days of an outbreak said, and I quote, I am blown away with the magnitude of work done by the home in the last 24 hours. I have never seen anything like it. Turning to Slide 6. The other game changer, of course, has been the approval and distribution of the vaccine and the prioritization of our residents and staff in long term care and retirement residences. As Vlad mentioned, this has led to almost all of our LTC residents It's actually all now.
And 3 sorry, almost all of our long term care residents and 3 quarters Reserves of our retirement home residents receiving at least the first dose of the vaccine. It has been so encouraging to see the immediate effect this has had with the number of homes and in particular, the number of active cases declining dramatically from the height of wave 2 just over 6 weeks ago to today, where we have no residents in long term care and only a small number in our retirement residences who are considered active cases. We are also working hard to ensure that as more vaccine doses become available, that our staff and residents have all of the information and facts they need Risk Decrease the Number of People Who Refuse TO BE Vaccinated. This vaccination awareness campaign includes videos that staff can access at the home or through a QR code on their smartphone device. Turning to Slide 7.
I now want to talk about our recovery initiatives that we have and will continue to put in place to begin to welcome new residents to Chartwell Retirement Residences across the country. There is no one more qualified to help seniors understand the benefits of living in a Chartwell Retirement Residence than those who live with us now. We also just completed a Facebook Live and YouTube webinar series to provide information on caregiving during a pandemic and comparing retirement living to living at home. And based on the latest research from Ipsos, we continue to dominate in terms of brand awareness in Ontario, Alberta and British Columbia, Risk Scoreings 2nd in Quebec, where we have increased our unaided awareness in women over age 65 from 14% 6 years ago to introducing technology to do virtual tours, create video content to share with prospects and their families and allow residents to sign and send leases online. We've also updated our web pages to include suite plans and have introduced more digital collateral.
There is no doubt that this will serve us well as we continue in this new phase to address the pent up demand for our services, but these tools will also continue to be used to personalize and enhance the sales experience for the future. As I mentioned last quarter, we are also focused on standardizing and enhancing our care service offerings in our retirement residences, particularly in Ontario. As our turnover data has demonstrated, people are staying longer in retirement homes, and we have put strategies and training in place to allow our residents to age in place and receive the We're also in the initial stages of piloting virtual physician services in our retirement residences in Ontario to minimize the need to leave the home to attend a doctor's appointment and to improve the overall health outcomes for our residents. Finally, we are undertaking a staffing optimization strategy to help us to increase full time employment in our residences and to ensure that we have appropriate staffing as care services change and evolve based on Chartwell's new care assist program. As we get closer to the 1 year anniversary of the World Health Organization's declaration of a global pandemic, I want to end with a word of gratitude for all of the people on the Chartwell team who sacrificed their time and provided their expertise and most importantly dedicated themselves truly making people's lives better throughout this unprecedented year.
On March 11, we will be celebrating being Chartwell Strong in our homes and residences across the country and recognize the efforts of these truly heroic employees. I'd now like to turn it over to Sherry to discuss our financial results.
Thank you, Karen. As shown on Slide 8, In 2020, net income was $14,900,000 compared to $1,100,000 in 2019. For 2020, FFO was $165,900,000 or $0.76 per unit compared to $199,700,000 or $0.92 per unit in 2019. Our same property adjusted NOI decreased by $26,000,000 or 8.8 percent in 2020. Same property occupancy was 85.2% in 2020 compared to 90.1% in 2019.
In 2020, same property occupancy declined 4.9 percentage points, primarily due to reduced move in activity, In addition to the impact of lower occupancies on our 2020 results, we've made investments, continued investments in resident and staff safety, resulting in unfunded pandemic expenses of approximately $7,300,000 As shown on Slide 9, in Q4 2020, net income was $12,200,000 of $3,500,000 or $0.20 per unit compared to $51,900,000 or $0.24 per unit in Q4 2019. The decrease is primarily due to lower same property adjusted NOI as a result of lower occupancies, Higher Finance Costs and Lower Management Fees and Interest Income. Turning to Slide 10, I will discuss our same property operating platform's results. Our same property adjusted NOI decreased Same property occupancy was 82.2% in Q4 2020, compared to 90.1% in Q4 2019. Same property retirement occupancy was 81.4 percent for Q4 2020 compared to 88.8% for Q4 2019 or a decline of 7.4 percentage points, which resulted in lower revenue of approximately $14,000,000 compared to Q4 2019.
Occupancy in all of our retirement platforms was significantly reduced by lower move in activity as a result of the COVID-nineteen pandemic and resulting restrictions that Vlad and Karen have discussed. This was partially offset by lower move out activity, primarily due to reduced departures to long term care spaces. In addition to the impact of lower occupancies on our Q4 2020 results for our retirement operations, The following factors affected our results. We have made investments and initiatives to enhance resident and staff safety and maintained and enhanced our staffing levels. In Q4 2020, we recognized a net $4,000,000 of government reimbursements, which helped partially cover expenses incurred in prior quarters for our investments in infection prevention and staffing.
We have generated increased revenue from inflationary and market based rental and service increases and from the provision of additional care and services as residents age in place longer and their service needs increase. Our food costs were lower due to lower occupancies and Utilities and repairs and maintenance expenses were lower. Our same property long term care home occupancy was 87.2% compared to 98.5% in Q4 2019, Respecting B and C Class Shared Accommodations, which now limit occupancy to 2 individuals. Occupancy protection provided by the Ontario government has been extended to March 31, 2021. There are approximately 38,000 individuals in need of long term care services on waiting list today.
This is an increase of over 8% from pre pandemic levels. We expect occupancies to recover in our LTCs due to the demand for this essential care service and with the introduction of highly effective vaccines, For Q4 2020, same property adjusted long term care NOI decreased $600,000 or 8.2 percent. Of this amount, dollars 1,200,000 relates to incremental pandemic related expenses that have exceeded the special purpose funding allocated to date. $300,000 relates to lower preferred accommodation revenues. These factors were partially offset by the timing of expenses and lower repairs and maintenance expenses.
Turning to Slide 11, You will see our monthly occupancies for our same property retirement portfolio. In January February, occupancy declined 1.0 and 1.1 percentage points, respectively. The pace of decline in occupancy accelerated in December through February move in protocols, resident activities and personalized tours that occurred during the 2nd wave of the pandemic. As Vlad noted, as more seniors are vaccinated in our residences and in the community, and with the expansion of rapid testing and the easing of restrictions, We expect move ins and occupancies to begin recovering. We collected substantially all rent and service fees for January February, consistent with our past experience.
As you can see on Slide 12, at December 31, 2020, Our liquidity amounted to $459,500,000 which included $70,100,000 of cash and cash equivalents and $389,400,000 of available borrowing capacity on our credit facilities. In addition, our share of cash and cash equivalents held in our equity accounted JVs was $6,500,000 At December 31, 2020, our unencumbered assets had a value of $1,000,000,000 Our mortgage maturities remain well staggered with an average term to maturity of 6.6 years at December 31, 2020. Research. Our interest coverage ratio was 2.9x at December 31, 2020. Our debt to gross book value calculated using was 9.4x.
Turning to Slide 13. At March 4, 2020, liquidity amounted and $389,400,000 of borrowing capacity on our credit facilities. Subsequent to December 31, 2020, We arranged additional CMHC insured top up financing on 7 properties totaling $55,000,000 and also arranged 1 CHC insured mortgage of $7,600,000 on a property which was previously unencumbered. The weighted average term to maturity on these 8 financings is 9.5 years and there are a weighted average interest rate of 2.21%. In addition, we have refinanced $48,000,000 of our 2021 mortgage maturities at a weighted average term to maturity of 3.9 years and a weighted average interest rate of 1.93%.
As at March 4, 2021, we have $74,600,000 of mortgage maturities remaining in 2021 that are proceeding in the normal course. In addition, in our equity accounted JVs, We have $41,500,000 of mortgage refinancings, which are also proceeding in the normal course for 2021. Turning to Slide 14. We currently have 3 projects under construction, which are budgeted to require an additional $92,600,000 for 2021 and beyond. In addition, we regularly invest capital in our own property portfolio with the goal of growing our property NOI and protecting and maintaining our properties.
Due to restrictions accessing our residences, 1. Turning to Slide 15. Chartwell with Teasdale 2 achieved stabilized occupancy in 2020, and we expect to complete the acquisition of an 85 percent ownership interest in this project for a purchase price of approximately $60,600,000 in Q2 2021. We anticipate settling the purchase price by assuming the related construction financing of $37,300,000 and the repayment of the outstanding mezzanine loan of $4,000,000 with the balance to be paid in cash. I will now turn the call back to Vlad to wrap up.
Thank you, Sherry. The pandemic has had a large impact on our business in 2020 and in the 1st 2 months of 2021. Its impact will continue to be felt in 2021. In this environment, we remain focused on maintaining strong liquidity and are cautious and selective in our capital allocation decisions. Still, I'm looking to the remainder of 2021 with cautious optimism.
We are a need driven business. Our residents come to us for social engagement and support with activities of daily living. I believe these needs have not changed. On the contrary, they have likely been exacerbated during the pandemic. Risk.
Various restrictions put on the daily lives of our residents and the society at large caused a slowdown in the move in activity And many more seniors than in the normal year remained in their homes with limited support. I believe that with the continuing progress in vaccinations, These restrictions will be gradually lifted and move in activity will accelerate. While the timing of the easing The restrictions and pace of occupancy recovery remains uncertain. We believe there is pent up demand for our services, which will support eventual occupancy recovery. Research.
Long term prospects for our business remain bright. The growth in population of people over the age of 75 is beginning to accelerate with 2022 growth of 5.3%. This growth will remain robust over the next 20 plus years. This should support increasing demand for our services. There continues to be shortage of LTC beds across the country.
And while various governments are taking steps to reduce the shortage, It is unlikely that they will be able to fund new beds to fully satisfy this existing and growing demand. Retirement residences are well positioned to fulfill that void. In the medium term, the slowdown of new construction starts during the pandemic will result in fewer new building openings in 2022 2023, further supporting occupancy recovery. Chartwell has always had a strong corporate culture. I believe this pandemic has only further strengthened it.
This culture built and grown by our extraordinary people I want to finish by thanking all of our employees from residences to corporate offices, People who demonstrated tremendous drive, ingenuity and commitment in these most challenging circumstances. People who volunteered in our homes in outbreaks, often staying in hotels for weeks months, people who stopped at nothing to keep our residents, their families and Staff Safe. There are thousands of individual stories of courage and sacrifice. There are thousands of expressions of gratitude and encouragement from our residents and Families. To Chartwell employees, thank you for everything.
Thank you for your time and attention this morning. We would
questions from the telephone lines. 1 on your devices keypad. Parzival participants register, and we thank you for your patience. So we have our first question.
Brendan Abrams.
Please go ahead.
Hi, good morning. And I would also extend my gratitude to everyone at Chartwell for their hard work over the past 12 months. Just on the topic of same property occupancy, I know no one really has a crystal ball on the future, You indicated you are cautiously optimistic in terms of pent up demand and the future outlook there As demographics play in your favor, just wondering what are the leading indicators that you and your team would be focused on over the next few months to see where occupancy will be trending. Is it inbound calls, foot traffic in terms of tours, like maybe just some visibility or color there on some of the leading indicators you'll be looking at?
Absolutely. We have very robust tracking and reporting on our online presence through all channels and that flows through our virtual call center into call tracking and then tracking Prospects and Tours. We do see trending recently with leading indicators being improved. We think that's going to be a factor of several things. It will be the easing of restrictions.
We do think there will be some benefit to the negative media attention drawing the distinction between long term care and retirement. And we have recent studies from Ipsos Reid that would support a better understanding of that difference. We believe that It will be a strong contributor to decision making once the 75 plus population in the community is vaccinated as well. All of those things, while we cannot predict short term recovery and the timing, we believe those will be positive for us on the go forward. Aaron's also spoken about the improved sales strategies we've implemented during this time frame, and we will continue to leverage those on the go forward.
Okay. That's definitely helpful. And maybe just in terms of operating margins, I think if I did the math correctly, for the Retirement segment, same property operating margins Obviously, 2021 is still going to be impacted by the pandemic. But if you look forward maybe to 2022, Do you think you can do you think operating margins can bounce back to 2019 levels in that 40% range? Or would you expect Maybe the structural operating margins of the business to be slightly lower, maybe somewhere in between 2019 2020?
Brandon, I don't think we can be that precise at the present time. So you look at our 2020 numbers and there is A lot of, I would call it, noise in the numbers. There is extraordinary expenses. There is government funding that offsets these to some degree. There is significant additional staffing costs.
And so those margins obviously are not comparable to the prior pre pandemic levels. As occupancies recover, and I hope they recover to better than pre pandemic levels over time, we should see that impacting the margins overall. The other thing that I will point out is, and this is maybe more specific to Ontario, where we are Going to already introduced additional care services to our residents in some of the homes. We think that that trend will continue. And as you know, these additional services come at a bit lower margin than what you get on the pure rent.
So that may impact over the long run The margins for Ontario platform specifically, now the margins may come down, but we certainly will be profitable delivering those services to Residence overall profitability should go up.
Right. No, no, and fair enough on the outlook there. And just last question From me before I turn it over, I think you disposed of 6 properties during the quarter. Looks to be about $157,000 per suite. I'm just wondering what that would translate into on a cap rate basis.
And Maybe just the investment environment right now in terms of prospective buyers, are they Looking at 2019 NOI and estimates or Just wondering if there's any color or visibility on valuation around the assets disposed of during the quarter?
Sure. So it's Jonathan. First of all, address the sales. So those sales were what we would consider
That are non core assets
that didn't fit within our strategy. And so the cap rates on those Maybe less relevant, but they were low based on in place NOI. In terms of the market, generally, We are seeing a little less market activity due to the pandemic. But based on what we are seeing, cap rates do not seem to have changed from pre pandemic levels.
Communications.
Our next question is from
Joanne Chen. Good morning, everyone. Thanks so much for providing the data on supply. Just wondering, looking at the numbers in terms of the 4,000 suite impact that you have listed that has within immediate competition to Chartwell. What sort of timing are we looking at in terms of it coming online?
And I guess, how does this compare to what we were seeing in 2019?
Yes, Joanne. So there's 4,000 give or take suites that we see us competing with our properties in these markets. Those are within 5 kilometer radius from our existing properties. This compares to I believe last year's number was 5,200. So it's a bit lower than what we are seeing before.
The timeframe for deliveries will be 2021 and maybe early 2022. And as I pointed out in my remarks, There is a significant decline in the construction start during 2020. I think the numbers that Cushman and Wakefield had was 1.3% of inventory Comparing to 4%, 5% of inventory that we saw in the previous years in terms of the start. So that is a significant decline and that should result in Fewer projects opening in 2022 and 2023.
I guess, we're not seeing really keen right now any pickup Kind of the same pace in terms of the construction right now, right? Do you have any development projects moving ahead?
Not in any significant way, including ourselves. As you could see that we just started one Long Term Care redevelopment this year and deferred a number of other projects that were ready for construction. But given the uncertainty, we are pausing for secondary.
And maybe just circling back in terms of the dispositions, maybe what is your thinking now around Is there further capital recycling opportunities for this year as the dispositions are more non core assets?
The short answer is yes. We will always you will see us disposing of assets We don't believe fit the long term strategy for Chartwell. So that happens every year and Research. We'll continue. I will just say that predicting the timing of such dispositions is very difficult because these are non core assets And there is a limited pool of buyers and we will have to take our time to determine it.
So in terms of Predicting the volume of these dispositions, it's really hard on the timing.
We all want that crystal ball, right? So it's encouraging to see that sort of profit towards Risk. I might be a little bit early on in the slow restrictions in terms of some of the lockdowns. But Could you maybe talk to how you're seeing the trend with respect to some of the prospect towards in person so far in February March?
Joanne, we will answer this question in a moment. I just want to ask Louise whether people can hear us well on the call because it sounds like there are some cross calls going.
No, it's all very clear on my
side, sir. Okay.
And it
looks like there's a second.
Sorry, back to you, Joanna. I apologize for this interruption. Sorry, your question was can you repeat the question again?
February and March tours and indicators. Joanna, I think that's your question, just confirming? Okay.
Yes, exactly. Yes.
Yes. Certainly, I mean, February would have been certainly impacted by wave 2. For the majority of February, there were a lot of restrictions in place. You will find in our MD and A, we've done a chart for you in the outlook section that describes the restrictions in each province. And hopefully that is helpful, but that would have reduced tour activity in February.
We are seeing an uptick in March, and we're pleased with that uptick that we are seeing. We do think that as restrictions ease, the pent up demand will come into play. But as we said, we can The crystal ball question that Brendan mentioned, it's difficult to predict. The long term fundamentals are there, and the decline in construction starts will impact in 20222023 toward the end of the year.
Hey, you got a raise this year.
Maybe one last one for me, Switching to the balance sheet side of things.
Last year, your base salary was 97,491,149.
I'm just wondering how have your discussions, I guess This
year your base salary according to
your last date was 104.
Your current credit rating.
February 2017. Yes, we continue
to maintain conversations with them. And they certainly understand at this time that Risk.
This is a once in 100 year event that we are prudently managing For the whole year, right? Are being No,
no, no.
This is before anything, salary,
before deductions. Is there
a time frame that Dave's given, can you remind me in terms of Risk.
Reserve. So when they had changed our BBB low rating from stable to net debt was Because we're trending in that range, we were at 9.4% for 2020.
Well, we need to see better clarity as to the pace of recovery and improvement in our Credit metrics coming with increase in earnings because of the occupancy recovery. So it all boils down back to occupancy, Risk and the PACE of Recovery. Yes, of course it works.
And I guess like one of the questions I have was just like How important is development for Chartwell for the long term? Because I could sort of paint a picture where you say like, you guys maybe don't need to be in that business, like You've got a great set of assets. Demand should hopefully improve over the next several years. Like, is having that development arm and Having that development pipeline critically important to the long term future of the company.
We do believe that it is critically important for a number of reasons. The first reason is there is a long term need and demand for this product That will continue for a very long time that needs to be served. So it could be served by other people, I suppose, not just by Chartwell. For Chartwell, it is important because we developed properties that we then proud to operate And that we built for ourselves that really built to our specifications, design and functional plans That make it efficient for us to operate and most importantly, create great experiences for the residents. We like to do the development we've always said was are probably more core to our external growth strategy risk than simply acquisitions.
So from those end, obviously, those developments, we see Better returns that we can achieve by buying properties from other people. Now obviously, this goes in cycles and in some markets, the answer is a little bit different. The development is a long term strategy for us and the current pause shouldn't be interpreted as we are getting out of the development activities forever.
Okay. And then just in your language around the occupancy recovery, like I noted in the MD and A, you sort of said it would take some time. And I guess, Reef. I just wanted to get maybe a little bit more clarity on what you meant by some. Is that meant to connote that like It's maybe longer than what we're expecting or it's just that, you know what, this is a it's tough to pinpoint The exact timeframe until we're being sort of deliberately kind of broad in our language.
Yes. So it really is difficult. We've been in this industry for a long time, so over 20 years. And You think back to the post financial crisis in the U. S, and we would have had 1 quarter where we actually increased Once the housing market reopened, about 300 basis points in occupancy in 1 quarter.
So we are being We do not have the crystal ball and it pent up demand is the unknown and we will see what happens. This isn't the same as the financial crisis. This has been very different. There have been some significant opportunities out of that to distinguish retirement and long term care. And we will wait and see how that proceeds.
We do see week over week, things are improving each week, particularly traffic to our website, personal tours in the 1st week of March are up. So it's just too early to say with any certainty when that recovery will happen.
Okay. And then just on the vaccinations, I don't know the right way maybe to phrase this question, but like How long until you think you are sort of done or at a target rate or at appropriate level?
Like how
do you sort of like measure the that sort of what the targets are for that?
It's been amazing in the last 2 to 3 weeks how we've gone from I'll give you an example. In Quebec, we were at 12% of our residents. And within 2 weeks, we are closer to 80%. So it's for the first dose. So it's happening very quickly.
It's hard to say exactly it's going happen on this day. But honestly, in the next couple of weeks, I think the numbers that Vlad said are going to go up. Like in long term care, We're very close to being there on our residents with 90% first dose, 84% second, and Retirement's sort of right behind them in terms of their prioritization. So I think that part is happening quite quickly.
And on the staff side, is there like a target that you're like wanting to get to and Yes.
Well, yes, again, Reef. They definitely moved the residents to the forefront, but the numbers in long term care are already quite high on both first and second dose. So, yes, again, maybe again, it's hard to say, but maybe more like 3 or 4 weeks, Risk. And we're looking at those numbers being quite high.
Okay. That's great. Thanks, Aaron.
Thanks, Aaron.
Thank you. Next question is from
Jonathan Kelcher.
Please go ahead.
Thanks. Good morning. Just sticking with Tal's questioning there On the vaccine, you're 90% long term care and at least for the first dose. And my guess is everybody's been offered. Is that sort of the level that you think you'll get to in retirement and that sort of level you can get to overall?
Yes, I think so. Maybe even in long term care a little bit higher. Sometimes it can be that they came to do the vaccine and somebody was out in the hospital or They weren't feeling great as in not they don't have COVID, but they're not having a good day. So I actually think it could be even risk higher than that. Where we want to always continue to push is with our staff and make sure that they are also taking the vaccine.
But I think for the most part, residents are very quick to roll up their sleeves
And we are doing a lot of education and promotion of this vaccination plan with our staff.
Right. So I'd assume that some people can't get it For allergies or whatever. And then so people just saying no, has that been a very small amount?
It has been. We've been really pleased so far.
Okay. That's good. And just switching, I guess back to the capital side, you're committed to buying with Teasdale. You said it's stabilized. What's can you remind us what the definition Stabilized is with your agreement with ADAML?
Stabilized is 90% occupancy for 2 months, 2 consecutive months.
Okay. So is that property still in and around 90% then?
More or
less, yes. Okay. And you did walk away from one of the projects or you guys agreed to walk away from To put on that, can you maybe give us a little bit of color there?
Sure. So we would have In normal course, when Batimo has a project, we would take a look at it and evaluate it as we would any other. But since doing that we've taken a step back, We looked at the project both sides we looked at the project and decided that we weren't comfortable with The programming that was being developed for that project, so both parties agreed that it was best to part ways amicably
Okay. That's it for me. Thanks.
Thanks, Jonathan.
Thank you. Next question is from
Himanshu Gupta.
Please go ahead.
Thank you and good morning. So just staying on Batimo acquisition, that's Teles del Property in Quebec. What CapEx would that imply on in place NOI or stabilized NOI?
The cap rate would be in the low 6s on in place NOI.
Okay. And do you think it is very closer to what it would have treated in pre pandemic level?
Yes. As I said, we haven't really seen cap rates move much from pre pandemic levels. So the answer is yes.
Awesome. And then if I look at, it's almost above 300,000 per suite. I mean, Is that the replacement cost today on the retirement homes?
No. Himanshu, this is a special Research. You got to understand, this is a second phase of the project that we already own or co owned with Batimo where we bought 85% in Phase 1 back in 2017. So the 2017 deal was where they prebuilt our common areas for both phases. And so now the second phase is just units.
And therefore, valuation is incremental to the first phase. And so $320,000,000 is on the high end of the per unit valuation, but it is only because the first phase was on the low end of overall valuations. If you put the 2 phases together, The valuation is around $250,000 a door, give or take, or maybe 2 70, and this is more in line with what the valuations are supposed to be on a per dollar basis.
Got it. Thank you for clarification there. And then just shifting to the rent growth, I think in the MD and A you mentioned you expect around 3% in Ontario and Quebec. Is that in line with the overall market? And then how does your rents compare to the new supply, which is getting delivered in your markets?
Sorry, the second part of your question, Himanshu, if you could just repeat that for me?
Sure. So how does your rents Compared to the new supply, which is getting delivered in your market, so for example, the Cubet Bibachimore property, which is now 90% occupancy, What rents are you charging there compared to an in place older property, which is owned by Chartwell, for example?
Well, in terms of rental rate increases, this would be consistent with what we would have experienced in 2020. So we're not Changing our expectations in terms of 2021. When new supply comes on, we certainly have in our toolkits locally the ability to compete with individual incentives. We overall Have a value proposition that is about the customer experience and service to our customers. So wouldn't be adjusting our rates relative to local market conditions.
Got it. So maybe like an older property is charging, let's say, 10% lesser than the new properties or that doesn't That will not be the case.
Yes. I don't think there's a standard that occurs. It really depends on the local market dynamics and the service offering and the competitive place. Your reputation
in some of our older homes have wonderful reputation.
Sure. No, of course. And then just shifting to the retirement home occupancy, obviously, you had declined a fair bit in January February. Can you share how much was move ins and move outs down compared to the last year in the 1st 2 months?
So we certainly have seen a reduction in move outs, in particular to long term care and to hospital. And residents are aging in place longer with us. Move outs are down. They would have been down Significantly in January February with the restrictions that were put in place, particularly in Ontario and in Quebec.
Okay. Okay. That's fair enough.
And then just a clarification on the operating expenses. I think you mentioned $4,000,000 government investments in quarter 4. Was it mostly retirement home related? And Was it mostly related to expenses in Q4 or anything related to Q2 and Q3 as well?
Yes. Some of that would have been so that $4,000,000 relates to our retirement residences and some of that would be a recovery of expenditures that we we had made earlier in the year. Year to date in our long term care homes, unfunded pandemic expenses are $3,200,000 And in total, we have $7,300,000 of unfunded pandemic expenses overall for Chartwell.
Got it. Okay. That's great. And then the last question from me, I think on the NOI margin improvement or visibility. And I know that question has been asked earlier as well.
My question is more around the let's say the Current staffing costs at retirement homes at 80% occupancy, will that stay the same if the occupancy goes to 85%? What Other expense items on incremental variable costs will be incurred if occupancy were to move, let's say, 5 points or 10 points from there?
So we've maintained our staffing levels despite the occupancy reductions, largely to ensure we can facilitate Things like extended dining times, increased disinfection, screening times. So all of our sales levels have maintained or augmented through the pandemic as our occupancy has declined. In some cases, we've also had to access agency staff And that would have elevated our costs in 2020. We don't foresee that when we move up, we would need to add staff. What I would say, and Karen and Vlad have both spoken about this, is there is an opportunity.
Our residents are aging in place We've implemented the Care Assist program, and we will augment services where people choose to stay with us longer, and it is an appropriate placement for them.
Got it. So there's definitely a limit of fixed costs from here. That's great. And maybe just one last final question. The residents which are now related.
Does the dining and group activity or other restrictions still apply to them? I mean, just thinking how quickly will a retirement home go back to like old normal days.
Yes. So and it unfolds differently in different provinces and even within the province, They're still considered to be more hotspots. So, it's not based purely on This home has been vaccinated. It is more the area of the province that they're in, that restrictions are starting to be reduced. So just Very recently, for example, the Quebec City area, Gatineau, Saguenay have been able to Be back in their dining rooms to eat, but not Montreal.
So it's based on Public Health Analysis Around the Community. But I think vaccines go hand in hand with this, Right. So one is going to affect the other going forward?
Sure, sure. Thank you. And I'll turn it back.
Thank you.
Thank you. And our last question is from
Eric Chico.
Please go ahead.
Hi, good morning. Thanks for having me. Can you hear me?
Good morning. Yes, we can hear you, Eric.
Excellent. Thank you. My question, I think 2020 was a very challenging year for everybody, and I think I'm looking forward to a far different 2021 as is everybody else. My question is actually focused, however, on some of the, let's call it, negative press that may have come forward from some of the LTC, in particular, Advocates across Canada, throughout Ontario. I'm wondering, I've seen some press regarding large pension funds and their holdings within Chartwell.
Has there been a conversation regarding any of those larger funds? What are the impacts of those changes? And I'm quite curious as well, are there background thoughts on how to ensure Chartwell is and maintains itself as an ethical investor as the world seems to be moving towards ethical investments as a whole.
Eric, thank you for your question. There always focus in the last several years, even before the pandemic, from the large investors on the matters of environmental, social and governance, CSG matters. And the pandemic certainly Accelerated or exacerbated or increased the volume of these discussions. And we had continued to be open to talk to all of our investors. And in many conversations, people continue to bring up ESG matters.
And we had these conversations with a number of Different Investors. If you look at our investor presentation, we've updated this with a whole section on ESG And also we added a section on specifically to long term care properties, because as you pointed out, a lot of negativity in the media was also very ill informed with respect to how the long term care operates in the country. So we want to make sure that everybody is very about those facts that relate to Long Term Care specifically and to Chartwell as an entity that investors who care about ESG matters are care to invest in. So that is always the top of our minds and especially now during this pandemic and we're doing everything we can to be Research. As transparent as possible and as clear as possible in our communications with investors and general public about what Chartwell stands for and what we're trying to achieve.
Thank you, kindly.
Thank you, Eric.
Thank you. So Mr. Volodorski, this was our last question. So I'll return the meeting back over to you.
Thank you very much, everybody. Appreciate your time. If you have any further questions, don't hesitate to reach to any one of us at any time. Thanks very much.