Ladies and gentlemen, welcome to Sienna Senior Living Inc's Q3 2021 conference call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer, and Karen Hon, 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 in the company's public filings, including 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 the 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 remarks on the company website under events and presentations. With that, I will now turn the call to Mr. Jain. Please go ahead, Mr. Jain.
Thank you, Latif, and good morning, everyone, and thank you for joining us on our Q3 call today. Our strong third quarter operating results and occupancy growth reflect the general optimism for Sienna's path forward. Occupancy is up significantly in both our long-term care and retirement portfolios. Our development projects have gained further momentum and the rollout of our new retirement platform, Aspira, is progressing well. We are also in the preliminary stages of developing a new long-term care platform. As part of a new service model, we want to improve our residents' dining experience, activities, and recreation programs. We also want to find ways to create a better community experience for residents, whether it is a vintage car club or visit from a local school.
We believe that creating more connections with the wider community will give our residents something to look forward to in their day, no matter how big or small. The design of our new long-term care platform is based on best practices and the input from our residents and their families. Our ultimate goal is to significantly enhance the quality of life of our residents by providing holistic and integrated care at our communities. The completion of the platform development is expected in the Q2 of 2022. The launch of the new long-term care platform follows Aspira, our new retirement platform. Aspira will make the retirement brand within the Sienna business lines more distinctive.
Our aim is to target prospective residents to consider Aspira retirement living as a better option to living at home, an alternative that provides a personalized experience, offers more choices with an increased emphasis on being a vital part of the local community. During the Q3 , we concentrated on the development of our resident-centric model, which emphasizes personalization and expanded choices, and included team member training on the new resident experience model and marketing initiatives. We're also in the final stage of developing the brand design and identity for a dedicated Aspira website. The website's features include a centralized lead management system, chat options, webinar series, and transparent pricing, all of which will support brand awareness, lead generation, and occupancy growth.
In addition, we are continuing the development of the platform's brand awareness strategy, which includes both online and offline marketing initiatives specific to the local communities as well as widespread communications campaigns. We're also developing new programming, which will support the brand's promise of a refined culinary program and enhanced residence programming. We are currently piloting various concepts at select retirement residences. Moving to slide 7. Throughout the summer and fall, our operating environment continues to improve. We saw the positive impact of high vaccination levels with a limited number of COVID-19 cases at our residences. In addition, our strong infection prevention and control practices, our extensive education programs, incentives to get vaccinated, and a new mandatory vaccine policy were all very helpful. To date, many of our residents have received their booster shots.
As of last week, over 70% of our long-term care residents and over 40% of the residents in our retirement communities have received their third dose of the vaccines. As a result of a more stable operating environment in current months, pandemic-related expenses continue to decrease, and we are encouraged by the improvements in occupancy in our retirement and long-term care portfolios. Our retirement portfolio benefited from in-person tours and continued strong lead generation, which resulted in a 44% year-over-year increase in resident move-ins for the quarter. Average same-property occupancy improved by 280 basis points during the quarter, increasing from 79.3% in Q2 2021 to 82.1% in Q3 2021.
In the long-term care communities, admissions of new residents accelerated and resulted in a 460 basis point increase in occupancy during Q3, ending the quarter with an occupancy rate of 87.8%, or 92.4% if we exclude the unavailable third and fourth beds in multi-bed rooms. Given the long-term care waiting list of 40,000 seniors in Ontario, we expect these strong occupancy gains to continue. The Government of Ontario announced the extension of the occupancy protection funding until January 31, 2022, and we expect to achieve the average annual occupancy target of 97%, which is required for full funding in 2022. Moving to the focus in building a team for the future.
During the Q3 , we continued with a proactive staffing strategy to lessen our reliance on agency staff and to position Sienna well for the increase in direct hours of care in our Ontario long-term care portfolio. Our proactive approach helped us fill positions resulting from attrition from our company-wide mandatory vaccination policy, which came into effect on October 12. It also supported extensive new talent acquisition and helped us bring back approximately 330 former teammates since April of this year who previously were restricted to work at single location as a result of the single site directive. In addition, during the Q3 , we supported the placement of approximately 350 students in our residences through our collaboration with colleges and universities.
We are thankful that the Government of Ontario extended its wage enhancement of CAD 3 per hour for personal support workers until March 31, 2022. Sienna's culture of fairness and equal opportunity is also reflected in our fair compensation and gender pay equity models. Over 95% of our frontline team members earn more than the minimum wage, and approximately 80% earn at least 50% more than minimum wage. In addition, male and female frontline team members in similar positions receive comparable compensation. Moving to the next slide. Our team members are our most important asset, which inspired us to launch SOAR, the first employee ownership and rewards program of its kind in Canadian seniors living. We're initially investing approximately CAD 3 million to provide our employees with the opportunity to become shareholders.
This will be done through one-time grants of common shares of approximately CAD 500 for full-time employees and CAD 300 for part-time employees. We're also introducing an employer matching program for employees who wish to further invest in the company. We launched this program to recognize the compassion, effort, and dedication that team members bring to our residents and communities every single day. Moving to slide 12. We continue to make good progress with respect to our development projects. Our CAD 50 million joint venture development of a retirement residence in Niagara Falls is progressing well. In early November, we secured construction financing for this project, and last week, we started construction at our new Northern Heights care community in North Bay. We're monitoring current cost escalations, which will impact our original cost estimate of CAD 55 million.
Our near-term redevelopment programs in Ontario also include the replacement of the current 60 long-term care beds with 160 new beds at our campus of care in Keswick and the redevelopment of our current 120-bed long-term care community in Bradford to 160 new long-term care beds with modern design, with the addition of a 147-suite retirement residence to create an integrated campus of care. We expect construction at these two locations to start during the H1 of 2022. We are also currently in the process of selling two assets. The sale include our 138-suite retirement residence located in Burnaby, British Columbia, and a 236-bed long-term care community located in the Greater Toronto area for a combined selling price of approximately CAD 53 million.
We intend to invest the net proceeds to further grow our business through our development programs. These dispositions are part of a fulsome review of our assets to add value through capital recycling. With that, I'll turn it over to Karen for an update on our financial results.
Thank you, Nitin, and good morning, everyone. I will start on slide 14. The operating environment continued to improve in the Q3 , and we saw the positive impact of high vaccination levels, in particular with respect to the decrease in pandemic-related expenses. We are also encouraged by the improvements in occupancy in both our retirement and long-term care portfolios and the continued pandemic funding support that we are receiving from our government. These positive developments are reflected in our Q3 and year-to-date financial results. Revenues increased by 2.1% year-over-year to over CAD 170 million this quarter. Net operating income increased by 15.4% to CAD 33.4 million this quarter compared to last year.
Sienna's long-term care NOI increased by CAD 5.1 million to CAD 20.1 million compared to last year, primarily due to annual inflationary funding increases and lower net pandemic expenses, partially offset by lower preferred accommodation revenues, annual inflationary labor cost increases, higher insurance premiums and utilities costs, and timing of repairs and maintenance due to deferrals from the prior year. Retirement same-property NOI decreased by CAD 700,000 to CAD 12.9 million compared to last year, primarily due to higher agency staffing costs, utilities costs, and insurance premiums, partially offset by annual rental rate increases in line with market conditions and decreases in pandemic expenses. Rent collection levels remain high at approximately 99%, consistent with pre-pandemic levels.
Over the past two years, we have seen significant cost pressures, in particular with respect to staffing. Agency premiums are generally 75%-100% above regular staffing rates, and we have been experiencing a generally higher reliance on agency staff as a result of staffing shortages. We forecast that agency staffing costs for 2021 will total approximately CAD 44 million compared to CAD 35 million in 2020 and CAD 19 million in 2019. The estimated impact on NOI from additional agency staffing costs is approximately CAD 2 million for 2021 compared to 2020 or CAD 4 million compared to 2019. We are thankful that a significant portion of the increased staffing costs are covered by government funding in long-term care.
We believe that agency staffing costs will moderate as more healthcare workers re-enter the workforce and as we start to see the impact of the government's enhanced focus on training of personal support workers and nurses to address the current labor shortage. We have also experienced a significant increase in insurance premiums and notable market rate increases with respect to gas and hydro. Pandemic expenses continued to decline during the Q3 as a result of the improved operating environment. We incurred CAD 1 million of net pandemic expenses, which included retroactive government funding of CAD 1.9 million for expenses incurred in Q1 of this year. This represents a CAD 2.8 million decline compared to Q2 2021 and a decline of CAD 8.8 million compared to Q3 of last year.
We expect pandemic expenses to moderate further as the pandemic subsides while related government funding gradually declines. We also expect continued timing differences between the incurrence of pandemic expenses and the recognition of related government funding. To offset cost pressures, we expect a continued occupancy gain in our retirement portfolio and an improving operating environment to support our operating margins in 2022 and beyond. Moving on to slide 15. During Q3, OSFO increased by 34% to CAD 18.3 million compared to the prior year, primarily due to higher NOI driven by the timing of government funding, lower pandemic expenses, lower interest expense, and lower administration expenses due to mark-to-market adjustment on share-based compensation, partially offset by lower recovery of current income taxes. Q3 OSFO per share increased by 34% to CAD 0.272.
ASFO increased by 10.5% to CAD 15.7 million compared to the prior year, primarily for the same reasons as the increase in OSFO, which was partially offset by higher maintenance capital expenditures resulting from spend deferrals from last year and one-time capital improvements in the long-term care Class D communities, as well as a lower construction funding principal. Q3 ASFO per share increased 10.4% to CAD 0.234. Looking at our debt metrics on slide 16. Our debt to gross book value improved by 260 basis points to 45.6% as of September 30th compared to 48.2% at the end of 2020, mainly as a result of repaying our credit facilities.
Debt to adjusted EBITDA improved to 7.8 years for the nine months ended September 30th compared to 9.4 x in 2020. Our interest coverage ratio improved to 3.8 x compared to 3.1 x in 2020, and we have limited debt maturities over the next two years. In terms of our balance sheet on slide 17, Sienna maintains a strong financial position and an investment-grade credit rating. On October 7, DBRS confirmed Sienna's issuer rating and senior and secured debenture ratings of BBB (mid) with stable trends. These ratings underscore the resiliency and strength of our business in support of our redevelopment plan. We ended the Q3 well-capitalized with CAD 222 million in liquidity and an unencumbered asset pool of CAD 1.1 billion. I will now turn the call back to Nitin for his closing remarks.
Thank you, Karen. Our Q3 operating results reflect the general optimism at Sienna. Strong occupancy gains, the transformational changes to our operating platforms, and our continued development momentum all support our optimistic outlook for 2022 and beyond. We forecast continued occupancy gains across our operations. In our long-term care portfolio, we expect to achieve the required occupancy target of 97% for full funding in 2022, and we anticipate that retirement occupancy levels will reach between approximately 87%-89% by the end of 2022. The transformational platform changes currently underway will further support our operations in 2022 and beyond. Over the past year, we have gained many insights through intensified stakeholder engagement and market research, which informed our strategy to launch Aspira and inspired us to develop a new long-term care platform.
Both platforms are aimed at significantly enhancing the quality of life of our residents. As we execute our strategic goals, we'll continue to draw on the insights we gain from our residents, families, and our team to build a stronger future for all stakeholders. Every initiative we have put into motion over the past year is grounded in the belief that it is a privilege to care for and serve Canada's seniors, ensuring they live with utmost comfort, dignity, and respect. I want to finish by thanking our team members whose drive, compassion, and commitment will support our mission to provide our residents with the highest level of care and services for years to come.
On behalf of our management team and our board of directors, I want to thank all of you for your continued support and your participation on the call today. We're now pleased to answer any questions that you may have.
As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Again, that's star one on your touchtone telephone to ask a question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jonathan Kelcher of TD Securities. Your line is open.
Thanks. Good morning.
Good morning.
Just on the occupancy, you seem pretty confident that's a good outlook you're giving for next year. If we look on the cost side, when do you think margins in the retirement side can return to close to pre-pandemic levels?
Hi, good morning, Jonathan. You know, that's, yeah, we do feel comfortable with some of our leading indicators on the retirement occupancy, you know, not only compared to 2020, which is gonna be an off year to compare, but even compared to 2019, where our deposits are significantly up. I think margins, as Karen mentioned in her remarks, you know, the three areas of cost we see is utilities, insurance, and agency costs related to labor. It's really hard to predict those. You know, we feel a lot more comfortable on the revenue side. There's still uncertainty on the cost perspective, and I don't think we can give you any more guidance than that at this stage.
I guess to switch gears on just on the asset sales. Capital recycling is not something you guys have done a ton of historically. You mentioned going into putting it towards development. What about on the acquisition side? Are you seeing much in the way out there?
For sure, acquisition market has been quite competitive. You know, we have not actively participated because our focus has been to ensure that we focus on our platforms first. Aspira first and now the work that we're doing in long-term care. We wanted to ensure our development projects get started, so 1 started last week, and we have two which we expect to start over the next six months or so. Now is the time, and we do feel confident that we can do acquisitions, and underwrite them well and integrate them well and ensure that we can create value. We would be looking for both.
You know, you're right, we have not done asset recycling before, but the reality is we have 70 properties, and from time to time you might have one or two which do not fit your portfolio well. You know, we do not have a long list of assets. These are the two where it made sense. One, because the market had changed, and the second it was a C home, and it fits extremely well for the needs of local community in terms of long-term care capacity and hospital capacity. You might see one or two from time to time, but there's nothing. Overall, our portfolio is in very good shape.
Okay. Thanks. I'll turn it back.
Thank you.
Thank you. Our next question comes from Scott Thompson of CIBC. Your question, please.
Thanks, good morning. Just a question on the occupancy in retirement residence. It was pretty strong. Just wondering what you attribute this growth to. Is it representative of normal activity on a quarter-over-quarter basis? Maybe just looking at move-ins, you mentioned a 44% increase. Were move-outs lower than expected, or lower than normal?
No. Move outs actually were also higher than before. I mean, you know, they're. You know, we talked about 2020, but maybe I'll give you even perspective 2019, because, you know, last year we were in the middle of wave one and wave two. For example, our deposits in Q3 of 2019 were around 200, and our deposits in Q3 of this year is around 400. We have a 100% increase there. Our attrition rate has stayed strong, so it's not that people are staying longer. Like our attrition rate in 2019 was around 10%, and now it's similar.
You know, we've been talking about focus, you know, on marketing initiatives, local approach, having a centralized call center, getting back to people on a quick basis. All the work that our retirement team and our sales and marketing team have been doing on our platform. We're really happy to see the results and that's what gives us comfort in terms of our forecast for the next year.
Okay, thanks. I'll turn it over.
Thank you.
Thank you. Our next question comes from Himanshu Gupta of Scotiabank. Your line is open.
Thank you and good morning. Staying on the retirement home occupancy discussion, how is that trending between Ontario and British Columbia?
We, Himanshu, we do not split that because, you know, we only have five retirement homes in British Columbia, and we are in the process of selling one. You know, it's not really one home could have a significant impact. I mean, the changes we're seeing in occupancy is across the portfolio. There's not really one market or one asset which is driving it. You know, it's been consistent across both Ontario and BC, overall.
Got it. Fair enough. If I look at the guidance 87-89 for the next year, is that a conservative number or, I mean, do you think there's more scope to beat that guidance of yours?
No. At this stage, you know, it's still a year away, so we feel comfortable with 87%-89%. As we get closer, you know, obviously we can keep updating it on a regular basis. At this point, no, we don't think it's conservative or aggressive. This is, it's realistic at the moment, and we'll find out as we get closer to that timeline.
Got it. Maybe, you know, just on your Ontario portfolio composition, are you more independent or are you more assisted living? Any color there?
Our portfolio, you know. First, many of our retirement homes, we have dedicated assisted living floors. Even in homes where we do not have that, you know, we would provide care behind doors. No, it's not really geared towards one side. It's a really good mix of independent assisted living and some memory care. We are getting more into memory care with our campus in Brantford, you know, and also some of the assets that we've acquired in the past.
Got it. Okay. Thank you. Just switching gears to LTC, you know, pandemic expense recovery. Karen, I think there was a CAD 1.9 million catch-up related to Q1 LTC expenses. Have you now fully recovered Q1 LTC?
For Q1, LTC, after that retroactive funding, we still have some unfunded expenses, and more so on the BC side. You know, the funding regime is a little bit different, so we are not yet fully covered, and that might remain the case for Q1.
Got it. Is it fair to say that, you know, eventually you're gonna recover pretty much everything with regard to LTC? I mean, there's a timing difference, but eventually there seems to be recovery happening.
No, it's hard to tell. What we have experienced is that there have been 2-3 quarters of delays between when we incur the expenses and when the government might come back with more funding. What we would say that is we do expect some unfunded pandemic expenses for some time. However, quarter-over-quarter, we have seen sequential declines in our net pandemic expenses as our operating environment continues to be stable and improving.
Fair enough. On your higher agency cost, so if I got it right, you said CAD 4 million compared to 2019 level. Is that something we should expect in 2022 also? Is it mostly LTC or is it LTC plus retirement homes?
On long-term care, because we have our government funding, a lot of that CAD 44 million cost that we have incurred for agency is related to long-term care just based on the nature of the operations with our staffing. Most of that has been covered through the government funding, so the impact on long-term care is less. That variation compared to 2020 and 2019 is more heavily weighted on the retirement side.
I think, Himanshu, to your other part of the question, you know, at this stage, human services is a crisis across all sectors. You know, it's hard to say at this point. I mean, our focus, we have initiatives internally, whether it's working with universities, supporting PSW, you know, supporting nurses. We are doing all the things we can internally, but it's hard to predict a significant decline in those agency costs.
Got it. Okay. Just a final question from me. On the LTC redevelopment, looks like I think North Bay has started, in terms of construction, and you're working on Keswick and Brantford as well. Are you advancing the pace or development pipeline? Is that the idea here?
Our goal was to be in ground with two projects this year. You know, between Niagara Falls and North Bay, we have done that. Our goal is to add two additional ones next year, so both Keswick and Brantford would happen. You know, our goal is to start a couple of projects each year, you know, and then really get in a phase where, you know, two come out each year and two go in, so that's gonna take us till 2023 to build that run rate. You know, our goal is to start around a couple of projects each year.
Awesome. Thank you guys, and I'll turn back.
Thank you.
Thank you.
Thank you. Our next question comes from Joanne Chen of BMO Capital. Your line is open.
Good morning.
Good morning, Joanne.
Maybe just sticking on the development side of things, you know, with respect to some of the timing of the projects, there's no changes given the current inflationary environment?
Yeah, no changes.
Okay. Sorry.
No changes in timeline. I mean, in North Bay, we disclosed previously our cost is CAD 55. We are seeing some inflationary pressure there. It's hard to predict, you know, that cost is gonna go up. We expect it to go up. Whether it's 2% or 5%, I think we'll still have to figure that out, but that project still makes operational and financial sense. So at this stage, you know, they work, but it is definitely getting more and more difficult with construction costs in some areas being up closer to 30%.
30%. Wow. Is that on, I guess, on the labor side of things? Also material?
I mean, there's a huge supply chain issue as well. You know, there's a huge issue with labor. You know, it's so I think it's a combination of all of those things. You know, people talk about lumber went up, came down, but the building we're building in North Bay, for example, we're not using any lumber. So going up in price and coming down is not really helping us there. Overall, prices are going higher, and the idea is, you know, continue to work with good partners, try to manage costs, try to fix costs as much as possible upfront. Those are all the things we're doing, and we'll again, if it comes to de-escalate, we'll rethink our development program. At this stage, we are comfortable where we are in terms of two projects a year.
Okay, got it. Maybe just going back on the question on, you know, the position and capital recycling opportunity. You know, looking forward to 2022, you did mention that, you know, the current acquisition environment is quite competitive. Do you think you guys would likely be net sellers or net acquirers over the near term?
Yeah. We don't really have many other assets to be selling. You know, again, as we've said, it might be one or two. You know, we expect to be net buyers only if it makes financial sense. We do want to grow across Canada, so we are only in two provinces, so the idea would be to grow nationally.
Okay. Got it. Maybe just the one last one on a broader picture. The recent Ontario Bill for long-term care, is there any, you know, direct impact on you guys with that bill?
I mean, overall, what the Bill 37 is talking about is increasing care hours, which is excellent news because the resident acuity level has changed significantly since the last funding model was put into place. It talks about increased transparency and accountability, which, you know, we are aligned with. People should be accountable and transparent. There's a big focus on increasing new capacity and also upgrading long-term care capacity. Overall, you know, I think we all headed in the right direction. Obviously, we are in the process of consultation through our association directly with the minister to ensure that we understand the changes coming and being able to implement them.
Right. Okay. That's helpful. That's it for me. Thank you very much, guys. I'll turn it back.
Thank you.
Thank you.
Thank you. Our next question comes from Pammi Bir of RBC Capital Markets. Your line is open.
Thanks, and good morning. Just in terms of your occupancy forecast, you know, what are some of the underlying assumptions in your outlook? And then maybe just secondly, you know, is that more back-end weighted to, you know, the end of 2022, or is it more evenly dispersed?
I'll let Karen answer the second part, but just in terms of assumptions, you know, what we have been doing is working with our retirement team and rebuild property by property, so it's not a high level assumption. Obviously, the big assumption built into it is that there's no significant fourth or fifth wave. If there's significant COVID for some reason, obviously all of these things go out the window. Then I'll let Karen talk about, you know, our occupancy projections for Q4 and also how it might play out next year.
Good morning, Pammi. For Q4, typically in the winter months, we do see move-ins a bit slower because it's the winter. People don't really want to move. It's the holiday season, and that could also trickle into the Q1 timeframe. When we resume the normal seasonality of the move-ins, then we expect that recovery will happen during those months.
Okay. Sorry. More, I guess, you know, Q2 2022 onward, over that, I guess, the last three quarters of next year.
Yeah. Q2, Q3, that would be the normal season. I mean, in the past couple of quarters, the seasonality seems to, you know, be a bit different. Looking at Q4 next year, if the same patterns have been happening next year, then Q4 might also be a bit slower for next year.
Okay. Thanks for that. Just with respect to the retirement portfolio, maybe without giving away too much of the secret sauce, can you maybe provide more color on the types of sales and marketing initiatives that you use in your local communities and how the referral program works?
It's really a combination of a lot of this, a lot of different things. A referral program could be a referral from, you know, current residents, where, you know, they would get some kind of incentive, whether it's some rent, whether it's some free rent, whether it's a new TV, and there's obviously incentive for the new resident moving in, similar to what we have done in the past, whether it's one month free or moving expenses and others. There are also referral programs for medical offices and others to, you know, to help guide them to us.
I wouldn't really think there is one specific thing which has done that, but it's really, you know, whether it's training of sales consultants, whether it's our online lead generation, it's the centralized call center. I don't think there is really one thing that we can point to versus really a system of, you know, great execution over the time and operations, great work by our sales and marketing team. I think that's really what it comes down to.
Maybe just to clarify, I guess, with respect to the comments around referrals from or incentives, I guess, for the surrounding communities like medical offices or other local healthcare operators, is that sort of, it's like a financial incentive that they're incentivized with, or is it something else?
You know, a lot of that is really a partnership with the hospitals because you know, people go for a minor surgery, and then they're looking, saying, "Well, my needs have changed." It's reconnecting with the hospital system, so it's not really a financial incentive. It is really a service in the local community. That's the big focus. Those are really generally the type because people are looking for the right recommendations for a place. That's what they would be for.
Just lastly, with respect to, I guess, the disposition in BC, any color you can share with respect to, maybe the NOI impact or cap rate range. Just secondly, was that a stabilized asset?
Again, let me talk to the last part, and then Karen Hon can cover the first one. You know, that asset in Burnaby, the market conditions have changed significantly. It has become a very expensive area to be in, with a lot of high-rise condominium really coming to that area. There's not much interest in senior housing. The location has changed. That's where we got to. And that home was not stabilized. Our point was either we have to significantly change the current asset or look to sell it. We decided to sell it, and in this case, it's gonna be bought by a not-for-profit which focus on providing affordable housing for younger seniors. You know, this is. That's why it made sense. I'll have Karen provide you a bit of update on NOI for both of those properties, both retirement one and actually even the long-term care at disposition.
Morning, Pammi. For the two properties that we are in the process of selling, when we look at the stabilized NOI, those two combined would be contributing about CAD 4.5 million. Currently those two would've contributed on a full year basis, approximately CAD 3 million. CAD 3.5 million.
Sorry, CAD 4 million-CAD 4.5 million, that was the stabilized and the CAD 3 million-CAD 3.5 million is the in-place?
That's right.
Okay. Thanks very much. I'll turn it back.
Thank you.
Thank you. Our next question comes from Yash Sankpal of Laurentian Bank. Your line is open.
Good morning.
Hi, Yash. Good morning.
Just, what were the cap rates on the assets you sold or you are in the process of selling?
They're not really sold by cap rates because the first one is being bought by you know a not-for-profit, which is working with the government of BC to provide affordable housing. It's not written as an cap rate. The second one is a C home where you know the long-term care beds that will be moving to a new community that Partners Community Health is building in Mississauga, and the land is being bought by the hospital. It's not really sold on a cap rate basis versus more the highest and best use for the current asset.
Okay. Moving to the Bill 37 discussion. Based on what you are seeing right now, how should we model your long-term care margins and retirement home margins given, you know, the increased labor costs and probably your insurance costs will also go up because of the Bill 37? Is that a fair comment?
Yeah. We don't really anticipate insurance changes because of Bill 37. I mean, insurance costs has been going up across the sector because, you know, there were significant losses for insurance companies, whether it was the floods in B.C. or the wildfires in B.C. or other things. We don't think it has anything to do with insurance costs. You know, having said that, you know, the insurance, utilities and labor costs are the key drivers. Really, we don't really have any insight to provide at this time in terms of how, when and how they would come down. We do expect them to moderate over time. The timing of it is really. We don't think we can provide you any guidance on that.
Okay. For modeling purposes, of those ward beds, how many should we remove, and what would be the total impact, NOI impact of those beds?
Hi. Good morning, Yash. We have about 300 third and fourth beds that have been put as unavailable for a very long time. In terms of how occupancy is calculated and how we would be funded, it would also exclude the isolation bay-beds that are unavailable. Between the third and fourth beds and the isolation beds, that make up about 500 beds that we continue to get full funding. As you know, the occupancy protection has been extended to end of January 2022. Our expectation is that those unavailable beds will continue to be funded as it has been based on directives that they have come out of capacity. We haven't really modeled out like what is the impact of the third and fourth bed because we expect continued funding for those.
You think the funding will continue until end of 2022?
Yeah, that's the expectation, Yash.
Okay. 2% of your employees have been barred from working as of now. How many people is that? Has there been any impact, like a positive impact of that move?
Sorry, say that again. Not sure I could get your question.
Based on your disclosure, I think 2% of your employees, because they're not vaccinated, they are not allowed to work right now. Is that right?
Yeah. Roughly, that's correct.
How many people is that?
You know, we have close to 10,000 employees, so you can do the math there of 2%. It's a couple of hundred.
Right. Have you seen any conversion after that move? Like anybody willing to take vaccine?
You know, it's one-off cases. You know, this is really October 12 coming after a year of you know, before the vaccines were available, but we know they were coming. We had a lot of vaccine education through our Chief Medical Officer and our Chief Infection Prevention Control Officer. We did that. You know, we provided all sorts of support to ensure people were getting vaccinated. We provided incentives for people to be vaccinated, and the last one was mandatory vaccine policy. This was not abrupt. You know, when we got to the balance of the 200 people, I think they made their choices in terms of you know, finding employment elsewhere. We did not see a huge change of that. There might be one or two people who might come back, but nothing significant from that pool.
These were diehard guys. Okay. Just one last follow-up question on your attrition comment. You said about 10% of your residents, you know, move, you know, leave the facility. How much of that is because they move to a long-term care home or, you know, privately or how much of that is moved to some other retirement home?
We don't see a lot of people moving into another retirement home. I mean, moving is a challenge for anyone. When you're a senior, you make friends. It is, you know, unless you are really unhappy with the place you are in, you know, people don't move out. I would say that would be you know, 1% or 2% of people. The difference between people moving to long-term care or other reasons would be around 50/50.
That's it for me. Thank you.
Thank you.
Thank you. Our next question comes from Tal Woolley of National Bank. Your line is open.
Hi. Good afternoon or good morning.
Hi. Good afternoon, Tal. Good morning, actually. Yes, we just-
Yeah. Good morning. Just on the Aspira relaunch, you're obviously gonna wanna invest some money behind the launch of the new brand in Q1. How should we think about just costs for that unfolding over the course of 2022?
The Aspira platform would be a one-time investment of about CAD 1 million, and there's going to be a portion of that in capital investment and another portion for one-time launch costs. Over time, we expect that for the first while it will be cost neutral, in the sense that we expect there will be revenue gains from occupancy lift as a result of the brand. Over time, it would help us contribute to further occupancy gains at risk as well as supporting rent growth. Therefore, in the longer term, we expect that it will be a positive contribution to our NOI as well as our margin.
Okay. Can you just speak to, like, the marketing mix, like online versus traditional media versus, you know, promotions within, you know, your partner, you know, your healthcare provider partners, and how that, you know, might change from sort of maybe where you were or how you were spending your money, like, three, four years ago?
Yeah. You know, it's really, I would say, first of all, it is quite local. You know, there's really no one national strategy for marketing, and that's on purpose because it doesn't work that way. Majority of our spend is digital and, you know, when I say majority, you know, more than 65-70%, and the balance would be the combination of all the things you mentioned, you know, whether it's referral programs, whether it's local newspaper advertising or others.
Okay. For the long-term care platform enhancements you're making, do you intend to rebrand the long-term care side of the business too?
You know, long-term care is a very local decision. There's no attraction to a brand. The attraction is to the quality of care and services that we provide. Our goal is to stay very hyper local for long-term care versus the brand that we launched for retirement, which is Aspira. We expect our long-term care homes to be locally named with no common brand across.
Okay. You know, again, you're doing this relaunch with Aspira. You've invested in, you know, you made some investments in call centers, things like that. When we think about your occupancy outlook, can you provide some color on, like, you know, are you sort of expecting outsized gains from what you would've made in the past because of those investments? If I read into what Karen was saying before, it seems like that would be a fair conclusion.
Yeah. I mean, that's our expectation. You know, if we invest all this and the result is the same, you know, we should not do those investments. I mean, that's a pretty blunt conversation we've had internally as well. We do feel, you know, it's during COVID, it is hard to differentiate, you know, if your results are suffering, are they suffering because of COVID or they're suffering because we don't have the right programming. We do feel confident that our programs that we put into place, and it does take quite a bit of time to, you know, for them to take into effect. Like we feel we are headed in the right direction, and that's what gave us comfort in giving occupancy forecast as well. We do think they are working.
Okay. Then just on the LTC side of the business, you know, there's a lot of focus on redevelopment, obviously. We also, you know, at least here in Ontario, we need to grow the number of beds too. How do you think about it? Like, do you wanna grow the LTC business as the province grows it? Or, are you okay leaving your exposure with what it is right now? Like, are you looking to add facilities over time?
You know, we have around 6,000 beds in Ontario long-term care. We are one of the largest operators. We do feel, you know, we have enough beds in the system. However, when we do developments, and Brantford is a good example, the current home is 122 beds. We're building 160, so we would add capacity there. You know, at Cedarvale Lodge, we have a retirement home, which is attached to only 60 long-term care beds. We are changing that 60 to 160 as we're rebuilding it. I think there would be places where we are adding capacity, but in Mississauga, for example, we sold our C home because, you know, it was a better use for the hospital.
For residents, it was faster to get to the new long-term care being built by the hospital and Partners Community versus us going through a whole rezoning process and building in Mississauga. I think it's really one-off, but we don't expect our long-term care numbers in Ontario to significantly change in the future. We expect them to stay overall consistent, but with a higher portfolio, or a better quality of portfolio as we are redeveloping these C homes.
Okay. Then just on the admission side, like, you know, prior to the pandemic unfolding, we were, you know, moving away from the LHIN model to the Ontario Health Teams. What's happened with that over the course of the pandemic? It, you know, for obvious reasons, it's sort of you know, that restructuring kind of is falling out of the news, and I'm just curious.
Right.
Has it made any difference or, you know, like, has anything changed as a result of those shifts?
Yeah. LHINs have gone away, so it's Ontario Health Teams that we work very closely with. We have great relationship across Ontario Health Teams. The admissions and long-term care are still directed through Ontario Health Teams. I mean, we have to realize, you know, if you have a set of capacity across the system to admit certain number of people into long-term care residence, and when the number grows by 4x or 5x , it'll take a bit of time. Working with Ontario Health Teams, you know, our team and Ontario Health have done an incredible job of getting people back into long-term care, which is reflected in our long-term care occupancy, and we continue to see good progress moving forward as well.
Just finally, on the campus model that you guys have been touting over time, I can obviously see the draw for the, you know, if you have retirement and LTC on the same side, you know, there's a draw for the, you know, for the family to sit there and say, like, "Hey, we've got basically the full spectrum of care in one place." You sort of have this weird thing, right, where, like, it's, like, technically not you in charge of the admissions into the long-term care facility. Like, how do, how-
Yeah, no, that's fair. You know, like, for example, Keswick just happens to be campus care because there's existing retirement beds, and we have more land, so we're building there. Brantford is a great retirement space as well. There's not much competition, so we're building a campus. No, but we are not focused on only building campuses. I would say if I had to guess, a majority of our long-term care home developments would be standalone long-term care developments. You know, that's for us. We have limited amount of development dollars, and we want to make sure that we are smart with that. In long-term care, our focus is to redevelop those long-term care beds because without doubling the cost for a campus.
If we find the right land, the market makes sense for retirement, we would add campus. What we're not doing is we're not saying, "Okay, we'll only do campuses, so let's find land where it works, and then we'll do." It's more we will. The idea is to provide solution for long-term care, and if it somehow lends into a campus, then that's a great outcome.
Okay. Got it. Thanks, Nitin. Appreciate it.
Thank you.
At this time, I'd like to turn the call back over to Mr. Jain for closing remarks.
Thank you, Latif. On behalf of our management team and our board of directors, I wanna thank all of you for your continued support. I hope you have a great rest of the day and a great weekend.
This concludes today's conference call. Thank you for participating. You may now disconnect.