Ladies and gentlemen, welcome to Ciena Senior Living, Inc. Q4 2020 Conference Call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer and Karen Hahn, Chief Financial Officer of Ciena Senior Livings, 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 and A and AIF for more information. You will also find a more full through discussion of the company's results and its MD and A and financial statements for the period, which are posted on SEDAR and can be found on the company's website, tanaliving. Ca. Today's call is being recorded, and a replay will be available. Instructions for access in the call are posted on the company's website, and the details are provided in the company's news release.
The company has posted slides, which accompany the host's remarks on the company's website under Events and Presentations. With that, I will now turn the call to Mr. Jain. Please go ahead, Mr. Jain.
Thank you, Michelle, and good morning, everyone. Thank you for joining us in our Q4 call today. First, I would like to express my deepest gratitude to our team members. Their demonstration of resilience, compassion and commitment over the past year has been inspirational and truly humbling. They're making a remarkable difference by prioritizing the health and well-being of our residents and their colleagues, while often making significant sacrifices in their own lives.
With the arrival of COVID-nineteen vaccines, we ended 2020 with both promise and urgency in the ongoing fight against the pandemic. We have new protection and renewed hope as many of our residents and team members are now vaccinated. Since mid December, Ciena's vaccination task force has been rolling out vaccinations across our long term care and resident residences, Retirement residences in Ontario and British Columbia. Over the past 2 months, approximately 92% of Sienna's long term care residents And 60% of Ciena's long term care team members have received their first dose of the vaccine. While the rollout of the vaccine in long term care has been a government priority, approximately 46% of our residents And 28% of team members in our retirement residences have also received their first dose of the vaccine.
In addition, the administration of the second dose is also well underway at many of our residences. The arrival of the vaccine has been a turning point and is expected to be the most impactful defense in the fight against COVID-nineteen. With the high vaccination rate at our residences, we are encouraged that the number of residences in outbreak The severity of outbreaks has started to decrease significantly over the past few weeks. As of yesterday, we had 12 residences with active At this point, we have no active COVID-nineteen cases across any of our residences in BC and only 6 residences in Ontario have active resident cases. This marks a significant improvement and represents a 96% decline since the beginning of 2021.
Moving to our continued focus on quality of care and safety. We continue to expect to have stringent precautions in place to reduce the impact of COVID-nineteen at our residences. Coupled with the high level of community spread, The transmission rate of the virus in older B and C buildings has posed significant challenges and vigilant eye type measures and protocols Will remain in place for the foreseeable future. Our incident management team meets on a regular basis, reviews announcements and changes to provincial directives and provides guidance and oversight for implementing changes to applicable policies and procedures. With the guidance of Doctor.
Moser, our Chief Medical Officer and Doctor. Maguire, Sienna's Chief Infection Prevention and Control Advisor, We made enhancements to our IPAC measures and developed a standardized COVID-nineteen management guide based on public health guidelines. This guide provides further advice on IPAC measures to our team members and helps standardize the clinical management of COVID-nineteen in our residences. Moving to Slide 6. As a result of the pandemic, we enhanced our staffing strategy, Both with our internal talent acquisition teams and the use of external agencies who provide short term ready to deploy team members.
From March to December of 2020, we added approximately 1200 team members to our workforce, And we increased our full time workforce by 16% to about 2 thirds of our total employees. Learnings from the first wave continue to be a key focus of team member training and weekly training webinars, which are held at all of our properties Along with webinars to address site specific needs. We have also placed additional emphasis on wellness programs, including mental health and well-being. We also made improvements to the way we communicate with residents and team members. We strengthened Ciena's family caregiver engagement program to better engage with the residents' families and caregivers and to provide them with additional support.
Every residence now holds a virtual town hall with all families at least once a month and send out a newsletter every 2nd week. In Q4, we have hosted close to 170 virtual town halls and issued more than 300 newsletter. We also launched a well-up series currently focused on stress management and dealing with loss. We engaged our in house medical experts, Doctor. Mozart and Doctor.
Magear to provide information and answer questions about the COVID-nineteen vaccines to our team members, residents and their families. We made further enhancements to a centralized call center. This includes longer hour of operations and enhancements to its marketing and sales function to support our retirement operations. And we continue to leverage True, Our team member mobile app, which has been invaluable in connecting with thousands of team members in different locations quickly and efficiently. Over the fall and winter months, we continued with intensified marketing and sales activities and process improvements Across our retirement platform, it includes efficiency and productivity.
Our continued investments in our digital presence have been driving to our website and in social media sites to support lead generation. Online leads have increased by approximately 80% In Q4 of 2020 compared to the prior year and remain well above their prior levels in the 1st week of 2021. Initiatives also include professional referral programs and a sales incentive program. In addition, we continue the use of virtual tours at our residences. Moving to occupancy.
Given the ongoing pandemic, occupancy declined in our retirement by 3.7% in the 4th quarter to 79.7% at the end of 2020, With average occupancy of 81.3 percent in Q4, year over year occupancy declined by 6.1% since the end of 2019. After several months of occupancy gains in the late summer and early fall of 2020, renewed access restrictions 8.6% in January of this year, down 120 basis points from December, and we expect continued occupancy pressure until mid-twenty 21. Based on our assumption that restrictions on our retirement residences will ease over the coming quarters, We forecast occupancy improvements during the second half of the year, supported by anticipated pent up demand and our continued investments in our sales and marketing initiatives. In our long term care portfolio, average occupancy declined to 84.8% in the 4th quarter From 98.2 percent in the same period last year due to access restrictions and capacity limitations. Occupancy will continue to be impacted by the pandemic with gradual improvements expected during the second half of the year.
Excluding the impact of net pandemic expenses, we expect the financial performance of Ciena's long term care portfolio in 2021 to be similar to 2020. Long term care residences are fully funded for vacancies if new residents cannot be admitted due to an outbreak. In addition, we continue to see full funding for capacity limitations to a number of 2 residents per room in multi bedrooms in Class B and C Homes Until February 28, 2021. This occupancy protection, however, does not compensate us for the loss of premiums we receive for preferred accommodations For private and semi private rooms if they are vacant. Moving to Slide 9.
Our operating performance has been significantly impacted by the extraordinary expenses incurred to manage the pandemic. Q4 OFFO per share was $0.211 a decrease of $0.129 compared to the prior year. Excluding net pandemic expenses, OFFO per share would have decreased by $0.44 compared to the prior year. Q4 AFFO per share was $0.196 a decrease of $0.117 compared to the prior year. Excluding net pandemic expenses, AFFO per share would have decreased by $0.032 compared to the prior year.
Sienna's AFFO payout ratio increased to 119% in the 4th quarter. Excluding the net pandemic expenses, the payout ratio would have been 83%. For the full year, AFFO per share was $1.04 compared to $1.40 in the prior year, And the payout ratio was 90% compared to 66% in 2019. While we expect a continued increased level of expenses in the foreseeable future, high vaccination rates, coupled with the many actions we have taken to strengthen our operations, Provide new protection to our residents and team members and increased optimism across our sector and our company. With that, I'll turn it over to Karen, who will provide an update on our operating and financial performance.
Thank you, Nitin, and good morning, everyone. As Nitin mentioned, Sienna has taken extensive precautions to manage the impact of COVID-nineteen, which is reflected in our results and key metrics. We have made investments in additional staffing, PPE and property infrastructure, entered into management agreements with hospitals and added senior healthcare expertise to navigate the effects of COVID-nineteen. All of this affected our operating and financial results. I will start with our Q4 financial results on Slide 11.
Revenue decreased by 1.9% year over year to $168,800,000 in Q4 2020 compared to Q4 2019. Our same property net operating income of $28,500,000 in Q4 2020 decreased by $9,500,000 over the prior year, mainly related to net unfunded pandemic expenses of $7,700,000 Retirement same property NOI decreased by 4 $300,000 to $12,200,000 which included net unfunded pandemic expenses of $1,800,000 recognized during the quarter. Excluding net pandemic expenses, Retirement same property NOI decreased by $2,500,000 to 14,000,000 mainly due to lower occupancy levels and inflationary increases in labor costs, partially offset by annual rental rate increases in line with market Long term care same property NOI decreased by $5,200,000 to $16,300,000 year over year Due to net unfunded pandemic expenses of $5,200,000 Excluding net pandemic expenses, long term care same property NOI was flat to prior year, with decreases in preferred optimization revenues in our Ontario portfolio, offset by timing of expenses. Moving to Slide 12 on our full year financial results. Same property NOI decreased by $31,500,000 compared to 2019.
Same property NOI and Retirement decreased by $16,900,000 or 11,600,000 And long term care seen property NOI decreased by $22,500,000 or $19,900,000 over the prior year. Rent collection levels in the retirement portfolio remained high at approximately 99% throughout the pandemic. We encourage an increased level of expenses to support the cost of fighting the pandemic and minimizing the impact of outbreaks. There are various programs and financial assistance provided by the government to support pandemic related expenses. It is important to note that there may be timing differences between the time of incurring these pandemic expenses and the funding of such expenses.
During the quarter, we recorded net unfunded pandemic expenses of $7,700,000 related to managing COVID-nineteen, a decrease of 20.8 percent compared to the 3rd quarter's $9,700,000 The decrease compared to last quarter was mainly related to lower pandemic staffing costs as a result of our effective recruitment and retention initiatives, leading to a reduction in external agency We also incurred lower hospital management fees compared to the last quarter. This was partially offset by increased PPE costs in response to the 2nd wave. For the full year, net pandemic expenses were 28,200,000 We are very grateful for the continued government support that helps us cover some of the extraordinary pandemic expenses. With the exception of funding related to accommodation, all government funding is flow through funding, which means it has to be spent At the beginning of January, the Government of Ontario announced additional funding for long term care of $398,000,000 for costs related to enhanced testing requirements and continued infection prevention and containment efforts, 2020, same property NOI in our long term care portfolio would have been $23,200,000 in Q4 2020. To date, The Ontario government has approximately allocated $747,000,000 excluding amounts for occupancy protection funding.
Of this amount, approximately $47,000,000 has been allocated to Ciena to date. The government of British Columbia has allocated approximately $197,000,000 in funding for costs in connection with additional screening and staffing, Infection prevention and control measures and social visitation, of which $3,000,000 has been allocated to Sienna. All of this funding is crucial to help offset some of the significant costs driven by the pandemic. Moving to our debt financing efforts. On October 2, we successfully completed $275,000,000 of debt financing, which significantly reduced near term debt maturities and improved our long term debt ladder.
These financings, which reflects the confidence placed in our company, included $175,000,000 in secured and unsecured ventures, carrying a coupon rate of 3.45 percent and maturing in February 2026 and a $100,000,000 credit facility carrying a floating bankers acceptance rate plus 2 25 basis points. The proceeds from the financings were mainly due to early redeem of Series These secured debentures, which would have been due in February 2021. With these successful financing, The weighted average term to maturity of our debt has been extended to 4.7 years at the end of the year. Looking at our debt metrics for the full year 2020 on Slide 16. Excluding the impact of net pandemic expenses, Our interest coverage ratio was 3.9x in 2020, in line with the prior year.
And excluding the impact of net pandemic expenses, Debt to adjusted EBITDA increased to 7.5 times in 2020 from 6.7 times in the prior year. And our debt to gross book value increased by 220 basis points to 48.2 percent year over year, Mainly due to an $87,000,000 drawdown on our credit facility, of which $40,000,000 had been invested in short term investments to provide us with continued financial flexibility. Subsequent to the end of the year, we repaid $63,000,000 of our credit facility, Therefore, decreasing our debt to gross book value by 150 basis points to 46.7%. We decreased our weighted average cost of debt by 40 basis points to 3.2% year over year, primarily due to increasing our mix of floating rate debt. In terms of our balance sheet, Sienna maintains a strong financial position and investment grade credit rating and ended the year with $217,000,000 in liquidity and an unencumbered asset pool of over $840,000,000 Our debt is well distributed between unsecured debentures, Conventional mortgages, CMHC insured mortgages and credit facilities.
As mentioned, We expect an increased level of expense for some time, which will continue to affect some of Sienna's key performance indicators, In particular, with respect to the company's operating performance. Given the many factors influencing your results, We remain committed to providing periodic business updates on the impact of the pandemic and on our business operations and financial results. I will now turn the call back to Nitin for his closing remarks.
Thank you, Karen. I had the opportunity to safely and within all the provincial guidelines Visit 24 of our residences since June of last year, including 5 in the last few weeks. When visiting our residences, I witnessed firsthand the dedication and courage of our incredible team members, many of whom have been battling COVID-nineteen for almost a year now. I'm truly grateful that our governments prioritize senior living and they roll out of vaccines. It gives our residents and team members the much needed protection they deserve.
I'm also thankful for the government of Ontario's decision to increase direct care hours over the coming years to an average of 4 hours per day each resident in long term care, a significant increase compared to the current 2.8 hours. At Ciena, we have taken many actions over the past year to review and strengthen our company's foundation by adjusting and enhancing our operations And our capacity to respond to the pandemic. Many of these initiatives have been highlighted in our inaugural ESG report, which was published yesterday. The extent of the pandemic impact on our operational and financial performance in 2021 depends on numerous developments. These include the duration and scope of COVID-nineteen outbreaks at our residences and the impact on our residents, employees and suppliers The speed of vaccine rollout across the wider population in Canada, the arrival of new variants of the virus as well as the extent of the general economic recovery.
In terms of a strategic focus on development, our plans include over $600,000,000 in capital investment To develop our Ontario Long Term Care portfolio over the next 5 to 7 years. This is a major opportunity to invest with a focus on sustainability To enhance the lives of seniors we serve and enrich the work environment for our team members, our 2021 goal is to start with 2 development projects In this year, last year has been filled with learning, innovation and resilience. With many of our residents and team members now vaccinated, We have new protection and increased optimism. As we look beyond the pandemic, overall sector fundamentals remain strong. An aging population, long waitlist for long term care and a slowdown in the future supply of retirement residences are all expected to support our sector's outlook going forward.
I'm incredibly grateful for our team of over 13,000 Who's doing everything it can to prevent the spread in our residences during the 2nd wave. I also want to acknowledge the many stakeholders We're dedicated to supporting us in our ongoing fight against COVID-nineteen, including the governments of Ontario and British Columbia, our sector associations and our residents and their families. Thank you for your participation on the call today. We are pleased to now answer any questions you may have.
Our first question comes from Jonathan Kelcher with TD Securities. Your line is open.
Thanks. Good morning.
Good morning, Jonathan.
First question, just On the long term care and the extra pandemic costs, I guess with vaccines being rolled out and your infection rates Way down, which is obviously good. When do you think those start easing off a little bit? Is that something that should taper over the course of 2021?
Good morning, Jonathan. We are very pleased with our vaccination rates to date. And with long term care having been prioritized and our residents being 92% vaccinated to date, That's very meaningful. And we see a very favorable correlation with the high vaccination rate and the decline in the number of outbreaks As we are now at less than 0.2% of active resident cases. And our pandemic expense do Vary greatly depending on whether our home is on outbreak or not and the severity of that outbreak.
And what we've seen is once the home goes into outbreak, there is increased needs for staffing costs For PPE, cleaning and cohorting and so forth. However, even with the vaccination in place, We're very committed to continuing with our IPAC measures and protocols, which means continuing with an elevated level of staffing And PPE and all those measures that come with it. And with the homes now coming out of outbreak, Those costs would continue for some time as we would unwind some of the extra effort, but it really has a standard level of IPAP protocols that will continue for some time, really until the general population will get vaccinated Because we see a direct relationship between community spread and the infection of our residences. So we are fully committed to ensuring that our residents, our team members are still very well protected from the pandemic. And as the pandemic subsides in the general population, dose costs would come down.
Okay. So I guess another way Of asking that is, if we were to assume that you're fortunate enough to have 0 outbreaks in all of Q2, roughly what would the extra pandemic cost be for that quarter?
Jonathan, I think it's very hard to estimate that because it depends on the community restrictions in that And there would be again, as Karen mentioned, there'll be a certain standard you would always keep, you would be screening people till The overall population is vaccinated. People would still be wearing some personal protective equipment. So it's really hard to estimate at this point what it would look like if we had no outbreaks.
Okay. Maybe switching gears just on the development program that you Outline the $600,000,000 How would funding work for a typical Development, like how much loan to cost could you get in terms of construction financing?
Sure. So around 75% for long term There, given the certainty of there's really no lease up risk, so there is you can borrow a bit more and There are certain lenders who are very active in this space. We can borrow close to 25 year money for around 3.25%. So we are And the balance, you would fund it from your equity upfront. And after the home or the building is completed, Depending on where you're located, you can get around 10% to 17% of that construction amount back As an upfront grant.
So whatever equity you put in, around half of it could be recovered once the home is open. For our $600,000,000 program, if you just think of it at a high level, if we borrow $450,000,000 which is the 75 percent And out of the balance, the $150,000,000 we would be close to $70,000,000 upfront over the next 3 years. And then once that program gets going as Building comes online. That equity is self funded through those grants going forward.
Okay. So bottom line, you're looking at about $70,000,000 of cash that you guys need to come up with over the next 3 years for this program?
That's correct. And these are again high level numbers at this point as we have detailed programs for few sites and we have high level Assumptions for some of the other sites, but directionally, yes.
Okay. Thanks. I'll turn it back.
Thank you.
Our next question comes from Fred Blondo with IA Securities. Your line is open.
Thanks and good morning. Just looking at the action plan from here, would you see you're Pretty much done increasing the size of your team. And in terms of the occupancy Protection funding, I mean, could you remind us and I might have missed that, what happens post February 28?
Sure. Hi, good morning, Fred. So on the first one, I guess our team is overall built. There are 3 areas where we added The first one being the healthcare. The second one is on communications, which included us opening a call center.
And the last one is centralizing our talent acquisition and we were fortunate to be able to do that in the time we did. In terms of the February 28 guideline, we continue to work with the ministry on how safely to reopen the homes So people can start to come back and also discuss how do we get people back into the 3 or 4 bedrooms and still maintain infection prevention So I know there's a lot of conversation happening at multiple tables to ensure how do we do it in the best interest of everyone. At this point, we really don't really have any more guidance than that.
No, that's totally fair. And expanding on Jonathan's Question on your redevelopment program. I know we discussed that in the past, but what would be your current assumptions in terms of yield on How would you say that these assumptions evolved over the last year or so?
The reason why I'm asking obviously
is that we all saw Material costs rising over the last couple of quarters?
Correct. So our assumptions continue to be that We would expect the development returns to be in 50 to 100 basis point over stabilized long term care home. Now The reality is there will be very limited construction of A. Long concave homes in Ontario. There were 500 beds built in the last 5 years.
So people are making guesses on what that cap rate would look like. When we look at A Homes and we recently went through a very fulsome appraisal process Because as you are doing an unsecured financing, the cap rates for A Homes could be anywhere from 6.75% to 7.25%. And Well, we would argue and advocate that if you have a brand new building built now with a brand new license, the cap rate should be lower Then the 6.75 number. So I would say anything in the 7% yield range would make sense for us financially. But secondly, it is also the right thing to do.
These older homes were built 50 years back for different residents' profile 50 years back when people used Welcome to long term care home. The average length of stay could be 4, 5 years. Today, people come in much Later in life with acute healthcare needs and those buildings are just not We have to make them work for the next 5, 7 years because you cannot really change them overnight. But going forward as the acuity level would only Become more and more difficult to manage. You need the right infrastructure to be able to do that.
So for us, we feel From an ESG perspective, it's the right thing to do socially, it's the right thing to do environmentally, and it would have, we expect, A decent return for our shareholders as well because we would be relying on huge amount of capital to make this happen.
That's great and congratulations to you and the team on great work. I can only imagine how difficult the situation is. Thank you.
Thank you.
Our next question comes from Himanshu Gupta with Scotiabank. Your line is open.
Thank you and good morning.
Good morning, Himanshu.
So with respect to additional funding announcement in January, Has that been fully allocated now? And then just to confirm, you have received $6,900,000 in January pertaining to expenses incurred in 2020, but that's not recorded in the financials so far.
Good morning, Himanshu. You're right on all those fronts. So in the January funding announcement, Ontario has shared a new funding of RMB298 1,000,000, which helps with the testing requirements as well as COVID related expenses covering staffing, All the kinds of costs we have been incurring. And out of that new funding, About 40% of it has been allocated to date. And we've shared that what we have received Of $6,900,000 related to 2020 expenses.
And because the funding announcement was only known in January, those are not reflected our year end results.
Got it. And if I look at the total unfunded expenses in 2020, they were around $18,000,000 And it looks like you have received $7,000,000 already in January. Do you get a sense from the government that you You're likely to receive more funding to close the gap between that $12,000,000 left now or $11,000,000 left now, which is not recovered from the last year?
That's a good question. What I can only say is that out of that new funding that has been There is still about 60% of it to be allocated. We're not sure how that would be allocated. But in addition to that, there was also a funding program that was announced back in the fall in September, Whereby every month, we have been getting pandemic funding to support with our ongoing costs as well. And as of late, that monthly allocation has been about $3,200,000 $3,500,000 a month.
Got it. Okay. Thank you. And then just looking at the nature of the pandemic expenses, I mean, if I look at the PP and Almost $2,000,000 in the quarter. There were other expenses as well, I think, and obviously, in the pandemic, labor continued to be elevated.
So which expense category do you think will come down? I mean like similar to Jonathan's question is On the homes which is 100 percent COVID free, 100% vaccinated, which category do you think the first category which will come down and Any what would be the level of savings there?
I think that's You're right. Jonathan asked the same question and it's not that we're not looking to give you an answer, but let me just walk you through some of the scenarios. For example, The vaccination is still relatively new. And a month back, the conversation was even if you receive vaccination, you should still be Getting screened and tested on a regular basis. Now there's some new conversation coming that as People are vaccinated that maybe they don't have to get tested on a regular basis.
But again, that is still in very early stages Before you can implement it. Then there's a second concept of rapid testing and we are now doing a pilot in 5 of our sites And the initial assessment was that it will take incredible amount of team members to make that happen because you're really creating a mini lab In 83 of your residences, even though it's not mandated on retirement at this moment. So it is very hard to estimate at this point as we learn a bit more, We again can provide a bit more information and that's why we are committed to provide regular business guidance rather than just waiting for the quarter. So As we know a bit more on how and what level of expenses can come down given the vaccination, we can certainly come back and provide a bit more fulsome update.
Okay. That's fair enough. And then just turning the changing gears to retirement home occupancy. So the question is, were there any restrictions in terms of admissions to retirement homes in Q4 or currently in January, February so far? I mean, just looking at the occupancy drop here, can you elaborate that?
Sure. Our retirement team has done Job of following up on previous leads. And as you can imagine, as seniors are moving into one of the retirement homes, they would like See it, compare it to other options and then move in. So during the summer of last year when there were less restrictions And there were more in person tours, people were already in the pipeline. We were able to actually see occupancy increase.
Now since all of those leads are gone and restrictions have been in place for quite some time, and there's a certain cycle for a senior to move into a retirement home. Well, in many cases, they're selling their own house. So the good news is the housing prices continue to be very strong and are only going higher. But if you're a senior and you're in the middle of COVID with all the restrictions, it is challenging to be listing your home and selling it. So we haven't really seen much traction and with the restrictions, there are only virtual tours available.
And there's still the need to ensure that people are isolating for the 14 days when they first move in, even though they might have a COVID negative test. So there are some items that we continue to work with our association and with the government to see if we can fine You know, influence them in a safe manner to make moving a bit more easier for seniors. But again, Safety always comes first. A long way of answering your question around that there continues to be restrictions. We're doing virtual tours when people are visiting in person.
They are allowed to do so. They have to have a COVID test to be able to do that. So at this stage, I would say we are cautiously optimistic with the vaccine that as Vaccines start to take impact. We can start to have a bit more visits in person and a bit more follow-up from a sales and marketing perspective.
Got it. And then maybe the last question is, previously, you mentioned you were not giving much incentives For supporting the Diamond Home occupancy, has that view changed now or will that view change now given that Some of your homes will be are at below 80 basis occupancy limits.
Right. So in the past, we've always talked about we provide one time incentives rather than changes in rates. So we will continue with one time incentives, whether it's moving cost, Whether it's some help with the furniture or might be some rental period free upfront, And we believe that's a better way than to lower market rents because it also upsets your current residents. It's a bit unfair if someone is living with you for 2 years and the next door neighbor is knocking less because you just are trying to fill occupancy. And there is continued cost pressure from a PPE perspective as well.
So most of the sophisticated Retirement owners and operators, they continue to provide incentives rather than lower rates because don't think that's the right strategy in the long term. So we are in the same boat of Providing one time incentives, but not really looking to change market rates.
Got it. Thank you so much. I'll turn it back.
Thank you.
Thank you.
Our next question comes from Tal Woolley with National Bank. Your line is open.
Hi, good morning.
Good morning, Kyle.
The staffing vaccination rates, What's sort of the impediment to increasing those? Because I think one of the things we sort of learned is that sort of been one of the vectors that has Created some of the outbreaks going forward. I'm just wondering if it's a vaccine availability issue or if there's anything else that's sort of factoring into that?
The biggest issue is availability because the residents are prioritized first. And for key members, it usually, the path has been you go to the local hospital when there's vaccines available to do that. And we had 60% of our team members are long term Vaccinated. Our refusal rate has been quite low. It's been less than 10%.
And with the new variants coming in, that rate is only going Lower and more education, which both our Chief Medical Officer and our Chief Infection Prevention Control Advisor are doing Because there was a lot of mess around this vaccine, how it might be unsafe because it was developed so fast and that is not the case. So we don't really see a huge number of refusals in cases where we had vaccine availability and we had staff who were worried. We even took on to ensure we can provide 1 on 1 education to get people vaccinated because you're 100% correct. The best the most fulsome way of fighting this pandemic is to get people vaccinated. So that continues to be high priority and we do Our team members numbers to be extremely high once there's a fulsome availability, which we understand might be coming in next 2 weeks or so.
Okay.
Just pivoting back to the retirement occupancy. I mean, We're sort of a year into it, and I appreciate that regulatory changes, everything staffing changes, everything has happened throughout the year. It's made Obviously, it was making it
a little bit difficult to
call like month to month what the expected impact should be on the business. But when you sort of look now kind of A year out, and thinking about what the average tenure of a retirement resident is. Like The rate of occupancy loss, has it been about what you expected now? Like is it or is it a little worse than what you were thinking or maybe even a little bit better? Now that you've got like sort of some time looking at this, looking at how it's performed.
Sure. So usually In the Retirement Homes, Q1 is a challenging quarter because with the flu season, many people are would be moving into long term care. So I'll just give you some high level metrics. For example, if you had 90 move outs, let's call it And January of last year in retirement, just I'm just giving aggregate numbers. The number of move outs would be 70% of that This year, because so the number of people moving out has definitely gone down.
The challenge is the number of people moving in might be a 20% rate of what people were a year back because of all the reasons I talked about before in terms of tours, people selling their houses and others. So The move out actually has not been a challenge and in fact has come down because of restrictions in long term care. But it's the move ins which We actively need to work on. And what we have been busy doing, whether it's with our call center, whether it's a sales and marketing program is ensuring that we are ready, That as restrictions do come out and the markets where it's out, we are actively doing that, building those local partnerships. So I can imagine the frustration on calling it out, the same applies to us.
But I would just give you an example. In There was no conversation of a U. K. Variant and now apparently that's going to be the biggest part of COVID in Canada. So things are changing at a rate, which are difficult to manage so far from everything we have done.
This new vaccine is or the vaccine To defend people against the variance, so that is positive. But there's just a lot of new information coming on a regular basis, Tal, which makes it very difficult To forecast. Thanks. Okay. And then
from your marketing teams, like what's the tone like Has there are they noting more concern from prospective residents about moving into a seniors home Pardon me, retirement residents through this period? Like are they you finding like their conversations are having to revolve around like Here are the infection controls and stuff like that? Or is it more like it was in the past? It's just I've got a Family member or relative who needs more assistance, but I'm just wondering if the conversation has changed from a marketing perspective a lot.
Not really. Again, our resin profile is 85 years old and it is need driven to some extent to do that. The 14 day isolation period definitely is challenging. It does seem like a lot, someone moving in, but we also have to ensure we are Keeping everyone else safe. So that's the work we're doing if people have a negative COVID test or residents have a negative COVID test and their isolation period could be different.
But again, we'll only change that once it's safe to do so. So it's more things on being able to tour properly, being able to talk to people, being able to tour multiple times Rather than really a change in mindset because again as I talked about our retirement resident profile is more need driven rather than just Living style. Okay.
And then you mentioned too in your MD and A just about Trying to do more medical visits virtually within your long term care homes and looking to spend some money on that. Can you just Talk to me about what exactly you're talking about and what type of money we're sort of discussing in that initiative?
It's not really that for virtual care, it's more on technology such as iPads or hardware. And You always have to, as our Chief Medical Officer keeps reminding everyone that virtual care visits only go so far. So you really need to do both, Where it's a physical visit and a virtual visit. What you're trying to do is that between those in person visits, you're really doing The virtual visits and there would be some upfront costs such as the hardware to set that up.
Okay.
So it's nothing yes, Not a big system implementation by any stretch of imagination. Okay, got it. Thanks very much, Kai.
Thank you. Maybe I'll just add To that, Tal, is we did get also a separate bucket of funding for IPAC related capital expenditures. So that's been helpful.
Okay, great.
Our next question comes from Joanne Chen with BMO Capital Markets. Your line is open.
Hey, good morning, guys. Maybe Just going back on just on the pandemic expenses, assuming I know it's hard to because things are changing day by day, but Assuming kind of the trend that you're seeing now, would it be fair to assume that the portion of that net unfunded Expenses should continue to trend down like it did from Q3 to Q4 throughout 2021?
Again, it is hard to tell whether it's going to trend down, but we are very encouraged With the decline in our number of homes on outbreak and the number of cases, so as The number of outbreaks and cases come down, the expenses would also come down, but no. Still, there is a Level of IPAC measures that are required and we are fully supportive of. And so we could expect that our expenses could They'll be a bit higher than what the funding might be.
Right. That's how we that Sorry, I might have missed this earlier here and you mentioned something with respect to the $147,000,000 and then the $47,000,000 allocated in Ontario. Is that for expenses? I don't know if I heard it wrong, but was that for expenses to be incurred in 2021?
So
there were the number I referred to is the total pandemic Funding that we have gotten to date is
up to
$37,000,000 And of the new funding announcement in January of RMB398 1,000,000. Out of that, we had allocated a portion of it, of which RMB6.9 million Was recognized in January, but related to 2020 expenses.
Okay. And I guess the assumption is later a couple of months later down the line for whatever expenses incurred in 2021 that will come From the government later down in the year, correct?
Potentially, Joanna, you're saying that for expenses This year, would we continue to get funding? Again, that would be our that is something we would be looking for because again, all of this funding goes directly Towards pandemic expenses and if you don't use it, you give it back to the government. So as outbreaks go down and hopefully the expenses go down, Maybe the funding will go down, but at this point, we continue to see increased level of staffing, increased personal protective equipment. So that is something which would We expect and hope that will continue on to help us mitigate all this risk.
Okay. And perhaps this is A longer term question, but assuming the pace of vaccination continues at a good Great. And we finally achieved some sort of herd immunity. With respect to your retirement home, Is there any thoughts on the in terms of what you guys are thinking in terms of the occupancy Recovering back the timeline for the occupancy to return kind of back to close to pre pandemic levels?
Again, our view on fundamentals haven't changed and in fact with slowdown of some of the retirement and new supply. And we will even give you our example where in the previous time we have announced that we want to do a project in North Bay and we were thinking of doing both long term care and retirement. We are only going to go ahead with long term care at this point. We were going to do a project in Kingsmere, but an expansion we have put that project on hold. So again, we expect retirement supply is going to decrease and that will continue to again help from a retirement occupancy perspective.
So our view really hasn't changed and we expect on a stabilized view to get to the low 90% In the long term, we just don't know how the long term is it 18 months, is it 2.5 years? It's hard to predict that today. In the summer of last year, we saw significant uptick in occupancy at a very fast pace, but it's just hard to say that today.
Okay. That's
Our next question comes from Yash Sankpal with Laurentian Bank. Your line is open.
Hi, good morning.
Good morning, Ash.
Let me try this one more time. Would it be fair to say that you will continue to incur these out of pocket costs, sizable amount of them In
2021? Let me answer your question in a more direct way. So What we will ensure is do not do we are not going to cut on costs if it's unsafe to do so. So whether we get the funding from the government or not, We will continue to have the right level of staffing, the right level of personal protective equipment or anything else needed to fight the pandemic. Our view would be that this is a sector wide issue and we should continue to get support from the government, but That is not going to stop us from continuing to do what we need to do.
On things such as extra care hours, In terms of changing from the current 2.8 to 4, those are long term. Those are the ones which we expect to continue to work with the government and others to make it happen and we are fully supportive of doing that. It's just hard to predict how that would look like, how much funding we would get versus our expenses.
Thank you. Now given the prospect Of incurring higher costs for foreseeable future and the uncertainty in terms of your recovery in Your retirement home occupancy. How does the Board think about your distribution at this point?
So we have been talking about our distribution throughout the year on a monthly basis And there's a lot of media conversation around dividends as well, around people taking government funding and putting into dividends, which is absolutely Untrue, because you cannot actually do that. You can only make any income from either your retirement homes, Which we have, which is half of our business or the accommodation portion of the funding. Our payout ratio for 20 2020 was 90%. We always believed in having a conservative payout ratio to ensure that we continue to bring our leverage down We're saving it for a rainy day. Well, it's been a hurricane for quite some time.
But with the vaccination and the high rates of vaccination we see, we do see an end To this, in the call it short to medium term or expenses coming down, we just don't know how much. So for now, we Do you feel strongly invested in what our dividend is, but that is a conversation we would have Internally and with the Board on a regular basis and we if you think that it's going to that we need to make a different decision, we'll do that. But we have not So far, we continue to believe that we have a good payout ratio and we have strong liquidity To offset any of the short term cash flow pressure.
Thank you. That's it for me.
Thank you.
Our next question comes from Brendon Abrams with Canaccord Genuity. Your line is open.
Hi, good morning, everyone. Maybe just following up on the earlier line of questioning around the long term care developments. On Fred's question relating to yield on cost, I'm just wondering if you can be a little bit more Specific in terms of on a percentage basis, like a cash on cash return, what you would be expecting in terms of Future Long Term Care redevelopments?
Yes, I would just say from a total investment Perspective because at a high leverage, your cash return might look a bit different. We expect Just on a development yield perspective on total investment versus the NOI you would generate, we expect the development yield to be in the range of Yes, 7% to 8%, so depending on project. So that's really our view has not changed on it. But as I did talk about With the way the development program works and the high leverage on long term care, you could Yes. Your cash on cash yield might look better than your overall development yield, but that could be misguided at a So for us, we continue to believe a development yield of 7% to 8% on total investment would make sense for us to keep going with this development program.
Right. And what would it translate to in terms of a price per suite basis? Like if we're thinking about $600,000,000 over the next 5 to 7 years. How many suites would that represent?
Yes. So we have 2,200 Older long term care beds, so this assumes roughly, call it, dollars 275,000 to $300,000 a bed, including land cost in areas Where we in most cases, we have existing land. And our goal would be wherever possible, where we have land, where there's a highest and best use for something else to be able Do that and reinvest that money into our long term care plan. So again, as we talked about, our internal Estimates are that we will need close to $70,000,000 to kick start this program over the next 3 years. And after that, it should really become self funding Between the construction financing and the government grant you get upfront.
Okay. That's great. That's helpful. And Maybe just returning to operations, clearly no one is a crystal ball at this point. But if we look out to 20 22, hopefully, we're in a more kind of normalized environment.
If I look back to 2019, Operating margins for Retirement was 45%, Long Term Care was 17%. How are you thinking about operating margins in the business, maybe 2022 and beyond in a more normalized environment? Do you think You can get to pre COVID levels or given maybe some of these measures It might become permanent. It would be it would fall somewhat shy of that.
You're correct. That is a big question. And in our view, really the long term care or The long term margins do not really change. So let's just use retirement for an example. There we see margin pressure is additional personal protective equipment, it's Screening cost, it's longer dining hours because instead of having 4 people on a table, you might have 1 or people might be eating in their rooms.
And in all my visits, when you talk to residents, they are not looking forward to living, wearing a mask every day and eating separately because that is part of Coming into retirement home is to is the whole aspect of not going through social isolation. So our belief is that in retirement homes, as occupancy picks up, margin will come back to the right level. For long term care, the two biggest areas are personal protective equipment, which is where, how efficient the vaccine is And as we get more data on how much personal protective equipment you need when people when everyone is vaccinated, that remains We've seen, but we do expect that number to come down. And on our staffing thing, the whole direct care hours, As you've talked about in the past, no operator which of any ownership kind makes any money off care. So we expect with the government's announcement of additional care hours going up to 4, we will get more funding And we will spend that funding towards care.
So our margin percentage might come down, but margin dollars should not change.
There are no further questions. I'd like to turn the call back over to Nitin Jain for any closing remarks.
Thank you, Michelle. And on behalf of our management team and our Board of Directors, I want all of you for your continued support, and I hope all of you continue to stay safe and healthy. Thank you.
Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.