Ladies and gentlemen, welcome to Ciena Senior Living, Inc. Q3 2019 Call. Today's call is hosted by Lois Cormack, President and Chief Executive Officer and Nitin Jain, Chief Financial Officer Chief Investment 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 statements 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 for more information. You will also find a more fulsome discussion on the company's results in its MD and A and financial statements for the period, which are posted on SEDAR and can be found on the company's website, cienaliving. Ca. Today's call is being recorded and a replay will be available. Instructions for accessing the call are posted on the company's website and the details are provided in the company's news release.
The company has posted slides, which accompany the host's remarks, on the company's website under Events and Presentations. With that, I will now turn the call over to Ms. Cormack. Please go ahead, Ms. Cormack.
Thank you, Joelle. Thank you, and good morning, everyone. Thank you for joining us on our Q3 call this morning. During the Q3 of 2019, we made great strides in strengthening our balance sheet and optimizing our capital structure. Subsequent to the end of Q3, Sienna received an investment grade BBB credit rating with a stable trend from DBRS, which supported our $150,000,000 inaugural unsecured financing in early November.
This rating and subsequent debt financing reflects the strength of Sienna's balanced portfolio and sophisticated operating platform. With respect to our operations, we are realigning and augmenting our sales and operations teams and have made further enhancements to our operations and sales programs. Slide 5, moving to our Q3 financial metrics. On a per share basis, Q3 OFFO and AFFO remained near prior year levels of $0.364 $0.368 respectively. As a result of lower occupancy in the Retirement segment, our Q3 same property NOI decreased by 0.8%.
During the quarter, we continued to strengthen the balance sheet and ended Q3 2019 with a debt to gross book value of 46.5%, a reduction of 180 basis points year over year. Slide 6. The long term care portfolio remained virtually at full occupancy at 98.2% with waiting lists for each of our residences. Q3 long term care same property net operating income increased by 1.5% year over year. Average same property occupancy in the retirement portfolio was 86.9% in Q3 2019.
There are a number of factors that are contributing to this softness in occupancy, which I addressed on our Q2 call as well, including high resident attrition rate to long term care in the portfolio that we acquired in 2018, the disruption associated with property upgrades and renovations at a number of our properties, and the oversupply in the Ottawa market. We have been focused on a number of initiatives to improve occupancy in the retirement portfolio, which include enhancing our assisted living services offered to residents in order to reduce the attrition rates to long term care, realigning and augmenting our sales and operations teams, intensifying marketing and communication campaigns, and increasing community outreach in every local community enhanced sales programs, including promotions and incentives making further suite and amenity upgrades, and investing in our teams through enhancements to recruitment, onboarding and leadership development. In addition, our residences are now gearing up for an active flu vaccination and prevention campaign in an effort to minimize the severity and duration of the upcoming flu season. Slide 8. While fundamentals in the sector remain strong with an aging population and growing demand for senior living accommodations, we are expecting competitive pressure in some markets in the short to mid term.
However, we believe that the majority of Sienna's retirement residences are located in markets where future demand is expected to exceed supply. In addition, we believe that high barriers to entry, including rising construction costs and licensing requirements will help to limit future oversupply. Our recent expansion at Island Park from Campbellford is leasing up well, and we estimate to reach stabilized occupancy at the end of 2021. I will now turn the call over to Nitin for further details on Sienna's financial results.
Thank you, Lois, and good morning, everyone. I will start on Slide 10. Same property net operating income for the quarter decreased by 0.8% or $305,000 compared to the same period last year for a total of $40,200,000 This decrease was largely a result of softer $23,300,000 an increase of 1.5 percent over the prior year. The Retirement division generated same property NOI of 16,900,000 dollars a decrease of 3.7% over the prior year as a result of softer occupancy, partially offset by annual rent increases and a focus on adjusting cost. OFFO increased by 1% year over year in Q3 2019 to 24,200,000 dollars This increase was largely the result of lower interest expense on long term debt and lower current income taxes, partially offset by a decrease in same property NOI in the retirement portfolio.
Q3 2019 diluted OFFO per share was in line with the prior year at $0.364 AFFO increased by 0.3% year over year in Q3 2019 to $24,500,000 Diluted AFFO per share was $0.368 in Q3 2019, down marginally from $0.372 in Q3 2018. Moving to Slide 12. We continue to strengthen our balance sheet. At the end of Q3 2019, Sienna's debt to gross book value was 46.5%, a reduction of 180 basis points from Q3 2018. Ciena's debt to EBITDA declined to 6.6 times in the quarter compared to 6.9 times in Q3 2018.
Our interest coverage ratio remained high at 4 times and our weighted average cost of debt was lowered by 20 basis point year over year to 3.7%, highlighting our refinancing initiatives over the past 4 quarters. We ended the quarter with approximately $128,000,000 in undrawn credit lines and cash. As Lois mentioned, we are pleased with Ciena's BBB issuer rating from DBRS. This investment grade credit rating reflects our focus on strong balance sheet and highlights our balanced portfolio and sophisticated operating platform. Our subsequent $150,000,000 inaugural unsecured debt financing at an interest rate of $3,109,000 for a 5 year term is a strong vote of confidence on the execution of our strategy.
We intend to use the proceeds from this offering to pay down part of our debt and create a pool of unencumbered assets. After the unsecured financing closing, we currently have $307,000,000 of unencumbered assets. With that, I will turn the call back to Lois.
Thank you, Nitin. Our long term care portfolio is expected to deliver stable and consistent NOI growth in 2019 2020, in line with growth achieved in 2018. We expect Q4 2019 same property NOI growth in the retirement portfolio to be consistent with Q3 2019, which will result in flat same property NOI growth year over year for 2019. For 2020, we anticipate occupancy improvements, which should translate to low single digit NOI growth in the retirement portfolio. We believe that fundamentals in senior living will remain strong and are optimistic about potential development opportunities, including exploring the development of freestanding retirement residences with joint venture partners, opportunities at existing retirement residences, as well as the development of senior living campuses.
We expect to begin a 60 suite expansion at Kingsmere Retirement Residence in Alliston by mid-twenty 20. The estimated unlevered return for this approximately $20,000,000 investment is approximately 10%. With an exceptional team, a strong operating platform and our strategy in place, I am confident about our future and the immense opportunities we have as one of Canada's leading high quality providers. Thank you for your participation on the call today, and Nitin and I will be pleased to answer your questions.
Thank you. Our first question comes from Fred Blondeau with Echelon Wealth Partners. Your line is now open.
Thank you and good morning. It looks like you very well defined the causes for the decrease in the retirement occupancy and you just gave us more granularity on your action plan. What's your scenario in terms of occupancy for 2020? And what's your timeline before seeing getting to a more optimal level, I guess?
So I think as we mentioned in our outlook and our call, so for the total 2019, we expect our retirement same property NOI to be flat to where it was in 2018, so no growth. Our asset occupancy at the end of Q3 2019 for the same property was around 86.3 and we are in similar range today. So we expect that year might be similar by the time we end it. And it will take us 2 to 3 quarters to start building it up. And we hope to be 300 basis point or so by the end of 2020, but it will take us some time to get there.
Okay. No, understood. And Nitin, could you remind us what's your target leverage ratio at this stage?
So we've always and again, it's debt to book value, not fair market value. And we think 48 to 50 is a good place to be at, considering its book value. And we are right now below it. So again, if you have a reason to go up, if it's development of the right strategic opportunity to grow, we will do that. Otherwise, we like the ratio where it is today.
And Lois, I think I missed it at the end. You mentioned an expected return an IRR on your Island Park project. But could you remind us what's your IRR on Island Park? And what's your I guess what's your expected IRR on Kingsmere?
Yes. So on Island Park, the IRR is 10% and Lois mentioned Kingsmere, it's also 10% roughly.
Okay, that's great. Thank you.
Thank you. Our next question comes from Chris Couprie with CIBC. Your line is now open.
Thanks. Just turning back to Fred's question on the outlook. What is it that gives you confidence that the occupancy rate is going to improve into next year? Is it certain markets? Or where exactly do you think you're going to get those occupancy gains?
I think
it's a good question. We don't expect really any change in the Ottawa market because there continues to be new supply there. Where we think we'll see changes is in our assisted living program. We're making some enhancements there. We do have a number of designated assisted living units and by kind of changing our service packages and some better marketing and communications about the program, we do expect to get some gains, particularly over the winter months.
So that's primarily the area. And then as well, we have, as we had mentioned, a number of upgrades that we're doing in a number of properties, and we expect them to be pretty much complete into early Q2 of next year.
I don't have the numbers in front of me, but if you look at your IL versus AL suites, are there material occupancy differences between the two?
I wouldn't say material. We just know that we do have some vacancy right now in our designated AL units, and we're really focused on that opportunity, particularly over the winter months where we feel that we can really get some traction there. Because as you know, in the winter months, it's a difficult time for seniors to move in. So traffic is usually down for IL, and we believe that AL is our opportunity.
Okay. Maybe just a different question. Have you looked at dispositions at all?
Well, we always look at the best our capital allocation. And we've been on a journey, as you know, to upgrade the quality of the portfolio. And we've done we're doing a good job on that note, but we're always looking at what makes sense for Sienna and get the most value for shareholders.
So I guess it sounds like there's nothing really contemplated right now, whether it be in the LTC or most likely not retirement home given that it's mostly recently acquired?
I think as Lois mentioned, Chris, we always are looking for what's the right mix for us. So again, nothing imminent at this point.
Thanks. I'll turn it back.
Thank you. Our next question comes from Jonathan Kelcher with TD Securities. Your line is now open.
Thanks. Good morning. Just sticking with the occupancy question. So it sounds like it looks you're going to look to sort of hold occupancy over the winter months by lowering attrition. Is that fair to say?
Yes. And we also like we have a number of promotions. We're really hoping that we can get some traction before the end of the year. But yes, we think between assisted living, our promotional packages, all the work that we're doing with our sales teams and so on that we hope to get some further traction. We know that Q1 is always kind of with the flu season, there's a lot of attrition at that time, but we're hoping through our assisted living programs to try and close that or reduce it.
Okay. So then the 300 basis points you're hoping to get by the end of 2020, that would sort of start to come in Q2 and Q3 of next year?
Yes. Yes, that's right.
Okay. How many properties are undergoing upgrades?
Well, in total, there's 10 properties. So at any given time, we've completed, I think there's 3 or 4 complete and the others are at varying stages and there's a couple that will start in Q1.
Okay. And are you getting better on those 3 or 4 that are complete, are you getting better traction? Are you seeing a difference?
Yes, in a couple of them, yes. That couple that have just been completed is well, the residents living there are very happy with them, and there's good feedback from prospects that are coming in. Okay.
And how do you look at your return on investment in those? Is it more just a defensive, almost maintenance CapEx? Or do you target a return on the upgrades?
Those are different, Jonathan. So when we acquired the Maple portfolio last year, we set aside $5,000,000 as part of purchase price, or I would say on top of purchase price to spend on it because some of those properties needed a bit of work. So it was more contemplated using whatever NOI we want to get from those properties and knowing that we had to spend the additional 5. So whatever price we paid at that point, in our mind, we paid that plus $5,000,000 So that's how we looked at it.
Okay, fair enough. And then just lastly on the unsecured debentures, I think at Q3 you had $49,000,000 on your line. So I'd assume you'd pay that down. And how should we think about the other sort of $100,000,000 of that unsecured?
Yes. So most of $150,000,000 we have already used to pay down debt. So the revolver would be part of it. We had some other debt maturities, which were coming due in Q4, which we have paid down as well. And we have little bit left over for some of the other upcoming maturities.
So I would what we would say most of the $150,000,000 would be to pay down current debt and we are on track to do that.
Okay. So you're not going to see a material uptick in interest costs?
Correct. You should we would not.
Okay. Thanks. I'll turn it back.
Thank you. Our next question comes from Himanshu Gupta with Scotiabank. Your line is now open.
Thank you and good morning. Just on the occupancy discussion, I think Louis, you mentioned running a number of promotions. So are you offering more price concessions or incentives to drive occupancy? And how is retirement home occupancy trending since September so far?
Yes. So I don't know if I completely caught your question, but we don't we do promotions and one time incentives rather than rate reductions. Was that your question?
That's right. Yes. I mean, my question was, are you offering more what you were offering previously just to drive occupancy there? And the second part of the question was how is the occupancy trending since September?
So, I did answer that one before Himanshu. So, we ended the quarter at 86.3% in same property and we are on similar range today. So, we are on we are where we ended the quarter with.
Sure. And maybe just switching gears on the acquisition side, is the integration of the portfolios which were acquired in 2018 2017 now fully complete? And do you plan to be active on the acquisition front?
The integration of the acquisition is fully complete. As I mentioned in our earlier, we are doing a number of things like enhancing our assisted living program, really looking at the services service packages that we offer to meet the needs of seniors in all of the assisted living programs, our designated units. So we're doing that and making some other enhancements to our sales programs and operations. That's kind of just ongoing improvements that we're always making. So, but the portfolio has been completely integrated.
Got you.
And then with respect to acquisitions, we're always looking at the right opportunity for Ciena, and our goal is to grow across the country.
Sure. And maybe just a last question on the development side. Do you have any timelines for the Phase 1 development of I think it's like 1,000 LTC beds and 500 new retirement homes? And how do you plan to finance this development cost?
Well, at the present time, we're working with government and our associations and the other providers in the sector to get a feasible program for these developments to work. So that's the current focus. And as you know, government's doing a lot of reorganizing. So that work is underway. So we can't really commit to a timeframe.
And they would all be financed on our balance sheet. Okay. We have adequate liquidity, yes.
Sure, sure. I'll turn it back. Thank you.
Thank you. Our next question comes from Brendan Abrams with Canaccord Genuity. Your line is now open.
Hi, good morning. Lois and it's in, I mean, you speak about the Ottawa market and the impact there and it seems like the challenges are fairly well understood for that market. I guess my question is, we've talked in the past about the retirement business being very localized. I'm just wondering, in your view, your portfolio includes pretty significant exposure in, let's say, the Kingston market, right, which is still a 2 hour drive away. How broad is the Ottawa market?
Is the impact from the Ottawa market spreading through other parts of the region? Or is it really just a localized impact?
Yes. No, Ottawa is definitely specific to Ottawa and kind of the Ottawa Valley area. It would not spread to Kingston. Kingston would have its own local supply issues from time to time. And there is there was a new property that just opened in Kingston this a few months ago.
So that's having a little bit of impact in the Kingston market. But the two markets would be completely distinct.
Okay. So you're not seeing that spread to markets that far away? No. Okay. And I guess the industry headwinds so far have been focused on the supply side.
I guess from your view, how much of the imbalance is attributable to the demand side? And when I speak about this, I'm thinking about some of the commentary around seniors living in their home longer, seniors are healthier, not moving in as early. Maybe you could just talk about kind of the demand side that you're seeing and kind of the tenant profile coming into your buildings or not coming in?
Yes. I mean, if you look at demand, capture rates haven't substantively changed. It's typically and there are some variation within region. Again, there is some variation in capture rates within local markets. But overall, the capture rate in Ontario right now is about 6%.
And that hasn't changed. I mean, that in our experience doesn't change. And I would say for us, home care doesn't really compete with retirement living. Seniors, when they choose the retirement residences for the lifestyle, they want socialization and food and so on. And seniors that choose to live at home, that's not the experience that they're going to get, because often it results in social isolation.
In fact, most seniors that move into our retirement residences often will say that they wish they'd done it sooner.
Right. Okay. So you're still of the view that it's the challenges are supply driven, not more structural on the demand side?
I would say, and it's again, it's very local. There's markets that we're in where there's not excess supply, where there's very stable markets.
Okay. Maybe just switching gears, I think in your MD and A here you talk about receiving, I guess, the first level of approval on 3 projects for LTC Greenfield projects. I'm just wondering if you could provide any color with respect to these in terms of timing, cost, location, return expectations, any color?
Yes, the timing, it will be subject to getting the feasibility, which we're working with government to get a program that will work for
more of
these projects. So other than that, they're ready to go. Like we've done everything we can from a real estate point of view. So we're really waiting for the right ministry program on this. And in terms of
Yes. And again, I think it's just the financial feasibility is a step. So once there's a financially feasible program, which we are hopeful there would be 1 with the ministry, we will proceed accordingly.
Right. I guess that was my next question. Have they outlined or changed any of the incentives or payment structures that would have changed the feasibility? No. Right.
Okay. That's it for me. Thank you very much. I'll turn it over.
Thank you.
Thank you. Our next question comes from Johan Rodriguez with Raymond James. Your line is now open.
Hi. Maybe just kind of adding on to Brendan's question. In the slide deck, you mentioned that most of your markets, retirement residence markets, you see future demand exceeding supply. I guess I was just wondering which markets you didn't see that happening. I guess Ottawa would be the obvious one, but anywhere else in maybe BC or Ontario that down the road you kind of see current supply, causing that problem?
Yes. If you I mean, other than the Ottawa area, we think Central Ontario, the GTA, the Lower Mainland BC and every other area that we operate, we see by 2023, there will be probably more demand than supply if there's no additional projects go in the ground than what's known to date. And we have that there's a bit of a chart in our MD and A that put some color on that.
Okay. And then just kind of the back half of next year and maybe in the first little bit of 2021 when you get a bounce back in occupancy in the retirement business to kind of that 90 level, you'd have a little bit of a spike in the same property coming off of the low comps in the second half of this year. But on a stabilized basis beyond that, what would you expect kind of over a long period of time retirement residency and property NOI to grow at?
I think you're looking into like 2021 beyond, is that what you're asking?
Yes. Or just if you get the portfolio back to 90% after that initial balance that you get because you're coming off 86% occupancy, once it's at 90%, then what would you kind of envision that occupancy. Once it's at 90%, then what would you kind of envision that portfolio growing at?
Yes. I mean, we have always talked about when things get stabilized low to mid single digits for retirement and stable consistent performance from long term care. So our view hasn't really changed. And it's a chart on our MD and A talks about the data in 2023 because a lot of those projects are away. It is not to say that today all the markets are over supplied.
All we're saying is today there are a couple of markets which are over supplied today. And by 2023, even with the existing supply coming in or new supply coming in, there still would be more demand. Okay.
I'll turn it back. Thanks.
Thank you.
Thank you. Our next question comes from siren Srinivas with BMO Capital Markets. Your line is now open.
Thanks, Louis. Louis, you mentioned in your comments this morning that about marketing and promotional campaigns as well as repositioning some services on the assisted living properties. Could you give us some color on that?
Yes, we do like as I mentioned, we do one time incentives. So, we provide our all of our residences with a toolkit, if you will, of things that seniors might be looking for when they're moving in to help them transition from their home into retirement living. So there it's a range of options that the site can use to support the senior with that transition. So it's kind of a just think about it as a one time thing to help residents move in. The other is just, we do a lot of things like community relations to invite seniors into the community, to join their friends for lunch and dinner.
There's always campaigns and promotions going on. This fall, we had one campaign to try and encourage seniors to move in before the end of the year.
Right. I mean, that's really helpful, Lois. And in terms of repositioning of services, which you briefly mentioned for the assisted living properties for recaptured occupancy, what would be your thoughts on that in terms of are you changing a structural service or the payment mechanism? Just wondering on that.
It's all of that. It's really looking at the whole program. So what's included in kind of the base rent and then what are the service packages. So this is kind of responding to residents' needs as they age in place. So typically, as a resident stays longer, after a few years, they may need just a few services.
And then as they age or their health changes, they may need more. So we're really targeting those service packages to meet the needs as the seniors' needs change over time.
That's great color, Louis. Thank you so much.
Thank you.
Thank you. Our next question comes from Paul Willi with National Bank. Your line is now open.
Hi, good morning. My first question just is on the financing environment, not necessarily for you, for Siena specifically, but what is it like trying to get debt capital and other types of capital right now for long term care centers?
Yes. I mean, Tal, I think from a debt capital, again, our recent financing would reflect on it because it is underpinned by a few of our long term care assets as well. The market seems very strong. There are a lot of Lifeco's who are very active in this business as are most of the banks are very active. Now Ontario does not have unfortunately a CMHC program, but but the CMHC program for BC long term care is very robust and we have a couple of properties which have CMHC financing and BCLTC.
So again, that market continues to be very strong like CMHC financing 10 year rates are around 2.7%, 2.8%, excluding the upfront fees. So I think all around between them and Lifeco's, there is a lot of demand for this kind of product for financing.
And so is it your intention then to finance more of sort of the LTC side of the business with sort of unsecured and maximized CMHC financing on the retirement side?
We always look at whether it's CMHC financing conventional revolver secured, unsecured as different things to look at in our debt structure. So it's never there's never a very specific answer, okay, all retirement CMHC and all long term care unsecured or secured. So I think really it's property dependent and the needs for the business at that time.
And so this is really just about opening up another capital source?
Correct. Yes. And we do not expect again, the idea was not to do it one time. So we do expect to do it when the market is right, when it makes sense. But I would say, you should expect the market should expect that we would be doing range of these things from everything we have been doing so far and unsecured would be just an additional item to it.
Okay.
And then in your earlier commentary, you mentioned perhaps working with some partners on some ground up development opportunities in retirement. Is that also a bit of a commentary on what the market for stabilized acquisitions looks like right now?
Not necessarily. I think what we have talked about always is, we mentioned in our Q2 conversation as well, we're looking at standalone retirement residences with joint venture partners, either developers or builders who are who have quite a bit of this expertise. That would be on top of what we do in acquisitions. So we've had good access to capital. We have a strong balance sheet.
So we don't think that these two things are mutually exclusive. So it's by doing one doesn't mean we will not be doing the other.
Okay. And then maybe I can just ask for what your commentary is on the market for stabilized properties right now then?
I think there's always opportunities that come up from time to time. Look at everything and we always do where we believe we can add value to a portfolio or an asset.
And so you just really because I mean it's been quite some time since your last portfolio acquisition. So I'm just is there anything that's sort of rate limiting you or do you or is it just been you haven't liked the assets you've seen really?
No, there's just there's been nothing imminent that we've that's come out that we can add value to that's kind of the right that meets all of our investment criteria.
Okay. And then sorry, just to pivot back to the assisted living issue, is the solution to that issue, is it a capital question or is it an operating expense question?
It's operating. It's service packages, getting the right staffing and the education and the promotional materials to explain it to seniors and to residents who are IL and need to convert to AL.
Okay, got it. Thanks very much guys.
Thank you. Thank
you. Our next question comes from Yash Sank Pal with Laurentian Bank. Your line is now open.
Hi, good morning.
Hello? Good morning, Yash.
Hi. First question is on the retirement home NOI margin. It has been holding up quite well. So I'm just wondering, do you think that you will be able to maintain this 44% level through Q1, Q2 2020? Yes.
I think our margin had been pretty consistent. Q3 year to date is around 44%. Total 2018 was around 44.9%. Obviously, there's when occupancy declines materially, we would have an impact in margin. So at this point, we think that the number where we ended the Q3 is a good way of thinking about for what it might be in 2019 and going forward.
Okay. And just on your taxes, I was wondering if you could give us some idea as to how we should model your taxes in 2020?
Yes. So this year, we have around $7,500,000 of taxes and I think next year it will be in the range of around $9,000,000
Okay. And one question for Lois. So Lois, these programs that you are considering, the assisted living promotions, so does that mean you are actually trying to convert your IL residents to the
AL? No, we don't convert. Like a resident when a senior needs care and services, we want them to stay in place rather than have to move out to a long term care. And so what we try to do is design service packages that we can handle, that we have the staffing for and the physical environment for to avoid sort of a premature move out to long term care. So this is the area that we're focused on.
You can't convert an IL. So yes, that's right. Like an IL only converts to an AL when the senior needs the services, a certain level of service.
Got it. Okay. That's it for me. Thank you.
Thank you.
Thank you. Our next question comes from Pammi Bir with RBC Capital Markets. Your line is now
open. Thanks and good morning. Just maybe coming back to the development commentary on the retirement home space, can you just maybe expand on what markets you're looking at, at this stage and how much capital you're comfortable allocating to Retirement Home Development?
So we can't really comment on specific markets. So, there are a couple of specific opportunities. We have initial due diligence of where there is a potential site and we are understanding if that's the right site for us depending on market conditions and if the pro form a works. From a development standpoint, so far our program has been quite small. We are committing close to $20,000,000 for our Kingsmere side, which will happen over the next year and a half or so.
I would say, Hamir, if things work out maybe in a period of 3 years or so, we might build a program, which is $100,000,000 or so at any given time, not more than that based on our current methodology. That could change over time if we find that that's more lucrative than what we think it is today. But I think $100,000,000 if you get there in the 3 years, we think that would be a good place.
And sorry, would that $100,000,000 include the long term care redevelopments or is that strictly just retirement homes?
No, it's everything. Any development we do that would be sort of added any given time.
Right. And just we have heard commentary in terms of rising costs for retirement home development. So I'm just curious what sort of returns would you expect even on this maybe the one site that you mentioned that you're looking at, not Kingsbury, but the one that you were talking about earlier. What sort of unlevered returns would you be thinking about today for retirement homes?
The market has changed quite a bit in terms of expectation because of rising cost and there are acquisition opportunities time to time, but building something which would work with your platform. So our return expectations would be if the acquisition cap rate is X, it would be, call it, 50 basis points to 150 basis points on top of X would be our expectation for retirement development.
And for lease up, let's say, to stabilize levels, is that changing as well? Or is that is it 3 years? Is it 2 years? Or is it getting a bit longer?
Well, it depends on the market. I think generally it's 3 years depending on where it is and that's to Nitin's what Nitin said earlier about the locations and the sites. We are in due diligence and that's a big factor that there's adequate income qualified demand.
Great. Thanks very much.
Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Lois Cormack for any further remarks.
Okay. Well, thank you everyone for joining our call this morning. We appreciate your support and have a great day. Ladies