Ladies and gentlemen, welcome to the Sienna Senior Living Incorporated Q1 2022 conference call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer, and David Hung, Chief Financial Officer of Sienna Senior Living Incorporated. 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 factor sections 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 in the SEDAR and can be found on the company's website, siennaliving.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 remarks on the company website under Events and Presentations. With that, I will now turn the call over to Mr. Jain. Please go ahead, Mr. Jain.
Thank you, Tanya. Good morning, everyone, and thank you for joining us on our call today. At the end of April, Statistics Canada published the results of the 2021 national census. This showed that seniors over the age of 85 make up one of Canada's fastest-growing demographics. The census also indicates that the number of people over 85 is expected to triple over the next 25 years, and that Canadian seniors are becoming wealthier and staying healthier, more active and involved for longer. Today, over one in four seniors in the 85+ age bracket already lives in a senior living setting or a hospital, and this number is only going to increase as Canada's population is getting older. This unprecedented demographic shift and changes in senior needs and desires has been at the core of many of our recent initiatives, including our transformations to our platform.
In April, we launched a new website for our retirement platform, Aspira, and in recent weeks, we started the rollout of the signature programs under the Aspira brand. We're grounded in the belief that our residents desire and deserve choice, personalization, and connections to the local community. This is reflected in our programs, Nourish by Aspira, Active by Aspira, and Explore by Aspira. While Nourish by Aspira focuses on culinary experience and more choices, Active by Aspira offers an expanded range of fitness classes, and Explore by Aspira aims to help residents connect with others, pick up a new hobby or continue learning. One of the initiatives under the signature program is Masters Academy, an educational program that is taught by experts on a variety of topics, including history, religion, health science, and lifestyle interests.
Our new retirement brand Aspira, is designed to differentiate our company and support resident satisfaction, lead generation, and occupancy growth across the platform. Average same-property occupancy in our retirement portfolio increased by 90 basis points to 85.5% in the first quarter compared to Q4 2021. In April, average occupancy reached 87.1%, its highest level in over two years. Since May of last year, monthly average same-property occupancy has increased by 830 basis points. Our retirement portfolio benefited from numerous marketing and sales initiatives, including an intense focus on outreach to our community partners in addition to pent-up demand. We are also very focused on creating demand by attracting seniors who are currently living at home and who are not actively considering retirement living.
This has resulted in a 58% increase in resident movements year-over-year in the first quarter. Rent deposits also remained high throughout Q1 and increased by 51% year-over-year, and leads are up 94%. For the balance of 2022, we forecast continued occupancy improvements in our retirement portfolio. Moving to long-term care. In our long-term care communities, admissions of new residents slowed during the first week of 2022 as a result of the new restrictions and the high transmission rate of Omicron. However, occupancy started to improve toward the end of the quarter. Same-property occupancy was 93.8% in Q1 2022, excluding approximately 500 beds that are unavailable largely because of third and fourth beds in a room. Starting in February 2022, occupancy targets have been reinstated in Ontario.
This means that homes require a 97% occupancy rate to receive full funding. Given the long waiting list for long-term care beds in Ontario and British Columbia, we anticipate to meet the required occupancy targets at the vast majority of our care communities for full funding in 2022. We have continued to develop new long-term care platforms similar to the enhancements we are making at our retirement operations. Our aim is to elevate our resident experience with respect to dining, recreation, and community-focused interactions, in addition to improving the move-in experience. During Q1, we entered into an agreement to acquire a 50% ownership interest in 11-property portfolio in Ontario and Saskatchewan from Extendicare. We have received all necessary regulatory approvals and are set to finalize the acquisition of this CAD 308 million portfolio in the coming days.
We are excited to welcome the residents and over 800 team members in Ontario and Saskatchewan to our growing platform. We are acting as the manager of the portfolio, which is deepening an already well-established relationship with Sabra, as we are currently managing eight of the Sabra wholly owned properties in Canada. The acquisition has an approximate 6% unlevered yield in the first year following closing and is expected to be accretive to Sienna's OFFO and AFFO per share. In addition to this portfolio acquisition, we entered into an agreement to acquire a CAD 72 million retirement residence in Saskatchewan in joint venture with Sabra, which is expected to close later this quarter. We also entered into an agreement to acquire a CAD 26 million campus of care in Barrie, Ontario, which is expected to close in Q4 2022.
With these acquisitions, we expect to capitalize on the growing demand for quality senior living in each community. In Ontario, the assets are strategically located around the Greater Toronto Area and the Niagara- to- London corridor. Now moving to our focus on Saskatchewan. Our acquisitions will also give us immediate scale in the Saskatchewan market, one of the fastest-growing markets in Canada. Saskatchewan's real GDP is expected to grow substantially as a result of the strength of the energy and agriculture sectors. In addition, the province's job market is exceptionally robust, and the housing market remains strong. With respect to the retirement sector, Saskatchewan has a high capture rate, and despite considerable new supply coming to market over the past decade, average rental rates have consistently increased by approximately 3.3% annually from 2009 to 2021.
Our development momentum is continuing with construction start scheduled for two of our long-term care development later this year. Early site works have started in Brantford, where we will replace the current 122 long-term care beds with 160 new beds and add 147 retirement residents to create an integrated campus of care. We also expect to start construction in Keswick later this year, where we will be replacing the current 60 long-term care beds with a 160-bed home. These projects are part of Sienna's CAD 600 million redevelopment plan of our Class B and C long-term care communities. To date, we have received bed licenses allocations from the Ministry of Long-Term Care for 12 of our long-term care communities for a total of 2,600 beds, including approximately 1,800 beds for renewal and over 800 new beds.
These allocations cover substantially our entire Class C portfolio. The license allocations bring certainty to our redevelopment program. Once the redevelopments are completed, they will elevate the quality of life for our residents and their family members, provide additional capacity and a great workplace for our team members. Our redevelopments are also an opportunity to address climate change and significantly reduce the environmental footprint of these homes through energy-efficient heating, cooling, lighting, and updated energy-efficient windows and fixtures. Our industry is at a cusp of exponential growth, and we expect competition for talent to further intensify in the years ahead. As part of a strategic objective, we aim to offer a compelling team member experience and nurture a purpose-driven culture. We are the first Canadian senior living company to offer shares to every eligible full-time and part-time member through the Sienna Ownership and Reward program, SOAR.
This program was approved by shareholders at Annual General Meeting in April, and we have started to issue shares to our team members. Two days ago, we celebrated this milestone at the TSX with many of our long-serving frontline team members. I was deeply honored to ring the opening bell with Vernicia Wade, a PSW at the Harmony Healthcare community in Toronto, who has been with us for 47 years. Our team members' incredible dedication and passion inspired us to launch SOAR, and I cannot think of a better group to be recognized as owners of our company. Our talent initiatives also include numerous programs to support our team members' career growth and to bridge the existing labor gap in our sector. Programs include government-sponsored education programs, expedited placements of internationally educated nurses, and increasing recruitment of college and university students.
During the first quarter of 2022, approximately 640 residents were placed across our residences. As we grow our company, we'll continue our focus on creating a positive experience for the team members and supporting their personal and professional growth. With that, I'll turn it over to David for an update to our operating and financial results.
Thank you, Nitin, and good afternoon, everyone. I will start on slide 15 for financial results. Sector fundamentals continued to strengthen during the first quarter, and demand for quality seniors living is increasing in many of our key markets. In our retirement portfolio, average same-property occupancy continued to improve during Q1, and in our long-term care portfolio, admissions started to accelerate during the second half of the quarter after a slow start in the early weeks of 2022 due to renewed restrictions and a high transmission rate of Omicron. At the same time, intense competition for talent and cost pressures as a result of the ongoing pandemic and decades high inflation continued to impact our operations. All of these factors are reflected in our financial results.
In Q1 2022, revenues increased by 8.1% year-over-year to CAD 174.3 million, largely due to increases in direct care hours funding in long-term care and occupancy and rental rate increases in retirement. Net operating income decreased by 27% to CAD 32.1 million this quarter compared to last year. The significant decline was largely the result of a retroactive government funding in Q1 2021 for 2020 pandemic expenses. NOI was also impacted by higher staffing, culinary, and utility costs, increases in insurance premiums, and this was partially offset by occupancy growth and annual rent rate increases in the retirement segment and annual funding increases and increases in preferred accommodation revenue in the long-term care segment, in addition to a moderation of pandemic costs.
Retirement same-property NOI increased by CAD 0.9 million to CAD 13.5 million compared to last year, primarily due to occupancy improvements and annual rental rate increases in line with market conditions. This was partially offset by higher costs for agency staffing, culinary costs, utilities, and insurance premiums. Rent collection levels remained high at approximately 99%, consistent with pre-pandemic levels. Sienna's long-term care same property NOI decreased by CAD 11.6 million to CAD 18.1 million compared to last year, primarily due to CAD 15.3 million in retroactive funding recorded in Q1 2021 for pandemic expenses incurred in 2020. Excluding net pandemic expenses and recoveries in both comparative periods, long-term care same property NOI would have increased by CAD 0.1 million to CAD 19.2 million in Q1 2022 compared to Q1 2021.
Over the past two years, we have seen significant cost pressures, including high agency costs due to staffing shortages, increased insurance premiums in the seniors living sector, and rising utility costs in addition to generally high inflation in line with the overall market. We expect that continued occupancy gains, rental rate increases, in our retirement portfolio, and an improving operating environment will help mitigate these cost pressures and support our operating margins in 2022 and beyond. We anticipate that pandemic expenses will further moderate as the pandemic subsides while related government funding gradually decreases. For Q2 2022, we expect incremental net pandemic-related expenses could range from CAD 2 million - CAD 3 million, with continued declines in the second half of the year. Moving to slide 16.
During Q1 2022, operating funds from operations decreased by 36% to CAD 16.1 million compared to last year, primarily due to lower NOI as a result of pandemic recoveries in 2021 and higher current income tax expense. This was partially offset by lower administrative expenses and lower interest expenses on long-term debt. Q1 OFFO per share decreased by 37% to CAD 0.239. Adjusted funds from operations decreased by 38% to CAD 16.4 million compared to last year, primarily due to the same reasons as the decrease in OFFO, as well as higher maintenance costs and lower construction funding. AFFO per share was CAD 0.243 in Q1 2022, resulting in an AFFO payout ratio of 96%. Looking at our debt metrics on slide 17.
Our debt to gross book value decreased by 450 basis points to 41.5% at the end of Q1 2022, compared to 46% at the end of Q1 2021, mainly as a result of mortgage repayments and the issuance of 5.8 million shares in late March 2022 to fund our acquisitions. The proceeds from this issuance will be deployed to help fund our acquisitions as they close. Debt-to-adjusted EBITDA increased to 8.7 years in Q1 2022 compared to 6.2 years in Q1 2021, and interest coverage ratio decreased to 3.3 x in Q1 2022 compared to 4.7 x in Q1 2021 as a result of the retroactive payments received in 2021 relating to 2020.
We have limited debt maturities over the next two years, and our debt is well distributed between unsecured debentures, credit facilities, conventional mortgages, and mortgages insured by the Canada Mortgage and Housing Corporation. To execute on our strategic growth plans, we have been active on a number of financing initiatives to raise capital to date in 2022. At the end of March, we completed our first equity offering in four years. Approximately 5.8 million shares were issued at a price of CAD 15 per share for a total of CAD 86.3 million, including the full exercise of the over-allotment of 750,000 shares. The successful completion of this offering was a clear indication of the strong investor interest and confidence placed in our company and our sector.
On February 3, we secured CAD 150 million acquisition term loan at 145 basis points over the floating BA rate for a 12-month term to finance our acquisitions. In connection with the closing of the 11-property portfolio transaction in the coming days, as well as the closing of the Village at Stonebridge later in Q2, we anticipate making a CAD 90 million one-time drawdown on this term loan to finance our acquisitions. We will assume CMHC insured mortgages for two of the acquisition properties for approximately CAD 27 million at Sienna's 50% ownership share at a weighted average interest rate of 2.24%. In addition, we have sold two non-core properties in Q1 as part of our capital recycling initiatives, including a retirement residence in British Columbia and a long-term community in Ontario.
The net proceeds from these sales will be used to support our growth initiatives. I will now turn the call back to Nitin for his closing remarks.
Thank you, David. The most treasured relationships people have in life are often with their parents. At Sienna, we have the privilege to care and serve for people's parents. As we grow our company and transform our operations, we are constantly reminded of our company's important purpose and the role we play in the lives of thousands of Canadian seniors and their families. In the coming months, we will unveil a new purpose and vision statement for Sienna. Our vision statement underscores what we think it'll take to be Canada's leading senior living provider through our continuum of care from independent living to full care.
The experience and learnings over the past two years have given us new clarity around our purpose and guided us in our reimagined new vision for the company. In everything we do, we consider the profound impact we have on our residents' and team members' quality of life and well-being. Helping them find joy and happiness in the big events and small moments and everything in between is always top of our mind. 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 you may have.
Ladies and gentlemen, as a reminder, if you do have a question, please press star then one on your telephone. To withdraw your question, please press the pound key. Our first question comes from Jonathan Kelcher of TD Securities. Your line's open.
Thanks. Good afternoon.
Hi, good afternoon.
First question is on the occupancy. You guys have had a nice little run here. In April, you're already at the bottom end of your target. Is it north of 89% something that you think you can achieve?
You know, for now, Jonathan, we continue to believe that 87%-89% is the right place. You know, we have been working on it over the last 10 months or so, and we saw a significant increase in occupancy since May. We, you know, we feel we have going forward, we either will stay consistent or we'll see growth at a smaller pace. At this stage, we're not comfortable changing that number.
Okay. That's like if you have a good summer season, that's something we might see?
Yeah, it'll be math at that point. Yeah, if it's higher, obviously. You're correct. Like, if the momentum does not slow down, then for sure, because you're correct, we are at 87%, which is the low end of our guidance.
Okay. Now, the Aspira program that you're rolling out, if we were to look at that on an apples-to-apples basis, pre-COVID and now. Like, it looks like I'm guessing it costs a little bit more to run that. How can we think about margins between the before and after?
Yeah, I can, David can answer the margin question. We do not see Aspira making a significant change in our margins because the things we are doing, for example, you know, putting more focus on healthy food and what we find is, given our purchasing power, you know, healthier food doesn't mean more expensive. It just means we have to be careful what we choose. There's more choices for residents. You know, the choices are carefully curated. So we do not anticipate Aspira in any way to drag down our margins in any significant way. David can give a bit of guidance on our margin expectations.
Yeah. No, sure. Thanks for the question. So our growth margins at the end of Q1 were approximately 36%, and that's, you know, fairly consistent with last year. I think that we would anticipate that our full year margins could be higher by about 100 or 200 basis points. It's a little bit hard to predict at this point, you know, given cost pressures, but we do see it, you know, going up from the current Q1 margins.
Okay, that's helpful. Just lastly for me, the CAD 2-3 million in net pandemic expenses, would that? That'd be more on the retirement side than LTC, I'm assuming?
It's actually gonna be on both, Jonathan. You know, it would be, you know, on the BC and long-term care side as well as on retirement.
Okay. Ontario LTC is likely gonna get covered by government funding? Would that be fair to say?
For the most part, it would yes.
Okay, thanks. I'll turn it back.
Thank you.
Thank you. Our next question comes from Scott Fromson of CIBC. Your line's open.
Hi. I was actually gonna ask a question on inflation, but it sounds like you covered it in Jonathan's question. Just maybe you could give a little bit of color on funding strategy for the development and redevelopment plans, please.
Sure. You know, we are still in early stages, you know, the. We're seeing some delays with the global supply chain issues that everyone is experiencing. You know, we thought we will be inching towards, you know, CAD 50 million-CAD 100 million range of development spend this year. We don't think we will get there. We have couple of years as we, as we move towards that. With increasing occupancy in retirement, you know, having our long-term care stabilized, there was a time where our payout ratio was, you know, was in the 60s. We do think, you know, as our payout ratio starts to inch a bit lower, we can start using some of our free cash to do that.
In the meantime, you know, we have very good access to our revolver obviously and to construction financing. It'll take probably a couple of years before we get to a place where we are spending CAD 100 million a year, and we do think as we get closer to that, we would have free cash flow to fund our equity portion of the development.
Thank you. That's helpful. I'll turn it back. Thanks.
Thank you.
Thank you. Our next question comes from Himanshu Gupta of Scotiabank. Your line's open.
Thank you and good afternoon. Just to follow up there, I think, David, you mentioned NOI margin to be 100-200 basis points higher. Were you talking about retirement home or LTC?
I was referring to retirement.
Retirement home. How does that compare to your pre-pandemic margin? I mean, your occupancy is almost pushing 89%, 87%. What will be the spread between your pre-pandemic and today's margin then?
Yeah, I mean, our pre-pandemic margins, you know, were in the low 40% range. We're, you know, currently at 36%. We do anticipate that the margins will go up, you know, a couple of hundred basis points between 100 or 200 basis points. That's, you know, we feel pretty comfortable about that at this point.
Good to know. Also, David, in your prepared remarks, you were talking about the rental rate increases in the retirement portfolio. What kind of rental rate increases are you doing? I know there's a pressure on the operating expenses side, but have you increased the rental rate increases here?
Yeah. We have had rental rate increases throughout the last two years, you know, mostly in line with inflation and also for care because we are using agency and other things to provide the care and retirement as well. With the inflation environment that we see, you know, we are reviewing our rates to see how we can manage some of that cost because everyone does understand, you know, whether it's utility, whether it's insurance, whether it's labor costs, they are all going up. We are in early stages of figuring it out, you know, how and when and how much of it to actually reflect in our rates.
Got it. Okay, thank you. On LTC side, I mean, you did not need the occupancy protection for February and March. What was the NOI slippage because of that?
Yeah, we actually didn't have a lot of slippage as a result of the ending of the occupancy protection funding at the end of January. We anticipate that the vast majority of our long-term care homes, you know, will achieve the 99.7% target by the end of the year.
Himanshu, the way it works is that it's really you're meeting that for the entire year, so it's not that if you don't meet it for the first month that you take a clawback. The only time you would do that is if, you know, you get to a point where mathematically or operationally, you know, you cannot get to 97%, that's when you will start, you know, building a clawback. But we continue to feel confident that we'll get to that 97%, you know, assuming some of the restrictions that are already on the beds, whether it's isolation or third beds and fourth bedrooms.
All right. Okay, so there's not gonna be any slippage here. Okay, so good to know. Then, you know, keeping on LTC, have you recovered everything from the last two years? Like, any catch-up still left to be received on the pandemic expenses?
Yeah, I mean, we're not expecting anything, you know, at this point in time. You know, as we've indicated, we recorded CAD 2.2 million of retroactive funding in the first quarter relating to 2021, and that's all we are expecting at this point.
Okay, fair enough. Maybe just last question from my side on occupancy discussion. I mean, clearly you've done a good job at 87%. Just wondering, Nitin, are you gaining market share here, or are you simply capturing the pent-up demand in the system?
Yeah, I mean, for us, you know, it's really about pent-up demand. You know, we don't really look at market share necessarily, you know, across considering that, you know, and it's very different in each market with different operators. I think we see overall, you know, as Omicron is subsiding, people are doing more tours. We are seeing more activity across our markets, not only just in our homes.
Okay. Can I say, you know, like British Columbia, you would have reached like almost 90% or plus and Ontario would be lagging or, both are going hand in hand, like British Columbia and Ontario?
Yeah, I mean, we only have four homes in British Columbia, so you know, it's hard to provide that level of detail, but we see consistent increases in both the provinces.
Okay, got you. Thank you, and I'll jump back. Thank you guys.
Thank you.
Thank you. Our next question will come from Tal Woolley of National Bank. Your line's open.
Hi, good afternoon.
Good afternoon.
I just wanted to start by looking at, you know, like some of the pre-COVID performance in the retirement portfolio until now. You know, like if I look at like Q4 2019, you were sort of running, you know, similar occupancy, similar revenue, you know, like overall versus today. I understand the cost portion impacting the margin, but I guess I am a little surprised with the run up in occupancy and given, you know, there's been a couple years in there that the revenue line isn't moving maybe a little bit more than I thought it would.
It feels like, you know, maybe there's either, you know, like a mix shift in terms of the, you know, where the, you know, either the mix of independent versus assisted living or between services and rent, or, you know, that may be, you know, rent have been constrained somewhat by the challenges in the market right now. Can you just give me a little bit of color around, the top line in the retirement business?
Sure. You know, I think the context of it is so important, and it's a great question, Tal, because when you know, in the time frame you were talking about, you were coming down in occupancy that you used to be 90s and you were coming downwards.
You know, when you're at high occupancy, and that gets a reflection in your rates when you only have two rooms left to sell, you can be a little bit more closer to market than you would be otherwise. Now we're in a place where we are driving up occupancy, so it is hard to drive up occupancy and rate at the same time. However, now we're getting to the point where we do have some homes which are 90+, where we would have an opportunity where we only have two rooms left with the view to the pond, and then we can make a change in those rates. You're right, they both have similar occupancy, and the revenue number is a bit different.
Because of that, one is coming down where you already built up that, and now this one is coming up. As David mentioned, you know, if it wasn't for the inflation environment we were in, we would actually be more confident in our margin expansion. Given the uncertainty of, you know, utility cost and issues around labor and agency staff, you know, we are going to be a bit more conservative in our view on when and if that margin will expand. We know it will, our top line would start growing, you know, as we feel it closer to stabilization.
Okay. You know, like you were sort of running margins, like you said earlier, in the low 40s, at that point. If you're us sitting from the outside, looking in, I appreciate that, you know, like, you can sort of see 100-200 basis points, before the end of the year. Like, A, do you think getting back to sort of those low- to mid-40% NOI margins is going to be possible? What kind of timeframe do you think it takes to get there, if it is possible?
The first question, we do think there is a path to get back to those margins because the business has not fundamentally changed. Again, the hesitation on giving you a bit of a timeframe for that. You find a little bit more certainty around getting to stabilized occupancy over the next 24 months or so. But the margin one is gonna be challenging because it's hard to predict what will happen. Our biggest expense is really labor and utility costs. Since there's minimal visibility into it as to what might happen, it is hard to predict when we would get there. But we do see a path to it because, again, most of the pandemic-related costs for the homes which are not an outbreak, we do see that cost come down significantly.
We're not seeing a lot of stickiness to that pandemic cost if the home is not an outbreak.
Okay. Then, on the LTC side, I apologize, I missed a few minutes of the preamble. You might have already answered this. You know, your average total occupancy was around 87% for the quarter. You wanna be obviously in the 90s to achieve full funding. Can you give us an idea of like where the challenges are? Like, is it sort of across the board in the remaining network, where you need to work to get occupancy up to the level to achieve full funding? Or is it, you know, a handful of sites where there are real issues? Can you speak to sort of like what might be constraining that occupancy?
Sure.
Right now, given the demand that there is inherently in the system?
The occupancy number for long-term care is 93.8%. It's the constraint is really that, you know, during Omicron, obviously things were shut down, and people couldn't move in. The wait list has not gone away, people think it's only growing because this is a need-driven world with, you know, people who need long-term care. It is more an aspect of if a home is in a significant outbreak, you cannot move people in. It's really there's not really anything more than that other than to just ensure as homes are not in outbreaks, they can start moving people in. The difference we are finding and why outbreaks are not making a lot of conversation is because we still have homes in outbreak.
It is becoming more an IPAC issue, making sure you have the right amount, you know, you have the right staff. Because from a health perspective, being all our residents mostly vaccinated, we are not seeing this becoming a health crisis. We are seeing more it's either a human resource crisis or it's more infection prevention to ensure we're trying to limit that increase. We do again see that for most of our homes, we'll get to the 97% number.
Okay, you know, just going forward, you guys have obviously, you know, it was a busy quarter last quarter, and you kind of stand alone in the market now as being, you know, the one publicly traded player who's, you know, committed to engaging in the full redevelopment of your Class C beds. You also wanna grow your retirement business as well, and that'll likely largely be done through acquisition too. Can you just talk about how you're thinking about balancing that and what should investors expect in terms of the mix of where the spending is gonna go over the next few years?
On the retirement side, like, do you have a, would you call it like a pipeline of acquisition targets, or is it still kind of a more opportunistic as, you know, as assets, you know, sort of come to market, you sort of participate in the process? Pardon me.
Sure. Let me answer your second question first because I think that's straightforward. We don't really have a specific pipeline. I mean, one of our pipeline was the homes that we used to manage, and now I think we basically have bought all the ones that we could buy out of that. I think that pipeline has now stopped, and it was not material. Most of the other homes that we buy, even though they're relationship-focused, most people do decide nowadays to go to market, so we'll participate where it would make sense for us.
We are not shy from walking away in the sense, you know, when we look at initial due diligence, you know, we do not, we are not trying to do this as a sport where we start five different deals just for the sake of it because it takes significant resources from operations, from finance, from investments, and the company overall. We are pretty picky in, you know, which one we proceed with. The ones we proceed with, you know, we have a lot of conviction towards closing, and we saw that with the last three deals that we announced. We really, it is market dependent is really what our focus is. It has to fit our criteria of retirement what we are looking for or long-term care in other provinces.
From a mix perspective, you know, you're correct. We are the only one left with, you know, in a publicly traded world which has both long-term care and retirement. For us, that's not only is it unique, we also think it's a significant strength for us. Before even COVID, four years back when there was huge supply issues in retirement where everyone was building retirement homes, long-term care provided that consistent, stable cash flow.
When we ran into Omicron, having that diverse portfolio, having the leadership and resources in retirement helped us, you know, as we were short-staffed in many areas, whether it's leadership positions or trying to find resources, that was a significant resource for us to move, to find work, in retirement. Also helps us grow because there's a lot more retirement opportunities for acquisition versus long-term care. The combination of it also shows up in our balance sheet strength. You know, we have a strong rating at BBB with a stable trend.
We do feel it is driven by both, the stability and the predictability of long-term care, even though it's lower margin and it's, it doesn't grow much, and the offset with growth from retirement, but also has a bit more risk. As we move forward, again, we talked about, you know, the need of Canadians going forward, the growth in 85+ population. Both of our business are need-driven. Even our retirement space, we don't really have pure senior apartments where, you know, people are making a choice. Most of the people coming to us in retirement space have some form of need. It might be that, you know, they just don't want to cook 3x a day.
We do feel having that right mix of long-term care and retirement, and at times one gets weaker and one gets stronger, is a very important thing, and we are committed to that strategy.
Okay. You know, like one of the challenges of having both is obviously like the, you know, like there's a perceived cost of capital difference between retirement assets versus long-term care. Carrying both in one entity, if you're trying to buy stabilized, you know, retirement assets, it can be a little bit more challenging to make the deals accretive because the market's gonna price your entire portfolio, not just the, you know, like, not just the retirement piece. Does that maybe lead you down the path of doing more development of retirement homes then as we go forward, particularly since you're gonna be picking up some, you know, more, increasingly more experience with the long-term care side?
Yeah. I mean, you know, for us, our big focus in development, and we have a lot of it over the next five to seven years, is really long-term care. Where we can, we would add retirement suites to it. For example, the one we're gonna build in Brantford, we're gonna do our retirement homes. You know, the Seaway project, even though it talks about long-term care, the current long-term care beds are attached to a retirement home, and once, you know, that home moves over, we will be adding potentially more retirement suites on that site. You know, we have a path of retirement development through that. We're also doing retirement development with a partner. You know, if we find right partnership opportunity to develop, we would, we would do that.
You know, we haven't found that constraint of, you know, the cost of capital issue for us because, again, you know, our leverage, our balance sheet is in a very strong point. You know, it was recently proven to us, you know, when recently we did a big acquisition and the equity market wasn't really that strong, so we decided not to raise capital at that point from equity perspective. We had enough room in our balance sheet to be able to do that. We continue to have the room in our balance sheet going forward as well. We do not think having the mix in any way hinders our cost of capital.
I would in fact say because the scope it provides, the ability to drive synergies, you know, we have a much bigger procurement process because of our long-term care business as well. We do think there's it is one of those where it's one plus one doesn't really equal two, it's really two point five or three, and we are committed to that mix.
Okay. That's great. Thanks very much. I appreciate it.
Thank you.
As a reminder, if you'd like to ask a question, please press star then one. Our next question comes from Pammi Bir of RBC Capital Markets. Your line's open.
Thanks. That was pretty close. But just really one question for me. You know, you're clearly getting good traction in the retirement occupancy and, you know, particularly considering Q1 is, you know, obviously typically a weaker quarter to begin with. Your marketing initiatives seem to be working well, but what do you think you may change maybe going forward to get the next leg up beyond, let's say, 89% occupancy that you've guided to? Secondly, what do you see as the new normal for stabilized occupancy in a post-pandemic world, maybe before new supply starts to accelerate?
Sure. Hi. Good afternoon, Pammi. I think that we do think stabilization to be in the low 90s continues to be a goal. You know, over the next 24 months, you know, we think we can get there. That, in our mind, hasn't really changed. On the retirement side, you know, we continue to see strong leads. We continue to see strong tours. We continue to see strong, you know, move-ins. I wouldn't really call it a change in strategy. You know, because we don't have one national approach, you know, we are quite specific about local communities.
You know, a home, if it's at 80% occupancy in one community, is gonna do something different than another home with 80% occupancy in a completely different region. I wouldn't call it a change in strategy versus just, you know, continued focus on it. We have, to your point, seen good results of it. You know, we saw significant increase in our occupancy since May of last year. We're not really looking to change approach because our approach has always been different for each market, where we have been.
Got it. Just, you know, when you do get into the higher sorta 80% range, you know, at a particular property, what makes the difference then? Is it, you know, for the pent-up demand, and maybe incentives might help initially when, you know, if a property might be struggling a bit. Once you get to that upper level, you know, the incentives taper off. Does it ultimately come down to then just the service, maybe the relationships in the community? Or is it kinda the same answer that it really just depends?
Yeah. I think it's a combination of all of that. You know, it also is a bit of an attitude. You know, I used to work in hospitality many, many years back. When you have a great product to sell and it's doing well, everyone wants to be a part of it. You know, as you drive this occupancy, you know, when people come to a home, it is full. The lobby area is full. Everyone, you know, the dining area is full. That's where people are coming to long-term care for social interaction. I mean, that's a key component because they always had a place to live. You know, as place get busier, it's frankly a bit of, you know, that only helps more.
It's very strong tailwinds when you're having a home how staff reacts. You know, suddenly you have more service because you have more people eating in the dining room. It really becomes a bit of a self-fulfilling process in a good way, so when your occupancy starts increasing. We are seeing that across our portfolio as we see increase in our occupancy.
Thanks for that. Maybe one last one. What do you think is maybe the perhaps most common differentiation or differentiating factor that maybe helps Sienna, you know, between competing properties in your markets? Like, what is it that you guys are particularly good at?
Yeah. You know, I'm not sure if it's something particularly good at. I would say it's more we have a brand new team, and we are focused on transforming both our retirement platform and our long-term care platform. We get a lot of questions on Aspira, you know, on the new name and website. But I would say that was the last thing we worried about was should we change the name? We were focused on differentiating a product and, you know, what do we stand for. Again, personalization, choice by the local community because the seniors coming into. We see some of it already because the average age is 84, but it does have a mix all across.
I mean, so far, you know, the retirement space, we are taking care of parents of baby boomers who grew through the Great Depression, and their view on life was quite different. You know, now we are taking care of baby boomers whose view on life is different. They, you know, instead of Great Depression, they lived through 200 TV channels with 15 different credit cards and a way to enjoy different things. Their expectations and choices are gonna be different. We are starting to make those changes, and we saw some early results of that, you know, in some of our occupancies. I would say that would be part of it, rather than something very specific other than that.
Thanks very much. I'll turn it back.
Thank you.
I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Jain for closing remarks.
Thank you once again. On behalf of all of us at Sienna, thank you for your continued support, and I hope you have a great summer ahead of you. Thank you.
Ladies and gentlemen, this concludes today's conference. You may now disconnect.