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Edited Transcript of CSH.UN.TO earnings conference call or presentation 9-Aug-19 2:00pm GMT

Q2 2019 Chartwell Retirement Residences Earnings Call

Mississauga Sep 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Chartwell Retirement Residences earnings conference call or presentation Friday, August 9, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Karen Sullivan

Chartwell Retirement Residences - COO

* Vlad Volodarski

Chartwell Retirement Residences - CFO & CIO

* W. Brent Binions

Chartwell Retirement Residences - President, CEO & Trustee

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Conference Call Participants

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* Brendon Abrams

Canaccord Genuity Corp., Research Division - Analyst of Real Estate

* Chris Couprie

CIBC World Markets Corp. - Analyst

* Lorne Kalmar

TD Securities Equity Research - Associate

* Pammi Bir

RBC Capital Markets, LLC, Research Division - Analyst

* Tal Woolley

National Bank Financial, Inc., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the Chartwell Retirement Residences' Q2 2019 Financial Results Conference Call. (Operator Instructions) Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Brent Binions, President and Chief Executive Officer of Chartwell Retirement Residences. Please go ahead, sir.

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [2]

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Thank you. Good morning. Thank you for joining us today. There's a slide presentation to accompany this conference call available on our website at chartwell.com under the Investor Relations tab. Joining me today are Vlad Volodarski, Chief Financial Officer and Chief Investment Officer; and Karen Sullivan, Chief Operating Officer.

Let me remind everyone that during this call we may make statements containing forward-looking information and non-GAAP measures. I direct you to our MD&A and other security filings for information about the assumptions, risks and uncertainties inherent in such forward-looking information and details of such non-GAAP measures. The documents can be found on our website or at sedar.com

Our results in the second quarter of 2019 have been impacted by a timing of the Good Friday statutory holiday and certain other expenses as well as lower occupancy due to competitive pressures in some of our markets. We are well on our way to executing on a 5-year strategy with the scheduled rollout of our newly developed customer experience training program to our frontline staff in late 2019 and early 2020. We continue our successful development program in 2019, having opened 3 newly developed retirement residences today, with lease-up in progress. In 2019 to date, we've completed sales of 2 noncore retirement residences and entered into a definitive agreement to sell 4 noncore long-term care properties Ontario. The closing of that sale is expected in early 2020, being subject to the receipt of regulatory approvals. Our financial position remain strong, as you can see on Slide 4. June 30, 2019, our liquidity amounted to $327.7 million, which included $14.5 million of cash and cash equivalents and $313.2 million available borrowing capacity on our credit facility.

In addition, in June 30, '19, our share of cash and cash equivalents held in our equity account of JVs was $5.5 million. The interest coverage ratio on a rolling 12-month basis remain strong at 3.2x at June 30, '19, consistent with December 31, '18. Our indebtedness percentage calculated using historical cost of our assets was 50.3% at June 30, '19. And our debt to capitalization ratio was 41.6%.

Net debt to adjusted EBITDA ratio increased 8.2x, as newly completed development properties currently in lease-up have not yet achieved their full EBITDA contribution. We continue to build value on our real estate portfolio through portfolio and asset management programs, development of new properties and opportunistic acquisitions, as shown on Slide 5. These value-add activities are supported by extensive industry and market research and by rigorous risk management practices. Work continues on our development pipeline of 1,170 suites with 5 projects, 524 suites in construction and 4 projects 646 suite in predevelopment. These projects are expected to generate meaningful development returns and allow us to grow our property portfolio with new, efficient, state-of-the-art residences. We continue to add future projects to our development pipeline. In addition, we have options to acquire close to 2,800 additional suites in Québec through our partnership with Batimo.

I will now turn it over to Karen Sullivan, our Chief Operating Officer, to talk about some operational initiatives she and her team are working on. Karen?

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Karen Sullivan, Chartwell Retirement Residences - COO [3]

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Thanks, Brent. Turning to Slide 6. We continue to implement a number of sales and marketing strategies that are designed to position our homes to compete effectively with the increasing number of new developments in specific markets. These include cluster sales strategies where our sales consultants work as a team in communities where we have a number of properties in order to improve sales coverage and help our prospects understand the variety of options available to them in terms of service, rate and availability.

In the busy Ottawa market, we have taken this one step further and introduced a specialist who can help prospects navigate and select from our 13 properties in the Ottawa and Kanata area. We also continue to focus on having our sales personnel in our home build business-to-business relationships with community influencers such as realtors, financial planners, healthcare professionals and other community influencers who interact with local seniors.

And in some of our more competitive markets, we have hired business-to-business specialists to assist all of the local homes in the area with this strategy. Our call center continues to produce positive results. And after significant success in setting up call center agents in our Montréal office, we are now in the process of hiring agents in our Vancouver office who can be experts with respect to our homes in British Columbia and Alberta and provide even better coverage during extended hours. And as our busiest leasing season approaches, we are in the final stages of preparing to launch our new brand marketing campaign in September. This multimedia campaign will be diversified across major channels, including television, digital, radio, newspaper, magazine and direct mail.

Turning to Slide 7. In Q2, we celebrated our frontline staff during employee appreciation week, holding special events and honoring those who have met employee -- employment milestones. This quarter, we are taking that pulse through our annual employee engagement survey as we strive to get to our 2023 goal of having 55% of our employees very satisfied. We will use the feedback from the survey to continue on our journey to make improvements in our homes across the country. We are also in the process of tabulating the results from our customer satisfaction survey, for our 2023 goal is to have 67% of our residents very satisfied.

Just last week, we launched a major initiative to assist us on that journey by starting the Chartwell Experience, a custom-made proprietary training program. First session has been delivered to the head office staff. The training will continue to be rolled out to over 800 managers this fall and then to our 1,000 frontline retirement home employees in late 2019 and early 2020. We are confident that this program will set us apart from our competition, enhance overall employee engagement and residents' satisfaction, and ultimately increase referrals sales.

So although occupancy has been a challenge due to increasing supply, we are beginning to see this moderating. And with our sales and marketing strategies, along with our continued focus on the experience that we are creating for employees and residents, we expect improvements to occupancy going forward.

I will now turn it over to Vlad to discuss our Q2 2019 financial performance.

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [4]

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Thank you, Karen. As shown on Slide 8, in Q2 2019, net loss was $1.6 million compared to net income of $7 million in Q2 2018. The decrease in net income was primarily due to higher depreciation expenses and negative changes in fair value of financial instruments, partially offset by higher contributions from property operations. Q2 2019 FFO was $47.1 million or $0.22 per unit compared to $48.9 million or $0.23 per unit in Q2 2018, primarily due to higher financing and G&A expenses partially offset by higher NOI from properties.

Our quarter-over-quarter operating results were impacted by the timing of the statutory holiday. We estimate that the impact was approximately $900,000. Q2 2019 FFO was impacted by $2.3 million of lease-up losses and imputed cost of debt related to our development project. This compares to $2.4 million Q2 in 2018.

In Q2 2019, combined same-property portfolio, occupancy was 89.8% compared to 90.7% in Q2 2018. For 2019 year-to-date, same-property adjusted NOI increased $2.4 million or 1.8% and FFO per unit increased 2.3%.

Turning to our operating platform results, as shown on Slide 9, our Ontario platform same-property NOI increased $0.4 million or 1.1%, as rental rate increased in line with competitive market conditions were partially offset by lower occupancies, higher staffing costs, property tax, administrative and repairs and maintenance expenses. Q2 2019 same-property occupancy was 84.3% compared to 85.6% in Q2 2018, primarily due to competitive market pressures in some markets.

On Slide 10, in Q2 2019, our Western Canada same-property adjusted NOI decreased $0.8 million or 5.8%. In addition to the timing of the statutory holiday, our Western Canada same-property results were impacted by higher employment health access, which are expected to reverse in 2020, higher staffing expenses at 1 community where we implemented our signature Memory Living program, where the corresponding revenue increases are expected to be realized on resident turnover. High utility cost, mainly related to rebate received in 2018 related to prior years and higher property tax. In Q2 2019, same-property occupancy was 95% compared to 95.9% in Q2 2018.

On Slide 11, you will see our Québec platform same-property adjusted NOI increased $0.1 million or 0.7% in Q2 2019, primarily due to rental rate increases in line with competitive market conditions and lower marketing expenses, partially offset by higher staffing costs, administrative food and repair and maintenance expenses and lower occupancies. In Q2 2019, same property occupancy was 90.9% compared to 92% in the second quarter of last year.

As shown on Slide 12, our Ontario long-term care platform same property adjusted NOI decreased 3.8% in Q2 2019, primarily due to timing of certain expenses, including the timing of the statutory holiday. Year-to-date, the Ontario LTC platform same-property adjusted NOI is higher by 6.8%. Weighted average occupancy in the same-property portfolio were 98.7% compared to 98.4% in Q2 2018.

I will now turn the call back over to Brent to wrap up.

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [5]

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Thanks, Vlad. We believe that by focusing on enhancing our residents experience in our homes and by delivering exceptional services and care to our residents, we will generate strong financial results and long-term sustainable value creation for our unitholders. We recognize that only highly engaged employees will deliver exceptional services and quality care to our residents, and we continue to make significant investments in recruitment, training and development of our team members. We continue to improve corporate support delivered to our operating teams, including the implementation of new technology solutions to better understand our customers, communicate with our employees and reduce administrative time commitment in the field.

We have put the infrastructure in place to successfully execute on a significant development program we set for ourselves for 2019 and beyond as we are confident that these new state-of-the-art properties will meaningfully contribute to enhancing the quality of our real estate portfolio and provide strong value creation for our unitholders over time.

We also remain open to and proactively seek additional acquisition and development opportunities in our core markets. Thank you for your time and attention this morning. We'll now be pleased to answer any questions you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we'll take the first caller.

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Lorne Kalmar, TD Securities Equity Research - Associate [2]

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Lorne Kalmar, TD Securities. Just quickly on the St. Gabriel, the Batimo development, with that now stabilized, are you guys still on track to acquire that during the quarter?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [3]

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Sorry, I didn't hear the question.

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Lorne Kalmar, TD Securities Equity Research - Associate [4]

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With the St. Gabriel now stabilized, are you guys still on track to complete it during -- complete the acquisition of it during Q3?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [5]

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It's not going to be in Q3 or Q4. We still need to do our regular due diligence on this property. And as soon as it is completed, we'll be prepared to acquire it.

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Lorne Kalmar, TD Securities Equity Research - Associate [6]

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And any idea of price and expected yield?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [7]

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No. At this time, we're still negotiating the price.

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Lorne Kalmar, TD Securities Equity Research - Associate [8]

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Okay. And then just -- I saw, obviously, you guys are getting rid of 4 LTC Ontario properties. Is there a concerted effort to lower the exposure to the LTC segment or is that sort of just a one-off?

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [9]

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That's more of a one-off transaction. We were actually not marketing these properties. We were approached out of the blue and someone wanted these 4. And we looked at it and said, maybe it make some sense for us. And so we proceeded with that transaction, but nothing beyond that.

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Lorne Kalmar, TD Securities Equity Research - Associate [10]

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Okay. And then just lastly for me, noticed that capitalizing interest is down a little bit sequentially. Was that related to the Sumach commencing operations?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [11]

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Sumach, Carlton and West Carlton all commenced operations in first half of this year. So interest stop being capitalized for these properties.

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Lorne Kalmar, TD Securities Equity Research - Associate [12]

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Okay. And then just what's a good run rate for capitalize interest going forward?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [13]

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That really depends on the timing of the investments, and it's really hard to model for the future. So at this time, the best you can probably do is just continue with existing run rate. But as the investments continue to be made in new projects, they will probably increase. And then as a projects open, the capitalization stops, so it's really is a question of timing and volume of investments, which depends on quarter-over-quarter fluctuates.

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Operator [14]

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Second caller, please go ahead.

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Brendon Abrams, Canaccord Genuity Corp., Research Division - Analyst of Real Estate [15]

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It's Brendon Abrams from Canaccord. Taking a look at same property occupancy, obviously continue to trend lower during the quarter. I guess specifically in Ontario, I'd just like to get your view on, what would you view as kind of reasonable recovery in the near term, so call it maybe the next 12 months? And what do you think needs to happen in order to get there?

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [16]

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Well, we'll answer this in a couple of parts. I mean occupancy does remain an ongoing challenge. New developments continue to open and compete for residents -- for new residents. We expect the occupancy issues will continue through the end of this year and will ease up into 2020 as the demographic growth catches up with new supply growth because supply growth is moderating. We still expect to have same-store NOI growth through this year, perhaps slightly lower than previously expected, maybe closer to 2% than it was before. But we are -- have numerous strategies, Karen spoke to some of them. And maybe Karen can just chat a wee bit about what the fall looks like.

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Karen Sullivan, Chartwell Retirement Residences - COO [17]

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Yes. So fall is our traditionally and we expect it to be our best leasing season. And -- so we're optimistic going into the fall and also optimistic based on the number and quality of our various strategies. So -- in particular, very excited about our new marketing campaign that you'll see in early September that some multimedia campaign, starts in early September. We have an open house, which is to the call to action from that a little later in September.

This cluster marketing, also cluster sales approach in some of the centers where we have a number of homes is starting to yields some results for us, for sure. Having the call center agents in Montréal has worked so well that we've decided to do that in Vancouver, so we're just getting those folks set up now and that's working well.

A little bit longer-term strategies around this business to business, working with realtors and financial planners and healthcare partners is starting to work for us as well. And then a very excited about what we're doing with -- in terms of how customer service training and what that will do for us in terms of what is our biggest source of prospects for the future and that's referral. So we're still very optimistic about the future in terms of occupancy.

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Brendon Abrams, Canaccord Genuity Corp., Research Division - Analyst of Real Estate [18]

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Okay. So -- yes, clearly, many different initiatives and strategies on that front. I didn't hear price or rental concession. Is that a strategy you're not considering at the time or...

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [19]

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That is indeed a strategy we are not considering. There will be no price concessions.

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Brendon Abrams, Canaccord Genuity Corp., Research Division - Analyst of Real Estate [20]

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Okay. Good to know. Just in terms of same property NOI, Vlad, do you know what the number would have been if you would have normalized for the stat holiday?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [21]

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Yes. It's about $1 million. As I said, $900,000-plus is the impact quarter-over-quarter, so the growth would've been flat.

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Brendon Abrams, Canaccord Genuity Corp., Research Division - Analyst of Real Estate [22]

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Great. Okay. And last question for me, just in terms of Alberta, obviously, down about 6%, I assume that reflects the Edmonton portfolio acquired last year. I'm just wondering how that portfolio is performing relative to the underwriting?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [23]

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No. The same property numbers do not include Edmonton's portfolio that was acquired last year. To answer your question about Edmonton's portfolio, it's performing a little slower than we originally anticipated. There's 1 property that is in lease-up that has not leased out as fast as we originally expected. We're seeing good traction on the property and fully expect to catch up back to where we originally expected this portfolio to perform.

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Brendon Abrams, Canaccord Genuity Corp., Research Division - Analyst of Real Estate [24]

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Okay. And sorry, one last question for me. I'm just taking a look at Page 13 in the MD&A where it talks about the 18 properties acquired or developed after January 1. I just want to make sure I have this correct. NOI for the quarter in the year, basically, a little bit of a loss. And what you're saying is, once these are stabilized at 95% occupancy, they should generate NOI of $10.8 million. Is that -- just wanted...

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [25]

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Yes. So this is in reference specifically to the 3 properties that are included as part of these 18. These 3 properties are new developments that we opened this year or late last year. And I'm showing here the contribution to these properties made so far to the overall NOI and our expectation of these properties in terms of the stabilized NOI.

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Operator [26]

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And we'll move to the next caller.

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Chris Couprie, CIBC World Markets Corp. - Analyst [27]

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Chris Couprie, CIBC. Wanted to touch on the occupancy, again. I believe they were comments earlier that -- there was hope that occupancy is going to improve. Have you started to see any of that kind of relative to quarter-end?

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [28]

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Yes. We're -- as we move into what we said is our best season, our metrics are -- our future metrics are all turning green. So we expect to have a good fall.

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Chris Couprie, CIBC World Markets Corp. - Analyst [29]

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Okay. And then just touching on development, you mentioned that you're seeing a slowdown in new developments. Just if you can comment on why do you think that is? And with cap rates looking like they have maybe compressed a little bit, do you think that could be incentive to turn development back on?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [30]

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So we're certainly -- the projects that are currently in construction, they're going to be completed and open. So that is -- the Brent's comments about continuing pressure this year will continue. We are seeing delays, and in fact we are ourselves delaying some projects that we thought would be in construction in the present time because the fast acceleration of construction cost. And so we are here, and undoubtedly from participants in the market that they are doing the same thing, we believe reevaluating their performance based on the construction cost estimates that we're currently seeing. So that causes us to believe that growth in new supply will moderate into the 2020.

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Chris Couprie, CIBC World Markets Corp. - Analyst [31]

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On the LTC assets that are being sold, are these Class A?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [32]

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No. They're all Class C.

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Chris Couprie, CIBC World Markets Corp. - Analyst [33]

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All Class C? Okay. Great. And then just on that $900,000 Easter impact, is that mostly in the LTC portfolio?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [34]

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About half-and-half.

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Chris Couprie, CIBC World Markets Corp. - Analyst [35]

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Half-and-half? Okay. Great. And then just last one for me is the SCIU negotiations. Have those been concluded?

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [36]

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No -- well, we finished the negotiations. It's gone to arbitration. The case is in. We are waiting for decision from the arbitrator.

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Operator [37]

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Caller, please go ahead with your question.

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Pammi Bir, RBC Capital Markets, LLC, Research Division - Analyst [38]

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It's Pammi Bir from RBC Capital Markets. Just maybe looking at the Ontario Retirement Home portfolio, again, the quarter-over-quarter drop in occupancy was rather large. I'm just curious, was that a function of, again, a particular market or a change in the composition of that inventory?

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [39]

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No. That's -- Pammi, that's more the impact of the development in the various markets that we're in. As we -- as -- have resident turnover in the normal course and it's been pretty normal this year. There are more options for people choose from, many of them brand-new state-of-the-art properties, and so we're competing across for the same number of residents, maybe slightly increased because demographics are getting better. But the supply is running ahead of it. And so people will -- generally 2 or 3 properties. And we're seeing somewhat fewer -- we had seen in the period of time somewhat fewer tours as the options has increased for people. So I believe it's normal turnover and slightly less fill rate based on there more options for people to choose from.

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Pammi Bir, RBC Capital Markets, LLC, Research Division - Analyst [40]

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So not necessarily a function of -- what I was referring to actually was the composition your same-property portfolio, meaning properties that are still in lease-up but they now form part of the same-property bucket?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [41]

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Oh. There's maybe a little bit of that, but the majority of it is not that. It's not really a composition.

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [42]

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That's a small piece of it.

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Pammi Bir, RBC Capital Markets, LLC, Research Division - Analyst [43]

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Got it. Okay. And then just along those lines, Brent, to your comment around the competitors, I'm just curious if you have some insight into -- you mentioned new state-of-the-art properties, but what are some of the most common cited factors that you hear about -- in terms of why a resident may have not selected your property to move into? You mentioned that you're not going compete on price or concessions, so I'm just curious if you know what factors -- what the main factors are in that decision to move to a competitor or to move into a competitor site?

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [44]

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Yes. Well, since the chief influencer is generally the daughter, the eldest -- generally the eldest, most geographically near daughter, but it's generally the case. You walk into a brand-new, fancy, state-of-the-art building and they like it better. And whether the service levels are as good, that's not something you can understand on day one, and that is what we're refocusing on in terms of how we market these things and it is how our marketing campaign will come out. So we're trying to differentiate on the quality of the service as opposed to the beauty of the brand-new home, except of course where we have the brand-new home then we can sell the real estate as well. So it is really just that. It is the tendency for what's bright and shiny is -- seems to be better, whether it ends up being better or not always remains to be seen because it's all about service, but it's certainly -- they pick because it looks better.

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Pammi Bir, RBC Capital Markets, LLC, Research Division - Analyst [45]

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That's helpful. Just one last one, and I apologize if this was maybe asked earlier, I just want to clarify, how has the supply picture changed relative to some of the data that you provided at the end of last year? If I remember correctly, it was roughly maybe 5% of the inventory in terms of supply growth over the next few years. Has that number moved up materially or is it kind of still in that (inaudible)?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [46]

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We'll update it with our year-end filings. And so we -- again, consolidating that is not available every day for us. I can tell you that what we disclosed had all projects that were in construction at that point in time. There are certainly a few more started construction between then and now. I cannot tell you definitively whether it's more or less because some of those projects now open -- some of the projects that were in construction before open. It feels like it's about the same, but I cannot be definitive on that.

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Operator [47]

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(Operator Instructions) Caller, please go ahead.

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Tal Woolley, National Bank Financial, Inc., Research Division - Research Analyst [48]

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It's Tal from National. My question, I was just wondering on the new Ontario government's long-term care and transitional care plans, do you have any sense on when we might get some more concrete information about how they're going to proceed with redevelopment and transitional care.

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [49]

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Right today there's lots -- I would say this: there's more discussions going on with the government on this problem than there has been for the last 10 years put together. So -- but no solutions as of yet. But for the first time in quite some time, it is a bit of a focus. So I guess all I can tell you, it's being worked on, but there are no answers at the present time.

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Tal Woolley, National Bank Financial, Inc., Research Division - Research Analyst [50]

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Okay. And then my next question, obviously, there's a big transaction announced in Québec in the last couple of months. If it closes and goes forward, does it change your perspective on the Québec market or your outlook for that market going forward?

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [51]

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No. The transaction doesn't change our outlook on Québec market. We will continue with our development program with Batimo where they are developing and we're buying properties. And we continue to be present in that market. There's nothing I guess new from the market perspective other than valuations that this transaction introduced these homes already operate and compete with us and they'll continue to operate and compete with us.

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Operator [52]

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And we'll take the next caller.

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Unidentified Analyst, [53]

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Just on the -- on your comment about developer slowing down because of the construction cost, was that across the country or specific to Ontario?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [54]

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We believe that it's the same across the country, at least in the markets that we operate in, maybe to a lesser degree in Québec, although there is construction cost increases there as well. But certainly, places like BC, Alberta and Ontario are impacted by this increase in construction cost -- by rapid increases in construction cost.

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Unidentified Analyst, [55]

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And then are you still able to get your typical 3% to 5% rent lift on existing tenants? Or has the lower occupancy impacted that as well?

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [56]

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It is not impacted. We are still able to do that.

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Unidentified Analyst, [57]

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And then does the change in supply kind of alter your view about what markets you want to be in? Are there any, like, small markets that maybe has seen too much supply where you'd look to exit?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [58]

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The answer to that is, yes, but not necessarily supply driven, it is strategy driven. We, according to our strategy, do not want to operate in the smaller markets. We do not operate in smaller homes that cannot be profitable and efficiently operated, and so we are looking at all these markets through that lens.

The competitive situation, if it's in the larger market, is temporary from our perspective and we're prepared to compete because we think over the long term these properties will be successful and that may not be the case for smaller markets. That's why our strategy is not focused on those.

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Unidentified Analyst, [59]

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And then outside of that big investment by Vantas in Québec, are you seeing more U.S. buyers looking at Canadian assets? Or is it bit the same as it was earlier in the year?

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Vlad Volodarski, Chartwell Retirement Residences - CFO & CIO [60]

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It feels like it's the same as it was earlier in the year. We have Vantas, Welltower and Sabra who are invested in the Canadian marketplace. There are some private equity firms that have certain investments, and we pretty much see the same people when we look at the transactions.

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Operator [61]

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And we have no additional questions at this time, we'll turn the program back over to our speakers for any additional remarks.

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W. Brent Binions, Chartwell Retirement Residences - President, CEO & Trustee [62]

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Thank you. That wraps up today's conference call. Thanks, again, to everybody for joining us. As always, if you have any further questions, please do not hesitate to give us a call. Thank you, and goodbye.

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Operator [63]

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And ladies and gentlemen, once again that does conclude conference. And again, thank you all for joining us today.