Chartwell Retirement Residences (CSHUN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Chartwell Retirement Residences Q2 2020 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. Vlad Volodarski, Chief Executive Officer of Chartwell Retirement Residences. Please go ahead.

Thank you, Justina. Good morning, and thank you for joining us today. There is a slide presentation to accompany this conference call available on our website at chartwell.com under the Investor Relations tab. Joining me are Karen Sullivan, President and Chief Operating Officer; Sheri Harris, Chief Financial Officer; and Jonathan Boulakia, Chief Investment and Chief Legal 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. More specifically, I direct you to the added disclosure in our Q2 2020 MD&A under the heading Forward-Looking Information and COVID-19 Risk for a discussion of risks and uncertainties introduced by the COVID-19 pandemic. These documents can be found on our website or at sedar.com. Cultures are built over time and are tested in crisis. This pandemic certainly tested ours, and I cannot be more proud of how our culture manifested itself. The commitment and dedication of our employees and our residences and corporate offices has been nothing but extraordinary. Chartwell is lucky to have them, and I am grateful to each and every one of them for the exceptional work they have been doing in these challenging times. Service excellence is one of our company's values. We strive to deliver an exceptional resident experience that is personalized, memorable and feels like home where families and friends feel welcome and respected. This is our customer experience vision statement. I believe that direct customer feedback is crucial in understanding areas for improvement and delivering on this customer experience we envision. It is arguably even more important in times of crisis like we're experiencing now. A month ago, we launched an extensive program called Listening to Serve You Better, which includes in addition to internal reviews of our pandemic management protocols and procedures, online surveys of our residents, families and employees and virtual sessions with families and residents hosted by me. This program is intended to solicit timely and direct feedback from our residents, families and staff about their experiences during the past 5 months and to get their input on things we could do better, both in operating our residences going forward and in preparing for a potential wave 2 of this pandemic. We expect to receive these survey results in September. I have now completed 12 virtual sessions with our residents and families across the country. Without exception, the participants praise the outstanding work of our employees that they have been doing in keeping our residents safe, well cared for and even entertained despite the tremendous challenges posed by restrictions. The participants also recognized decisiveness and speed of our response in the early days of pandemic from the quick implementation of screening and enhanced infection control protocols to directing our staff, to wear masks prior to it being mandated by health authorities, to regular and informative communications being delivered to residents and their families. I've also received a number of interesting suggestions, particularly in the areas of dining and lifestyle and program services, which could make our residents and families' experience even better. Our operating teams are reviewing these suggestions, and I have no doubt that some of them will be implemented at our residences. We're proud to be one of the founding members of the Cares Fund, established to provide emergency relief support to workers in Canadian retirement and long-term care sectors and their families. Chartwell contributed $725,000 to this fund, including a $225,000 contribution by our Board members. To date, the fund, run by a group of volunteers, including many Chartwell employees, disbursed $1.8 million to over 400 deserving sector employees. Our Q2 and year-to-date 2020 results have been significantly impacted by the COVID-19 pandemic both in occupancy declines and additional expenses incurred in order to keep our residents and staff safe. As provincial economies begin to gradually open and numerous restrictions are being lifted, we are resuming our leasing activities, including virtual and traditional personalized tours for our prospective residents. In July 2020, same-property retirement leasing activity represented 70% of July 2019, and our occupancy decline continued to slow down. July 2020, occupancy in our same-property retirement portfolio declined 0.6 percentage points, a marked improvement from May and June declines of 1.2 and 1.1 percentage points, respectively. Our financial position remains strong. Our liquidity as of August 6, 2020, was $408.8 million, including $82.8 million of cash and cash equivalents and $326 million of available borrowing capacity on our credit facilities. We know this pandemic is not over yet, and the uncertainty regarding pace of occupancy recovery and potential for wave 2 restrictions remain high. Still, I look to the future with optimism. Long-term demographic trends are favorable. Our team has tremendous depth of experience, which now includes operating through a pandemic, a resolve to succeed and dedication to our purpose of making people's lives better. Our culture is exceptional. Our brand is strong and getting stronger, and our strategy is clear. So Chartwell is well positioned to weather the storm and succeed in creating lasting value to all our stakeholders. I am going to turn the call over to Karen to provide a more detailed operational update.

Thank you, Vlad. Turning to Slide 5. I'm pleased to report that we only have 1 home in outbreak with 1 confirmed case of COVID-19. Chartwell's operations critical incident command continues to meet twice per day to assist our residences to interpret and effectively implement new and evolving directives and guidelines in all 4 provinces where we operate. Our most recent efforts have been to allow our residences to open to visitors and begin to bring back some of the services that are now allowed in our homes, including, depending on the province or municipality: hair dressing, fitness rooms, group activities, et cetera, with strict physical distancing as well as additional infection prevention and control measures in place. These include mandatory masking for staff in all Chartwell residences, enhanced cleaning of high-touch surface areas, vigilant hand hygiene practices, and in Ontario, testing of staff for COVID-19 every 2 weeks. We've also been developing, over the past number of months, new strategies for sales and marketing in light of the pandemic. I'm pleased to say we are now able to put these in place across our retirement home portfolio as we have been able to begin in-person personalized tours, again with IPAC protocols in place in all of our residences, except the 13 properties in Alberta, where we are still restricted to virtual tours. The combination of a new virtual selling kit that includes, for example, e-collateral for each property and the tools for sales personnel to create both prerecorded and live virtual tours, along with the ability for prospects and their loved ones to come in for tours in most of our residences is helping us to begin to take advantage of the potential pent-up demand for retirement living. We've also created a comprehensive Transition Together program with an easy-to-follow schedule to successfully transition new residents during the mandatory 14-day isolation period that is a requirement in Ontario and Western Canada. Having a focus for these new residents each day, even though they are in their suite, is a definite selling feature and differentiator. With respect to marketing, we launched a new multimedia campaign on August 3 called Life is Better, Together. The campaign focuses on the importance of the social setting for -- that Chartwell offers to its residents from a peer-to-peer perspective, distinguishing healthy and active seniors and retirement residences from the recent media portrayal of frail LTC residents and overcoming the objections of those who would hesitate to make the decision or delay their decision to choose retirement living due to COVID-19. This campaign is running on TV, social media, print ads, direct mail and radio. Turning to Slide 6. Chartwell has also been very involved in our provincial associations, which are working with government on responding to the pandemic. Recently, there has been a great deal of focus on long-term care, particularly in Ontario, where the provincial government has now announced the members of the commission into long-term care as well as their terms of reference. Ontario long-term care represents approximately 10% of Chartwell's business. We have significant expertise in this sector. Prior to joining Chartwell, I spent 21 years at the Ontario Long-Term Care Association, including serving as its CEO for 6 years. Sheri Harris, our CFO, has over 20 years of industry experience and has served on the OLTCA Board of Directors. Fraser Wilson, our VP of Long-Term Care, has been in the sector since 1992, including running his family business of 16 LTC residences for 15 years. Our former CEO and current Board member, Brent Binions, has over 40 years' experience in the sector. So to say the least, we remain active working with OLTCA, governments and other sector partners to improve the system. We are pleased with the current -- with the recent Ontario government's announcements with regard to long-term care, which includes a revised capital program that is an improvement to the previous program in terms of the capital funding subsidy, variable amounts based on geography and funding some upfront costs. We are in the process of analyzing our various redevelopment projects based on this information. There's also a regular government funding increase for April 1 of 1.5% as well as an increase to the residents-based accommodation rate of 1.9%, which will be effective January 1, 2020. It's a delay of 6 months from the typical July 1 increase date, but there's been a guarantee from the government that they will make up any revenue loss for this period. Also the introduction of a minor capital funding -- minor capital fund beginning on April 1, 2021, that will replace our structural compliance premium, which will continue until March 31, 2020. Turning to Slide 7. Our other focus has been to learn from all that has occurred over the past 5 months and ensure that we continue to be prepared as the pandemic evolves. As Vlad mentioned, this included his Listening to Serve You Better virtual town hall sessions. This qualitative data will be combined with quantitative data from an online survey of our residents, their loved ones and our staff on our response to the pandemic. We are also undertaking a communication audit of all the information: memos, posters, letters, et cetera, provided to our residents, their families and our management teams and frontline employees so that we can again continuously improve. We're also working to ensure we have sufficient personal protective equipment as well as reviewing our housekeeping policies and procedures and our IPAC infection, prevention and control material and training. In addition, our corporate office support teams are now back in our properties with a focus on auditing the residences for compliance with COVID requirements and assisting them to get back on track with regard to sales. Due to the size of the corporate support team, we can limit the number of residences that each person goes to per week and work as a team to cover all of the properties in a few short weeks. We've also kept in place our enhanced recruitment support for our residences to ensure that they continue to have sufficient frontline staff and to reduce agency costs. I'm extremely proud of how our frontline staff, managers, GMs, administrators and corporate support team members have worked together throughout the pandemic with a focus on resident safety and open and transparent communication with their loved ones. You certainly cannot create a positive culture during a crisis, but you can absolutely take advantage of one that already exists. I believe that our focus and investments in the Chartwell experience has served us well so far and will continue to do so going forward. I'd now like to turn it over to Sheri Harris, our Chief Financial Officer, to talk about the financial results.

Thank you, Karen. As shown on Slide 8, in Q2 2020, our net loss was $1.9 million compared to a net loss of $1.6 million in Q2 2019. For Q2 2020, FFO was $39 million or $0.18 per unit compared to $47.1 million or $0.22 per unit in Q2 2019. Our same-property adjusted NOI decreased by $5.8 million or 9.7% in Q2 2020. Same-property occupancy was 85.6% in Q2 2020 compared to 89.9% in Q2 2019. In our retirement residences, same-property occupancy declined 84% -- to 84.5% in Q2 2020 compared to 88.5% in Q2 2019. Permanent move-ins declined 65% in that time period. However, we also saw a decrease in move-outs of 23% compared to Q2 2019. Through Q2, we saw increases each month over the previous month in move-in activity, along with a smaller increase in move-out activity. In addition to the impact of lower occupancies on our Q2 results, we have made investments in initiatives to enhance residents' and staff safety. And as a result, our pandemic-related expenses exceeded announced government funding by $7 million in Q2 2020. The majority of our pandemic expenses are for additional staff to provide screening, enhanced cleaning and disinfection to expand dining service hours to facilitate physical distancing, and in many of our retirement residences, for additional care where families were not able to provide assistance in person or where governments have reduced home care services. We also invested additional funds to recognize the extraordinary efforts of our frontline and management staff who go above and beyond to care for our residents. We are continuing to invest in PPE and will continue to consume more cleaning and housekeeping supplies, along with the current costs for disposables for meal services where residences are an outbreak. In addition, as a result of government single site directives, we offered additional hours for our part-time employees to allow them to maintain their earnings during the period of time while they are not permitted to work at another retirement residence or long-term care home. We also reduced marketing and repairs and maintenance expenses in our residences while access was restricted. We saw contributions from our acquisitions and developments and this partially offset our net pandemic expenses. Turning to Slide 9. I'd like to discuss our same-property operating platform results. In Ontario Retirement, our occupancy was 79.1% compared to 84.4% in Q2 2019. NOI decreased $3.4 million or 9.2% due to lower occupancies, COVID-related expenses which were partially offset by funding, higher property tax expense, staffing costs and office expenses which were partially offset by rental rate increases in line with competitive market conditions and lower marketing expenses. In Western Canada, our occupancy was 91.2% compared to 94.7% in Q2 2019. NOI decreased $1.3 million or 8.8% and due to lower occupancies, COVID-19-related expenses, higher property tax, staffing costs and office expenses which were partially offset by rental rate increases in line with competitive market conditions, funding which provided a small offset to the additional expenses related to COVID-19 and lower marketing expenses. In Québec, our occupancy was 88.8% compared to 91.3% in Q2 2019. NOI for this period decreased $0.6 million or 4%. Lower occupancies, higher staffing costs and food expenses, COVID-19-related expenses net of funding were partially offset by rental rate increases in line with market conditions and lower utilities and marketing expenses. In long-term care, NOI decreased $1.9 million or 25.1% due to COVID-19 expenses and higher staffing costs. Occupancy was 92.6% compared to 98.7% in Q2 2019. The while occupancy-based funding in our Ontario long-term care residences is protected in December -- until December 31, 2020, funding announcements to date are not sufficient to cover the costs of long-term care homes investments in protecting our residents and reducing the spread of COVID-19. Turning to Slide 10. I'd like to provide you with a more current update on our same-property retirement residence occupancy: April was 85.7%; May, 84.5%; June, 83.4%; and July 82.8%. As Vlad noted, the pace of decline in occupancy has steadily slowed since the onset of the pandemic in mid-March. Move-in activity has steadily increased each month. In July, permanent move-ins were approximately 65% of previous year volumes. And move-out activity was approximately 80% of July 2019 volumes. It remains too early in the reopening process to identify trends related to pent-up demand, particularly as July and August is typically lower in volume and initial contact generation due to seasonality. We collected substantially all of our rents for July and August, consistent with the past experience. As noted, we continue our investments to protect our residents and staff and prevent the spread of COVID-19. With our strong management operating platform with benefits of scale that Karen has touched on, we were able to quickly mobilize to ensure that we had the densest area staff and equipment to reduce the spread of COVID-19. We do anticipate costs decreasing as we move to a more steady state, albeit while we are still on high alert for a potential second wave, it will be gradual. We are also beginning to look to rationalize and improve schedules where and while single site staffing restrictions remain in place. In addition, where we are providing additional services previously provided by families or by home care that has not been available, we will work with our residents to assess additional service revenue opportunities on a go-forward basis. We also continue to advocate for the government to fund the home care services that we have replaced out of necessity to ensure that our residents are cared for appropriately. As you can see on Slide 11, at June 30, 2020, our liquidity amounted to $346.1 million, which included $48.9 million of cash and cash equivalents and $297.3 million of available borrowing capacity on our credit facilities. In addition, our share of cash and cash equivalents held in our equity accounted for JVs was $7.5 million. At June 30, 2020, our unencumbered assets had a value of $957.3 million. Our mortgage maturities remain well-staggered with an average term to maturity of 6.9 years at June 30, 2020. Our interest coverage ratio was 3.1 at June 30, 2020. Our debt to gross book value, calculated using the historical cost of our assets, was 52.7% at June 30, 2020. Net debt to adjusted EBITDA ratio was 8.7x. Consistent with our business strategy to build and purchase high-quality state-of-the-art new properties, our portfolio includes several new properties in lease-up. In Q2 2020, 5 newly developed properties, including 1 we acquired with an aggregate gross book value of $274.5 million and weighted average occupancy of 42.6%, generated adjusted NOI of $0.8 million compared to their expected stabilized occupancy of 96% and stabilized estimated annual adjusted NOI at share of $20.3 million. Our net debt to adjusted EBITDA metric will be higher while these properties lease-up. Turning to Slide 12. We have $68.7 million of mortgage maturities remaining in 2020, of which $26.3 million are CMHC-insured and also includes $40.7 million related to mortgages on 2 properties that we acquired from Batimo Inc. in the first half of 2020. We do expect to replace these with CMHC debt later this year. New property-specific financings in Q2 2020 amounted to $68.5 million, including a CMHC-insured mortgage of $17.2 million with a 2.04% interest rate and a 10-year term to maturity; a conventional mortgage of $45.8 million with a 3.4% interest rate and a 1.9-year term to maturity; and construction financing for 2 properties under development of $5.5 million with a weighted average interest rate of 1.71% and weighted average term to maturity of 2.5 years. On July 31, 2020, we refinanced 2 conventional mortgages with new CMHC-insured mortgages for net proceeds of $12 million and financed one 10-year CMHC-insured mortgage of $17.9 million on a property which was previously unencumbered. The weighted average interest rate of these 3 new mortgages is 1.85%. We have $243.3 million of mortgage maturities in 2021, of which $37.5 million are CMHC-insured. We have strong lending relationships and expect to refinance our mortgage maturities as they come due. And discussions in respect of our -- of 2021 maturities are well underway. Projects under construction are budgeted to require an additional $68.9 million to complete. Chartwell at Teasdale II has achieved stabilized occupancy, as defined in our agreements with Batimo. We expect to complete the acquisition of an 85% ownership interest in this project for a purchase price of approximately $54.4 million in Q4 2020 and anticipate assuming the related construction financing of $37.3 million. In normal circumstances, we regularly reinvest capital in our owned property portfolio with the goal of growing our property NOI and protecting and maintaining our properties. Due to strict restrictions allowing only essential visitors in our residences beginning in late March 2020, only emergency capital works were undertaken. With the easing of restrictions on visitors in all provinces, we have now begun to allow contractors into our buildings with strict requirements on infection control practices. As Vlad mentioned, at August 6, 2020, our liquidity is strong amounting to $408.8 million, which included $82.8 million of cash and cash equivalents and $326 million of available borrowing capacity on our credit facilities. In addition, Chartwell share of cash and cash equivalents held in its equity accounted for JVs was $14.4 million. And our unencumbered asset pool is $927.9 million at August 6, 2020. We expect to be able to meet all of our obligations as they come due, primarily utilizing cash flow generated from our operations, property-specific mortgages and our secured and unsecured credit facilities as needed. The COVID-19 pandemic has introduced significant uncertainties, and we continue to monitor the situation closely. I will now turn the call back to Vlad to wrap up.

Thank you, Sheri. I will -- we will now be pleased to answer any questions anybody might have. I will turn it over to Justina to open the line, please.

[Operator Instructions] And the first question is from Brendon Abrams from Canaccord Genuity.

It looks like there was about $6.4 million in pandemic-related expenses incurred during the quarter. Just wondering, going forward in terms of modeling purposes, what would you expect kind of the increased expenses to be for the next few quarters?

Thanks, Brendon. We would look at our long-term care portfolio, which you would see same-property NOI decreased compared to Q2 2019 of about $1.9 million, and we're optimistic that the governments will fund our additional expenses in our long-term care operations. So we're hopeful that, that's a timing adjustment. We would have provided direction in our monthly business updates but the majority of our expenses have been funded up until the end of May and in June, you would see those numbers coming through in our quarterly results. So about $4.5 million would be the monthly run rate of expenditures that we expect. As I said, we will continue to be prepared for a second wave, but we should be able to rationalize staffing in light of single site restrictions. We have more experience now, we should be able to gradually bring those down.

Okay. No, that's very helpful. And maybe just on the financing front and with some uncertainty in the credit markets. As it relates to CMHC financing, I think it's about 70% of your current mortgages outstanding today, would you expect CMHC-insured mortgages to be -- to increase as a percentage of your total mortgages or even debt outstanding? And then secondly, on that, how have CMHC values compared recently to maybe the old values or what you were using previously?

So in terms of CMHC will continue to be our very important source of financing, and we'll continue to access that program as much as we possibly can for the stabilized properties. In terms of the percentage of mortgages that will constitute across our overall portfolio, over time, it will probably grow but in the short term, if not, we have quite a few non-CMHC-insured mortgages that are still going to be outstanding for a number of years, and those will be converted at the time when they mature. So historically, we've been around 70% of total mortgages being CMHC-insured, we probably will remain around that overall balance going forward. And so in terms of the valuations, that really hasn't changed significantly. We're still getting -- even in the past, we were never getting full value from -- in terms of the leverage that we're getting from CMHC, and that continues to be the case pretty consistently now.

Okay. That's helpful. And then just last question for me before I turn it over. Occupancy in the retirement segment has declined. But as you noted, the pace of the decline has slowed as well. Just curious what you're seeing in the last few months -- sorry, the last few weeks, in terms of resident interest, phone calls, leads or otherwise for prospective residents looking to move into one of your homes. I don't know if you could -- where it would compare to maybe the same period last month in terms of a percentage basis decrease?

Yes. It's such -- it really is such early days because we've opened up to tours just in the last short while. So we're pretty pleased that we have all these new processes in place to have virtual tours as well and much more availability online to look at our homes. No. So it's just -- I would tell you, it's almost too early to tell, but I would say that the -- [ RoCs ] our sales folks are sort of well positioned as we've opened back up. So we're going to watch that in the coming weeks.

Next question is from Himanshu Gupta from Scotiabank.

Just a follow-up on the unfunded pandemic-related expenses. I think you mentioned $1.9 million related to long-term care, and you're optimistic that government will fund. Just wondering, is that a guaranteed amount? Or is it still at the discretion of the government? And for the remaining $4.5 million on retirement homes, what is the breakdown? I mean is it more PP&E and onetime expenses? Or is it going to be more permanent in nature?

Sure. In terms of -- is it a guaranteed amount? No. And we are continuing to advocate with -- through the Ontario Long-Term Care Association. The government funding announced so far for long-term care is a pot of $88 million that relates to pandemic expenses, of which they've issued funding announcements for $78 million. So there's $10 million remaining in that. They've also announced $130 million that was originally allocated for new capacity and surge capacity from hospitals. So we continue to work with them to -- they are continuing to understand what the expenses are that are incurred by long-term care home operators. And we are optimistic that, that will be funded on the go forward. In our retirement residences, the vast majority of the expenses relates to staffing. As we mentioned, we are providing active screening in every resident. There is staff time that goes with that. We wanted to ensure that we maintained physical distancing in our dining rooms. So we have significantly extended dining hours, and that increases the staff service costs. And we are also putting additional hours into housekeeping and cleaning. Single sites and offering full-time hours, in many cases, to our part-time employees also has costs associated with it, and we can optimize our schedules to a reasonable approach to maintain staff levels in advance of a potential second wave. We do think that second wave, based on what we know now, is we've got the experience to know how to handle things and don't feel that we are as anxious about what those staff levels are on the go forward. It's more of a known commodity. And in the early days, many staff were frightened and we wanted to make sure we were covered.

That's very helpful. And on the staffing topic, are you -- I mean, what kind of staffing shortages are you facing now versus a few months back? And as other businesses open up, do you see any staff turnover now? I mean staff could be going to better paying jobs or outside of health care, which might be perceived to be less risky there?

So I think we've done very well through this. I'm not suggesting it hasn't been difficult, particularly in March and April, but our recruitment campaign was very successful. We've hired 1,500 people during this time. I think the other thing that is going to change this quite dramatically, 2 things. School is coming back and so people who might have chosen to be at home during this period, I think, will have more of an opportunity to come back because of the issues with child care. And also the [ surge ] is ending. So I think all of those will play to our favor in terms of allowing us to continue to recruit and also reduce our agency staff.

All right. And then on the move-outs, they're still down, I think, around 20% in July. Why is that? I mean is it because long-term care homes are accepting significance on a restricted basis or hospitals are asking you all to be -- more reserve capacity?

Yes. So the long-term care homes in Ontario, one of the issues that certainly came to light through this was that it's not great to have 3 and 4-bed wards with shared washrooms during an outbreak. So the homes that have those through attrition are reducing to only having 2 in those ward rooms, and that's taking somewhere between 4,000 and 5,000 beds out of play in Ontario. And so the waiting list was long to begin with, and I think that's playing into it for sure.

Got it. And maybe just one final question from me in terms of cap improvements. I mean, obviously, there has not been much transactions out there. It looks like you sold 3 properties for $30 million. What was the CapEx or pricing you achieved there? And in general, do you see evidence that buyers' underwriting assumptions have changed with respect to stabilized occupancy?

Sure. So on the 3 properties that we've entered into an agreement to sell, we would have very low cap rates on in-place income. One of the properties isn't fully leased up, so our cap rate on those -- on that sale would be quite low. And these are noncore assets that we're selling, and we're continuing to look at other noncore assets that we might want to dispose of. But the cap rates that we're seeing are still low.

Next question is from Jonathan Kelcher from TD Securities.

First question, just on your same-property NOI, the breakdown by region. Québec seems to have really outperformed both Ontario and Western Canada. Can you maybe give us a little color as to why?

So we were still able to take admissions during the pandemic. We didn't take many, for sure. But because the sales cycle in Québec is just -- it's longer, right? We've talked about that before, how people in Ontario and West come to us sometimes within the month or around a month later. In Québec, it's a 3-month sales cycle typically. And so during the period of the pandemic, we would have had people who had already sold their house who were still looking to come into our homes. So you just saw more of that in Québec than you would have the rest of the portfolio.

In addition, yes, benefit from some reduced utility costs there, there were some additional savings on that.

Okay. So it wasn't the government funding it better than, say, Ontario or the West?

I mean I think we're looking for additional funding, in particular, from Ontario and Québec for the expenses that we've incurred. All of the governments have funded the majority of the top-up pay to date. It's the additional cost for screening, supplies, disposable, staff time around cleaning, those types of things that are unfunded. So both Québec, Ontario, BC and Alberta were short in each of those provinces. So I wouldn't say Ontario or Québec did any better than the other. We are incurring additional costs in each of those jurisdictions.

Okay. And then switching over to LTC. It's good that there's government funding for occupancy through the end of the year. But have the LTC facility started to fill back up again?

We're taking admissions. As I said, there's that attrition issue in the older homes. We don't have a lot of those, but -- and there are so many less outbreaks than there were. So you are -- we are starting to see that.

Right. So do you think you'll get back to the 97-ish percent by the end of the year, excluding the wards that you can't use anymore?

Yes.

Okay. And now have you guys talked to any hospitals or the government about using excess retirement space for alternate level of care patients?

To some extent. There was a lot of talk about that in the early days of the pandemic, and then that's not actually how things went. So I almost feel like right now, there's more focus on how to make sure that we're keeping people safe in long-term care and in retirement, although the narrative played out very differently in retirement than there is around surge capacity. And we would only be interested in that in very few homes, in really specific circumstances.

Okay. And then just lastly and kind of related to that. Has the LTC refilling, is that would it be fair to assume that, that's mostly coming from hospitals and not yet coming from retirement homes?

Yes. Yes, you're correct. Because if you're a critical admission, you're going to get -- you're higher on the list. And often, people in retirement aren't considered critical because they're actually getting care from us or our competitors. So yes, I think that is what you're going to see. And as a result, that could assist with our occupancy and also assist with us getting some additional care revenue.

Next question is from Chris Couprie from CIBC.

I just wanted to clarify something on the pandemic related expenses. In the MD&A, you kind of called out $1.8 million of additional compensation. So is that something that is expected to be repeated in subsequent quarters?

No. We don't think so, Chris. That was -- certainly, there was top-up pay put in place for frontline staff that was funded the majority by government. We really felt our management teams and our residences just went above and beyond through this pandemic, through the early days of the pandemic, and we just wanted to make sure that we were recognizing their efforts as well.

Okay. Got it. And then kind of dovetailing on Jonathan's questions about same-property experience by geography. I don't know if it is anything more than just a chance, but the same-property occupancy change in Ontario was quite a bit above the other geographies. Any thoughts on that?

Yes, Chris. So Karen sort of talked about Québec where it's a 90-day sales cycle. So through the early part of the pandemic, many people, as she said would have sold their homes so that assisted in supporting occupancy levels in Québec. In our Western platform, there's also more pundits that sit within our Western platform. So occupancies would have remained a bit higher again in readmission there. Ontario, areas were harder hit by the pandemic slightly shorter length of stay there where turnover is a bit higher, is really driving more of that.

Okay. Got it. And then maybe just -- I know you guys have indicated that it's still kind of early days on trying to assess the pent-up demand recovery. But if you do look at your kind of initial contacts or your leading indicators, where they are versus where they would be a year ago, is there any color you could provide us on that front?

Certainly. So it's -- we have just reopened our marketing campaigns as well. As we reopened the residences to personalized tours, we turned on our digital campaigns, and you would have seen that we just launched the new campaign on August 3. For July, we were at 70% of our leases that we would have had in the previous year. So I think that's good trending in terms of what we were seeing compared to June and compared to May and April, certainly. We are now, as of about July 7, as I said, fully operational on all of our digital campaign. And we do see increases that are a bit higher than that 70% in call volumes. One of the things that will change, we used to have fairly significant volumes from walk-in activity, about 15%. And now those walk-ins are phoning us. So our -- as I said, our call volumes are up. It's not fully covering off the walk-ins that it also needs to replace, but we are getting close to prior year levels. And then you have to add in those walk-ins of 15%.

Right. Okay, understood. And then just last question for me, maybe 1.5 month or so ago, there were reports that there could potentially be some type of legislation or something that gives good faith immunity to people kind of prevent class action lawsuits from happening during COVID-19. Just wondering if you've heard any update on that. And whether or not long-term care would -- could potentially fit into that immunity?

Sure. I can answer that. And to be clear, in BC has implemented this legislation, and it's not really immunity as much as it is protection from litigation where an operator has complied with public health requirements and where there's no gross negligence. So we've seen that in BC. We are hopeful that, that kind of legislation will come out in our remaining 3 jurisdictions. We haven't seen any real indication that that's the case. But I know that the provincial associations or the industry associations continue to push government to get that kind of legislation in place.

Next question is from Pammi Bir from RBC Capital Markets.

Just in terms of the new construction funding subsidy for long-term care, can you maybe just comment on what impact this might have on your redevelopment plans? And if there's any color you can provide on the potential returns there?

Sure. So it's going to have a positive impact on our redevelopment plans. It's important to note, I think, that out of our 30,000 beds, we only have 577 B&C LTC beds that require redevelopment. But for those redevelopment plans, we are evaluating the impact of the new funding. There's a 17% upfront development grant on certain costs and an increase to the baseline construction funding subsidy is going to help with our redevelopment, but we're still evaluating the full impact of that. It's also important to note that we do have plans for all of our redevelopments, and some of them are to redevelop on existing sites so that also helps.

And would some of those redevelopments also involve additions of Retirement Home suites on those sites?

It could, but it could also involve additions of actual new beds to the sites, and that's what we're trying to -- that's how we can make this work by adding some beds on some sites.

Right. Okay. And then just lastly, the government also announced, I guess, an ability to perhaps accelerate the development of some of these beds. Is there perhaps a possibility for Chartwell to participate in that as well?

There is, and we're looking at that. And we have one long-term care redevelopment that is well into the works. And the balance, yes, is something we're looking at.

Next question is from Tal Woolley from National Bank Financial.

I just wanted to ask a few operations questions. So you've been in this sort of state for a few months now. I'm sure you've gotten a lot of staff and resident feedback about how things are running. If you take that into account, what are some of the regulations or temporary rules or things that have been introduced during this period that you'd like to see changed or maybe new rules put in place for the retirement business and the long-term care business that you think would be effective in helping to manage the situation?

So one of the things, and we're working closely with our associations on us is because the story of the outbreaks played out so differently in long-term care versus retirement, we're looking for them to understand that we don't have to have all of the exact same directives in both sectors. And I think there's a lot of evidence to suggest that, that could be -- we could still be very safe, but we could also help with the overall system issues if our retirement homes could be more accessible during the next wave. And we've learned so much in terms of masking and knowing that people can be asymptomatic, so we have to focus on testing. And so there's -- I think there's so many lessons learned that could allow us not to shut down the whole system like we did in the first round of this.

That part is very important, Tal, because while we were keeping people safe from COVID, we actually -- this isolation and restrictions have impact on their overall health. And because it's lasting for so long, it creates another challenges for people not being able to see their loved ones not being able to have activities or normal meal programs in the homes. And so that part is extremely critical where we need to have a balance between the 2.

And I would say even in long-term care, there will be a lot of push to continue to allow essential visitors to come in, and that would be family members who -- there are some family members that come in every day and do things to help their loved one, not just visiting but to actually help them. And you're seeing just such a push for that, and that helps us overall as well. So that would be another one, I think, that you're going to see.

Okay. And then you're back into restarting your marketing programs. And so you're talking to prospective residents, what's been sort of top-of-mind when they're reaching out to you now. Is there more of a concern about COVID? Or is that sort of like the top mind share thing? Or has it not really changed that much, where the concerns are kind of the same thing. It's like I want to be close to my family, I want to see the amenities like -- do you just notice anything early, on a change in the tone -- from perspective rather?

Yes. I think all of the regular things are still part of the mix location and referrals and whatnot because we have some fabulous stories of what happened through this that are some of the best testimonials I've ever seen for coming to retirement living. But for sure, and I think it's just like society. It depends. Some people are very concerned about safety. And others were kind of, okay, we've seen how this played out, and they just want to make sure that we have processes in place. And so that's definitely talked about through the sales process. And again, I just think we're in a really good position because I think we've done -- we've learned a lot and we've done this very well.

The other thing that people are concerned is with 14-day isolation that they have to go through when they move in. And so we created the program for them that is very specific that provides for activities during these a 14-day of isolation that would keep them entertained and engaged and [ fat ] in their suite. And hopefully, it will become differentiator for us during this period of time while this restriction is still in place.

And we're also asking government not to have 14 days of isolation for retirement people, but instead to have what we call precautionary measures so that they still get to go -- they have to have a test before they still do to the dining room, and they wear masks more in the hallways, but they don't get sort of -- they're not in their suites the whole time. And I actually think governments will be open to those kinds of discussions.

Okay. And just my last question on the staffing. You've obviously wanted to step up your recruitment. Has the pool of employees like where they've come from changed that much as a result of the change in the economy? Or are you still kind of drawing from the same sources? Like I think early on, you were talking about how restaurant and hospitality workers like this could be a natural fit. Like have you seen that in your -- has that played out as you expected?

I think Karen spoke about surge coming to an end in school is going back. I think that's when we'll really start to see that shift. Certainly, the pool has been very active in terms of, as Karen mentioned, we were successful in hiring 1,500 people. We think that will start to change through the fall.

Okay. And union negotiations. You typically have a few of those every year. Has the tenor of those conversations changed as a result of this whole experience?

No. Obviously, you may have noticed that during this period of time, certain unions chose more public means to drive their agenda forward. That's unfortunate, of course. But generally, the negotiations are ongoing. Just as we always say, we always have a number of these going on at any given time, given the number of collected bargaining agreements and the number of people that we employ. And these conversations are going. In fact, we had quite a few settlements during this pandemic of some contracts, and this will continue in normal course.

[Operator Instructions] The next question is from Troy MacLean from BMO Capital Markets.

It might be a little too early, but are there people coming into the retirement now, mostly people who need some level of care like assisted living who could no longer stay at home? Or are you seeing interest from potential independent living residents as well?

It's always been the case, Troy, the people that come to us either need some kind of assistance with activities of daily living now or anticipate having these needs shortly. That has not changed.

And then just my final question is, given it's a very competitive environment, are you seeing competitors lower rents to fight for occupancy or offer discounts? Is there anything happening there that could impact the rents that you can charge?

Yes. There's always a little bit of that going on. I would tell you, we're going to focus and continue to sell the value of the Chartwell experience, and I'm very confident in that. So we're not, at this point, considering broad discounting. We'll have to watch, obviously, and see what happens with our leasing activity. But if we felt we had to do anything, I would tell you it would be very, very targeted to maybe a specific area.

So would there be more discounting by competitors going on right now than it was 6 months ago? Or is it -- any commentary there?

There's always been discounting in certain areas depending on how desperate people are to lease-up their new developments or properties that suffered at the time. So it's hard to tell whether there's more or less, seems the same.

Yes.

[Operator Instructions] There are no further questions at this time. I would like to turn the meeting back to Mr. Volodarski.

Thank you, Justina, and thank you, everybody, for joining us. If you have any other questions, please feel free to reach to us directly at any time. All the best to you all. Bye.

Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.