Chartwell Retirement Residences (CSHUN) Earnings Call Transcript & Summary

Good morning ladies and gentlemen and welcome to the Chartwell Retirement Residences Q4 2021 Financial Results Conference Call. I would now like to turn the meeting over to CEO, Vlad Volodarski. Please go ahead.

Thank you, Louise. 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. Before we begin I'd direct you to the cautionary statements on Slide 2, as during this call, we may make statements containing forward-looking information and non-GAAP and other financial measures. Our MD&A and other securities filings contain information about the assumptions, risks, uncertainties inherent in such forward-looking statements and details of such non-GAAP and other financial measures. More specifically, I direct you to the disclosures in our 2021 MD&A under the heading COVID-19 Business Impact and Related Risks for a discussion of risks and uncertainties related to the pandemic. These documents can be found on our website at sedar.com. Despite a significant negative impact that prolonged COVID-19 pandemic has had on our business, despite the tremendous challenges our teams had to overcome in the last 2 years, and more recently combating the latest wave, we have made important progress in putting more building blocks in our foundation to support recovery and future growth. From our staffing optimization project, recruitment initiatives, employee referral program, new employee training and development programs to our new Chartwell Care Assist and Virtual Physicians programs, to our new resident referral program Chartwell club, and to our expanded business-to-business development programs, innovative marketing and sales initiatives. All this and more have been accomplished in the last 2 years. These initiatives will continue to differentiate us from the competition and will undoubtedly serve us well for many years to come. While timing of our recovery has been affected by this Omicron wave, our leading indicators -- website traffic, initial contact, personalized tours and move-ins -- are trending positively and are pointing to the beginning of occupancy recovery in the spring. Turning to Slide 4. We remain committed to our strategy centered on highly engaged employees, delivering personalized experiences to our residents, driving high resident satisfaction rates. Very satisfied residents are more likely to refer their friends to our residences, which will support growth in occupancy and ultimately cash flows. We focus on our upscale and mid-market service offering. We invest in residences in urban and suburban settings, which we operate, leveraging our national management platform. While our employee engagement, resident satisfaction and occupancy declined from the pre-pandemic levels, we believe we are on the path to recovery and growth to achieve target of 55% of highly engaged employees, 67% very satisfied residents and 95% same-property occupancy in our retirement portfolio. Every percentage point in occupancy growth is estimated to deliver $9 million or $0.04 per unit of incremental revenue. To achieve our 2025 target, we will have to grow occupancy by nearly 18 percentage points from the 2021 average of 77.1%. No doubt this is a big challenge. We believe, with our dedicated teams across the country and the positive market dynamics and the foundation that we have strengthened in the past 2 years, we will achieve these ambitious targets. The potential growth embedded in our portfolio is significant, and we're committed to realize it. As shown on Slide 5, simply getting back to the pre-pandemic occupancy of 88.6% in our same-property retirement portfolio is estimated to generate approximately $70 million of incremental NOI with additional $63 million estimated to be generated from achieving our targeted 95% occupancy in our retirement portfolio. While we expect that we will be able to complement this potential growth with new investments in acquisitions and development opportunities, our primary focus has been and will continue to be operating our existing portfolio to its full potential. On that note, I will turn the call over to Karen to provide for operational update. Karen?

Thanks, Vlad. Turning to Slide 6. Despite all of the challenges with the pandemic, 2021 showed signs of significant recovery with leading sales indicators higher year-over-year, the last 4 months with higher move-ins and move-outs, and December occupancy gains higher than even in 2019. And although the Omicron wave began to impact our homes and residences just before the holiday season, resulting in enhanced pandemic restrictions and increasing number of outbreaks and challenging staffing shortages, I'm pleased to report that we have clearly turned the corner with respect to this wave of the pandemic. The number of outbreaks has reduced substantially in the last several weeks, with today only one long-term care home and 20 retirement residences currently an outbreak. Due to the high resident vaccination rates and our mandatory vaccination policy with staff, this wave was and continues to be much less severe with most people either asymptomatic or having only mild symptoms. As always, though, our thoughts are with all of our staff and residents who have been affected. We are grateful that we were also prioritized with respect to booster shots. And as a result, over 90% of our residents have received their third dose with fourth dose shots now underway in Ontario. Pandemic-related restrictions in our homes and residences across the country have also recently been significantly relaxed and prospects are now returning for in-person tours, and we're welcoming general visitors and reintroducing group activities and social gatherings. Importantly, our staff are returning to work, and our reliance on agency staffing has reduced significantly. Even with the impact of this most recent wave, our occupancy dip is within the normal range of previous winter seasons, and our leading indicators have improved, including significant increases in initial contacts, personalized tours, leases and move-ins in January and February 2022 compared to the same months in 2021. Turning to Slide 7. Our marketing strategies in Q4 featured new content showcasing our residents and staff at Chartwell Cite-Jardin in Gatineau, which highlighted the theme of support and connection. In the spring, we will be shifting towards an emphasis on the important connections and sense of community in our retirement residences. This will include a 4-day open house in early April. As part of our recovery efforts, we have introduced new occupancy-focused incentive compensation programs for our sales teams and general managers as well as the profit-sharing program for all our managers based on occupancy, resident satisfaction and employee engagement. We also recently received the results of our annual brand awareness survey conducted by Ipsos Research, and I'm pleased to report that we continue to dominate in terms of brand awareness in English Canada of scoring second in Quebec, where we continue to increase our unaided awareness with target audience -- with our target audience. And although the effects of the pandemic still linger, there were improvements in the perception that retirement residences are safe, it's an important step towards restoring confidence in our congregate living sector. Specific questions that Chartwell is a brand you would be willing to recommend and as a company that cares about its residents and staff, both showed improvement year-over-year. Finally, turning to Slide 8. The operations team continues to focus on The Chartwell Experience, including developing new content and preparing to return to in-person training sessions for frontline staff and managers. Not only do we believe that this training will assist us to meet our 2025 resident satisfaction goal, but we know that very satisfied residents are much more likely to refer their friends and relatives to a Chartwell home. Also as part of our recruitment efforts, we are piloting an employee referral program as well as working on strategies to support our homes with their local recruitment efforts. We are also continuing our staffing optimization project to create more full-time positions in our residences and better align staffing levels to occupancy, care and service levels. Overall, our expenses continue to decrease as the pandemic restrictions ease and case counts have subsided. This includes a reduction in the cost for PPE and additional pandemic-related staffing as well as efforts to combat inflationary pressures. For example, we recently moved to direct delivery dairy distribution from milk processors, which is resulting in not only savings but also reduced packaging. And finally, we were very pleased to see the most recent announcement from the Ontario provincial government, which recognized the pandemic costs in our long-term care homes, both from 2021 as well as related to the most recent Omicron wave. I'd now like to turn it over to Sheri to discuss our financial results.

Thank you, Karen. As shown on Slide 9, net income in 2021 was $10.1 million compared to $14.9 million in 2020. For 2021, FFO was $132.3 million or $0.59 per unit compared to $165.9 million or $0.76 per unit in 2020. Our same-property adjusted NOI decreased by $33.3 million or 12.3% in 2021, primarily due to lower occupancy in our same-property retirement operations, which reduced revenue by $50.6 million. This was partially offset by higher revenue from both inflationary and market-based rental and service rate increases and from the provision of additional care and services as resident retention has increased, combined with lower net pandemic expenses. Same-property occupancy was 78.2% in 2021 compared to 85% in 2020. In 2021, same-property occupancy declined 6.8 percentage points. Positive trends through 2021, including increasing monthly move-in activity through the year, higher move-ins in aggregate for 2021 compared to 2020, lower move-out activity in aggregate for 2021 compared to 2020 did not offset declining occupancy from the onset of the pandemic until July 2021, when occupancy stabilized and then began increasing gradually through to December 2021. As shown on Slide 10, in Q4 2021, net income was $18.7 million compared to net income of $12.2 million in Q4 2020. For Q4 of 2021, FFO was $28.4 million or $0.12 per unit compared to $43.5 million or $0.20 per unit in Q4 2020. The pandemic and associated government restrictions have continued to be the primary driver for the decline in financial performance. To summarize, the decrease in FFO per unit compared to Q4 2020 is primarily due to lower same-property adjusted NOI, which decreased by $12.2 million; higher amortization of internally developed software intangible assets of $2.5 million; higher G&A expenses as a result of compliance-related costs and lower supports from government programs, which together amounted to $1.8 million; lower adjusted NOI as a result of the disposition of non-core assets. And these factors were offset with improvements from both higher revenue and inflationary and market-based rental and service rate increases as well as from the provision of additional care and services with resident retention increased, higher adjusted NOI from acquisitions and development properties that are currently in lease-up, lower finance costs and higher management fee revenue. Slide 11 summarizes our same-property operating platform results. Our same-property adjusted NOI decreased by $12.2 million or 17.9% in Q4 2021 compared to Q4 of 2020, primarily due to lower occupancy in our same-property retirement operations of $7.2 million, increased net pandemic expenses in our same-property retirement operations of $5.7 million. In Q4 2020, we had been in a recovery position and our net recoveries were $4 million. In Q4 2021, we earned a net pandemic expense position of $1.7 million. In addition, we incurred higher agency staffing costs of $3.6 million in our same-property retirement residences as a result of staff shortages, net of vacancies. Same-property retirement occupancy was 76.8% for Q4 2021 compared to 81.3% for Q4 2020 or a decline of 4.5 percentage points. Q4 2021 showed the first full quarter sequential increase in occupancy since the onset of the pandemic. Permanent move-ins increased 54% in Q4 2021 compared to Q4 2020; and compared to Q3 2021, move-ins increased 14%. Move-outs were also lower in Q4 2021 than in Q4 2020 and Q3 2021. On a sequential-quarter basis, our Western Canada platform achieved strong growth with weighted average same-property occupancy increasing 2.1 percentage points from Q3 of 2021. Our Ontario platform occupancies began to stabilize during the quarter with a sequential increase of 0.9 percentage points from Q3 of 2021 and the pace of decline in our Quebec platform slowed. With Western Canada's strong growth in occupancy in the latter half of 2021, we achieved NOI growth in this platform of 3.8% compared to Q4 of 2020. Both Ontario and Quebec experienced declines as a result of the factors I described, lower occupancy, net pandemic expenses compared to recoveries in Q4 of 2020 and higher agency costs to fill vacancies due to staff shortages. These were partially offset by higher revenue from inflationary and market-based rental and service rate increases and from the provision of additional care and services to our residences. Our trend on retirement operations, net pandemic expenses, had been improving significantly in the latter half of 2021, even with reduced government supports. The spread of Omicron rapidly increased from December 20, 2021, and continued through the holiday period. More of our staff had to isolate due to exposure to the virus. To continue to provide services to our residents, we had to engage more agency staff, which resulted in the increase in costs. Additional expenses of $2 million were incurred in the latter half of December. Despite this, we finished Q4 with $1.7 million in net expense. We now, 2 years into the pandemic, have a greater degree of confidence in our ability to return to normalized staff levels quickly and expect to do so as government directives are lifted and as homes come out of outbreak. That said, we are 2 months into Q1 of 2022, and we will see elevated expenses as a result of the Omicron wave. We came into the Omicron wave with no residences in outbreak on December 15, 2021. At the peak of Omicron, we had just over 100 homes with some level of Omicron restriction. We are now down to as of today, 21 residences, as Karen described, with generally limited cases. There are 2 main temporary factors that drive our cost up, the staff vacancies and government directives. As government restrictions on our operations in general and specific to our residences in outbreak are easing, we expect expenses associated with heightened operational requirements to decline quickly as it has in previous waves. We expect that Q1 2022 net pandemic expenses in our retirement operations could be in the range of $6 million to $9 million. The level of costs will depend on how quickly the Omicron wave recedes, the necessity to replace staff vacancies with agencies and overtime, the extent of continued government restrictions and further government support for costs associated with the restrictions that have been imposed. We have also experienced significantly higher agency staffing costs in Q4 2021, which amounted to $3.6 million for replacement of existing staff. Historically, our reliance on agencies has been very limited as we would prefer to have our Chartwell staff, who are selected to be part of our culture and trained in our Chartwell programs. Agency costs have started to elevate in several locations that were experiencing tight labor markets prior to the pandemic. The pandemic has exacerbated this situation. As a result, agency costs continued to increase in 2021, which amounted to an increase of $7 million or 2.7% of total compensation costs for the full year of 2021 compared to 2020. As Karen noted, our staffing optimization project will assist in ensuring we are focused on optimizing full-time jobs and matching staffing levels through occupancy, care and service levels and significantly reducing our reliance on agency staff. Our same-property long-term care home occupancy, based on total capacity of licensed beds, was 90.5% compared to 87.2% in Q4 of 2020, an increase of 3.3 percentage points due to higher admissions. For Q4 2021, weighted average occupancy -- excluding the beds that are not available due to reduced capacity in 3- and 4-bed ward rooms, and rooms designated for isolation and cohorting -- was 97.1%. Effective February 1, 2022, the Ontario government confirmed funding for isolation beds and the third and fourth bed ward rooms that are currently unavailable for occupancy. In addition, the Ontario government has reinstated occupancy targets, including the outbreak occupancy funding protections that existed prior to the pandemic. For Q4 2021, same-property adjusted long-term care NOI increased $0.1 million or 1.9%, primarily due to lower pandemic-related expenses compared to Q4 2020, partially offset by higher staffing costs. On February 4, 2022, the Ontario government confirmed and clarified eligibility for incremental COVID prevention and containment funding. We expect based on these newly released guidelines that we will be reimbursed for the vast majority of the direct resident care expenses that we have incurred today, or approximately $5.7 million in Q1 of 2022, as well as funding for the elevation and containment and prevention costs with the Omicron wave. Turning to Slide 12. You will see our monthly same-property retirement occupancies. Same-property occupancy decreased to 76.6% or 0.4 percentage points in January 2022 and is forecasted to decline by 0.5 and 0.4 percentage points for February and March 2022, respectively, based on known leases and notices as at February 10, 2022. These expected occupancy trends are consistent with our historical experience. Sales and leasing activities slowed in late December and early January 2022 as a result of the new Omicron-driven wave. These activities began rebounding in the second half of January. And for the full month of January 2022, all of our leading sales indicators were higher compared to January of 2021. Sales and leasing activities have continued to improve in February 2022 compared to both January 2022 and February 2021. In Q4 2021, our same-property portfolio move-ins exceeded Q4 2020 by 54% as did January of 2022. Our move-outs remain below pre-pandemic levels. We expect occupancy to begin to recover in our same-property portfolio as restrictions are eased and as we move into the spring leasing season. Our acquisition and development portfolio has shown continued lease-up progress, growing weighted average occupied suites by 143 suites since September of 2021. Turning to Slide 13. At December 31, 2021, liquidity amounted to $438.9 million, which included $95.5 million of cash and cash equivalents and $343.4 million of borrowing capacity on our credit facilities. In addition, our share of cash and cash equivalents held in our equity accounted JVs was $5.1 million. At December 31, 2021, we had $223.3 million of mortgage maturities remaining in 2022, of which $75.2 million are currently CMHC-insured. We have strong lending relationships, and scheduled refinancings of our mortgage maturities in 2022 are proceeding in the normal course. Our mortgage maturities remain well-staggered with an average term to maturity of 6.3 years at December 31, 2021. At December 31, 2021, our unencumbered assets had a value of approximately $1 billion, and our ratio of unencumbered assets to unsecured indebtedness increased to 2x at December 31, 2021. I will now turn the call back to Vlad to wrap up.

Thank you, Sheri. As pandemic-related restrictions ease, we expect that positive trends in our leading indicators will begin translating into occupancy growth. Assuming no new pandemic waves, we believe more robust occupancy growth driven by the pent-up demand could be expected in the second half of 2022. Given low in-place occupancy, larger-than-usual occurrence of market incentives being offered by our competitors and some elevated construction activity in some of our top markets of Ottawa, Quebec City, Durham and York regions of Ontario, we expect rents and services rate growth in 2022 to be between 2% and 3%, slightly below our historical growth rates. The rapid escalation of construction costs over the last several years means top-of-the-market rates are required for most new developments to be economically viable. It is likely that the gap between the rates in existing residences and new developments will further widen. As occupancy recover in future years, we believe there will be opportunity for higher growth in market rates. 1 percentage point growth in our rent and services rate is estimated to generate approximately $6.8 million of additional revenue. There continues to be challenges with availability of labor in our sector. We have been investing significant time and resources in our employee engagement, recruitment and retention initiatives. We expect labor cost growth will be higher than our historical experience and would range between 3% and 4%. High unionization rates and collective agreements spanning 2 to 4-year terms smooth out the impact of labor cost growth over several years. 1 percentage point increase in total compensation cost is estimated to increase expenses by approximately $2.6 million. We primarily finance our portfolio with long-term fixed-rate debt and strive to stagger our debt maturities to avoid large volumes of renewals in any given year. In 2022, we have $223.3 million of debt maturing at a weighted average rate of 3.72%. Current 10-year CMHC and 5-year conventional mortgage rates are approximately 2.9% and 4%, respectively. One percentage point change in interest rates would result in a change in our interest cost of $1.4 million in 2022 for maturing and variable debt. 2022 is going to be a transition year, transition from the pandemic to recovery and growth. As we discussed, we have put in place a significant number of strategies to bring this growth to reality as fast as possible. The ingenuity, drive, and commitment of our people have proven to be incredible, and it is them who give me confidence in our ability to realize this growth. To all nearly 16,000 Chartwell employees across the country, thank you for everything. We will now be pleased to answer your questions. Louise?

[Operator Instructions] The first question is from Jonathan Kelcher.

First question, just on -- I guess, on the occupancy front. Are you seeing a sort of general softness or are there a number of homes or geographies that are causing occupancy to sort of -- and I'm thinking Ontario in the mid-70s?

Well, certainly there are challenges in Quebec. They stabilized, I would say, in the fall, but they were lagging the other provinces. And Quebec City would certainly have continued to be a challenge. Some of that comes from the more independent nature of our product as well as the restrictions in the initial waves. But they -- as I said, they were stabilizing, and we had more significant occupancy gains in December in all of our provinces. So the Omicron wave has impacted the occupancy recovery. But that said, I would say that our leading sales indicators are clearly improving. And based on this and the reduced restrictions that we have and all of our recovery strategies, I expect that we will gain occupancy in the spring with more substantial recovery in the second half of the year.

And maybe to add to that, Jonathan, you asked specifically about Ontario. I think it'd be fair to say that's kind of going to east, we had more challenges. Ottawa market continues to be overbuilt and occupancies would be a bit lower there, and so is Durham region.

Okay. And you said the sales indicators are better than last year, how close would they be to pre-pandemic levels?

By the time we're in -- thanks, Jonathan, for the question. By the time we're in February of 2022, they're pretty consistent with February of 2020.

That is good news. And then just lastly, Slide 5, which is a helpful slide. You're using pre-pandemic margins for that, and you've talked a couple of times about the pressure on staffing costs. How realistic do you think it is that you do get back to pre-pandemic operating margins?

I think getting back to pre-pandemic operating margins is going to happen towards early 2023 and coming from increased occupancy, combined with the staffing optimization project, bringing down those agency costs that have really elevated in 2020 and in 2021. So I do feel that that is realistic in terms of achieving the pre-pandemic margins.

Next question is from Himanshu Gupta.

So just a follow-up on Ontario occupancy. Just wondering how is your Ontario occupancy trending compared to your competitors or broader market? And I mean, do you think you are underperforming? And if yes, why?

Interesting question. I guess it seems that we are underperforming in some cases. The composition of portfolios are very different. The size of the portfolios are very different. The locations and concentrations are very different. The only sort of answer I can give you, for example, I mentioned the Ottawa market where we have been underperforming our own portfolio metrics. That is because of the enhanced high competition in that market. It's been overbuilt for a number of years, and we have a large concentration of studio suites in that market, which are generally less desirable. Having said all of that, the initiatives that Karen's team has been putting in place in increasing, as an example, our Chartwell Care Assist program that's been implemented in a number of different markets, staffing optimization projects and our sales and marketing initiatives, I think, will drive both the occupancy and also rate -- rental rates in that particular market and across our portfolio. The other part is, as we've spoken before, we are not as readily introducing discounting in our properties. We want to ensure that our retirement living consultants build the relationships with their prospective tenants and then tailor these incentives if they require to give some to what the residents really need. And that may result in some slower lease-up compared to some other people who would broadly discount. And we've always prepared to take that slower lease-up over diminishing the value of brand and the margins over time.

So it looks like the strategy going forward will be very similar to what you have been doing, less concessions, but it will be more tailor-made. Okay. And then on Quebec, I mean, again, you have given some color already. Just wondering what do you think of the more independent model there, what you have? And those more independent seniors in Quebec, which are not incentivized who come to retirement homes right now, but where we are going right now? Like I'm just wondering like, what could bring them back in the retirement homes?

Yes. I would think it's a matter of time. And also even in Quebec, we've seen pretty strong lease-up of newer homes, the homes that have been recently developed and homes in our own portfolio that have been recently acquired, that is a very attractive real estate and amenities. And those homes have actually continued to lease up even through the pandemic and during the Omicron wave. The older properties that may be less attractive from the physical standpoint will take a little longer to recover. What's going to bring people back, I think Karen mentioned our Ipsos study that the sentiment has begun to change. And my expectation is that with time, when there is less restrictions, and we can fully run our social activities and great meal programs that we have for our residents. Those are the things that will bring people back in larger numbers.

And maybe the final question is on FFO per unit. I mean, obviously, Q4 was -- FFO was impacted by one month of Omicron extension and agency staffing cost. I mean do you think Q1 FFO will look very similar or worse than Q4? I mean, given that you will have more impact from Omicron?

Yes. In terms of Omicron expenses, I mean, certainly, Himanshu, we would expect those to have continued at that level in January and February. The costs have really come down. As we mentioned, there's only 21 homes in outbreak now, and they're very limited generally. So I do see those costs coming down quite significantly in March, but our Q1 will be impacted by the Omicron costs. We also typically have higher seasonal utilities in the first quarter, but we will also have the recovery of the long-term care expenses. So there will be a number of those issues that play for Q1.

And then looking into Q2, I mean, do you think this Omicron-related $6 million to $9 million expenses will go away or will reduce quite significantly in Q2. But I guess the agency staffing costs will continue to remain for most of the year. I mean, is that fair to say that?

Yes, that's a great way to frame it. I mean coming into the month of December, our costs were pretty neutral. And we had very, very limited residences in outbreak. So certainly, once the properties are out of outbreak, they come to [ external ] operating protocols, and those expenses come down quickly. Agency costs will take us a little bit longer to bring down, and we are very purposefully managing those costs down with new tools in place and new controls in place as we move to the other side of the Omicron lab.

[Operator Instructions] Next question is from Tal Woolley.

I guess flipping back to the NOI bridge that you included in the presentation, what do you sort of see as a critical impediments to meeting that 2025 target apart from, obviously, COVID being a bit of a wildcard. Hopefully, not through 2025. But can you just talk a bit about what would be some of the obstacles that you would expect to face and could possibly get in the way of hitting those types of numbers?

That's a great question, Tal. Thank you for that. We've been talking about the labor challenges, and this will continue to be a challenge for the sector, I believe, for a long period of time until we have more people that are ready to work in these sectors to deliver services to our residents. So we believe with the initiatives that we put in place, both on the employee engagement, recruitment side, staffing optimization project that Karen and Sheri spoke about, that we will be able to reduce the reliance on the agency staff. But if you're asking to the risks to us achieving those rates, that would be probably one of the bigger ones. There is a very positive environmental backdrop to the sector, as we've talked about for a while, the growth in the seniors' population. I do believe that there is pent-up demand in the system because people were not able to move in retirement accommodation for a long period of time. And then supply, although we do have some markets where we have elevated supply, overall, it's now still in terms of the construction start at the overall lower historical levels. So those things should help us. Supply is always a wildcard. People can start development relatively quickly, and that could affect competitiveness of older properties in some of the markets and certainly could affect our ability to get to these rates. But I think overall, it is realistic to assume that we should be able to get there.

And then you made reference in your earlier comments, I think it was in Ottawa, you were saying maybe some of the types of suites you had available are probably not among the most desired. It's probably been a long time since we talked about product-market fit. If we think about your portfolio kind of on 3 dimensions, whether it's the mix of the type of suites, independent versus assisted living, the age and the size of the suites, like how well positioned do you feel you are? And are there certain markets that we should be keeping an eye on where you think maybe you do have a little bit of a misfit?

I wouldn't call it a misfit. I think it's just a period of time that it's going to take for some of the properties to come back versus some of the other properties that are coming back. I think they're all competitive in the normal market environment, but in the environment with everybody kind of trying to fill up those properties, some of those may be less competitive or will take longer to recover back. We have been very active in managing our portfolio of homes. As you know, we've been selling incrementally the homes that we did not feel that fit our strategy. And that work will continue. You will see us selling properties that are not fit into our long-term vision and also repositioning other properties that we think could be very successful over time, but perhaps a generation or 2 behind some of the newer product that is coming in. So that work continues within Chartwell and you'll see us both repositioning some properties and selling more of the older properties.

Okay. And then since we're sort of talking about competition and where incentives or the use of incentives into the market, can you just run through what are sort of the most traditional incentives you would expect to see in a market like this and how you try to counter them?

So normally, people would be doing something like 1 month free. Now it's up to 2, 3 months plus 3. And what we're doing to counter them, our retirement living consultants do have incentives in their toolkit. The difference -- and generally between us and competition is that we're not broadly advertising the incentives that we have to everybody because then you have to give them to everybody who shows up. We want to understand what matters to the customers that come to us and make sure that we tailor the incentives if those required for those specific customers. Having said that, I think Karen spoke about it on the last call, we are doing experiment where we're trying to advertise discounts in some markets and compare them to other markets where we do not have discounts and understand whether that makes significant differences in terms of the traffic and move-ins. That is ongoing, and we'll report back the results once we finish this experiment. Generally, this is not what we want our brand to stand for. We do not want to be known as a discounted brand. We want to be known as a brand that delivers value to the customers. And I think I said this before, if somebody chooses to live somewhere else for -- because somebody offered one or 2 months free, then perhaps they were not our customer to begin with, and that's okay, too.

And then just lastly, if we think about how -- as the largest player in the market, should investors expect -- like is it reasonable to expect Chartwell to be the -- like the leader in terms of occupancy growth over the next couple of years, simply because, like as the largest player in the market, you're kind of the incumbent, and you're playing maybe a little bit more defense than some of your smaller peers. Is that a reasonable assumption? Or do you think that come to the end of 2022, you will -- the strength of your business will sort of power you through at the end of the day?

Well, our expectation and belief that starting at the back end of 2022, [ barring ] any additional pandemic waves, we should see a more robust recovery and growth in our occupancy driven by all the initiatives that we talked about today and the pent-up demand that we have in the system. And we expect that that growth will be sustained over time by the growth in the seniors population. And so -- and we will do that in a prudent manner with waiting very carefully, occupancy gains versus significant discounting and again, preserving the value of Chartwell brand. This is really -- our strategy is to deliver 95% occupancy by 2025, and that's what we're focused on. But we also want to deliver that NOI that we showed on Slide 5 for you today and not just occupancy. And so we'll be very careful how to balance the speed of recovery and growth of occupancy with maintaining the margin and the value of the brand.

There are no questions registered at this time. So Mr. Volodarski, I will turn the meeting back over to you.

Thank you very much, everybody, for joining us. As always, if you have any further questions, please do not hesitate to give us a call. Goodbye.

Thank you. Your conference is now over. Please disconnect your lines at this time. We thank you for your participation.