Sienna Senior Living Inc.

Ladies and gentlemen, welcome to Ciena Senior Living Inc's Q4 2021 conference call. Today's call is being hosted by Nitin Jain, President and Chief Executive Officer, and Karen Hong, Chief Financial Officer of Senior Living Inc. Please be aware that certain statements or information discussed today are forward-looking and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to the forward-looking information and risk factors sections in the company's public filings, including its most recent MDNA and AIF, for more information. You will also find a more fulsome discussion of the company's results in its MDNA and financial statements for the period, which are posted on CEEDAR and can be found on the company's website, cianaliving.ca. Today's call is being recorded and a replay will be available. Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides, which accompany the host's remarks, on the company website under Events and Presentations. With that, I'll now turn the call to Mr. Jain. Please go ahead, Mr. Jain.

Thank you, Andrew, and good morning, everyone, and thank you for joining us on our fourth quarter call today. Recent months have been marked with some exciting developments and important progress at Ciena. Our strategic priorities have been focused on enhancing team engagement, elevating the quality of life of our residents, and advancing our growth initiatives. This included notable investments in our operating platform, our properties, and the well-being of the residents and our teams. Our solid Q4 results reflect the impact of these investments. They also highlight generally improving fundamentals in the senior living sector and put us in a strong position to accelerate investments in strategic growth and value creation initiatives. Under this backdrop, demand for the services and care we offer continue to build in 2021. This was reflected in our strong queue for operating results. Occupancy in our retirement portfolio reached its highest level in nearly two years, and resident admissions in our long-term care communities continue to accelerate for most of the fourth quarter. Our retirement portfolio benefited from in-person tours and our robust marketing and sales programs. This resulted in strong lead generation and 140% increase in resident movements year over year in the fourth quarter. In December, average same-property occupancy levels reached 85.3% and further increased to 85.9% in January 2022, the eighth consecutive monthly increase. Since May of 2021, average same-property occupancy has improved by a total of 710 basis points. And along compared communities, admissions of new residents accelerated for most of the fourth quarter. Excluding the beds that are unavailable due to the capacity limitations and isolation requirements, safe property occupancy reached 95.3% at the end of 2021. We anticipate continued occupancy gains throughout 2022, given the long wait list of long-term care beds in Ontario and British Columbia. In recent months, the operating environment continued to improve, which has led to the easing of restrictions across our residences. There are currently no significant outbreaks in any of Siena's long-term care communities or retirement residences, with most of her residents and team members having received their booster shots, and the majority of her residents and team members' symptoms have been either mild or moderate. In 2021, we announced the launch of our new retirement platform, Espira, and the development of our new long-term care platform, both to be launched later this year. These platforms are expected to elevate the quality of life and care of her residents and include enhancements to their dining experience, activities, and programming. With respect to SPHERA, our recent efforts have been concentrated on team member training on new resident experience model, marketing initiatives, and the rollout of pilot programs of various concepts at selected tenant residences. In addition, we finalized the core brand and marketing elements for the launch of the offer platform in the second quarter of 2022. Development of our new long-term care platform is well underway and is aimed at providing holistic and integrated care. The platform is expected to be launched in Q3 of 2022. Now moving to our recent joint venture. On February 3, 2022, we announced that we entered into an agreement to acquire a 50% ownership interest in a portfolio of 11 retirement residences on an Ontario and Saskatchewan with our joint venture partner, Sabra Healthcare Reef, for a total of $308 million. This transaction, which we expect to close in late second quarter, will increase the number of our owned and managed retirement suites by 26%. The portfolio is currently owned by Extendicare and represents their entire private pay retirement portfolio in Canada. This is a high-quality portfolio with an average age of approximately six years, and it offers extensive amenities which reflect the changing lifestyle of seniors. With an approximate 6% unlevered yield in the first 12 months, all in closing, the acquisition is expected to be accreted to Ciena's OSFO and AFFO per share. The portfolio is located in growing communities in Ontario and Saskatchewan and will provide us with immediate scale, a platform for future expansion, and entry into a new province. We expect to capitalize on the growing demand for quality seniors living in each community. In Ontario, the assets are strategically located around the GTA and in southern Ontario. The portfolio will increase our footprint in the Niagara to London corridor and expand our position in the highly desirable berry market. Through the acquisition, we will also increase the number of memory care units, which are in high demand, and this will better position us to serve this growing segment. With excess land and four other properties, we also have the option for future development of over 200 suites, and once the transaction is complete, we will act as the manager of the 11 properties, which will deepen an already established relationship with Sabra. Now moving to our focus on development, our growth initiatives also include a significant expansion of our development pipeline. In December of 2021, we got approved for three additional long-term care redevelopment projects, including a first-of-its-kinds campus of care in partnership with Scarborough Health Network. The campus will combine Altamont Care Community and Rockliffe Care Community in Toronto onto a single site. Once the 478-bed campus is completed, it will support the growing need for seniors in the Scarborough area. We are also progressing well on several other projects in Ontario. In North Bay, construction started at the Northern Heights Care Community last November, where we are replacing the current 148 older C-class beds with 160 new beds. In addition, we expect to start construction at our communities in Keswick and Brantford to start during the first half of 2022. In Keswick, we will be replacing the current 60 long-term care beds with a 160-bed facility. And in Brantford, we will replace the current 122 long-term care beds with 160 new long-term care beds and add 147 suite retirement residents to create an integrated campus of care. In total, these six long-term care projects in Ontario comprise over 1,500 beds, or approximately two-thirds of CNS Class C beds. Planning for the balance of CNS Class C portfolio is well underway. In addition, construction of a 150-suite retirement residence in Niagara Falls with Reitman Senior Housing as a joint venture partner is well underway, and we expect to complete this development by the end of 2023. As part of the continuous review of our portfolio, we completed the sale of a 138-suite retirement residence in British Columbia at the end of January, and have agreed to also sell a 236-bed Class C long-term care home in GTA, which is expected to close in the second quarter. The net proceeds will be reinvested in our recent acquisition. Staffing remains a key focus as we grow our company and build our team for the future. Our goal is to become the employer of choice in seniors' living markets where we operate. We achieve this by offering a compelling team member experience and by nurturing a purpose-driven culture. We believe it helps differentiate a company and attract and retain a highly engaged workforce in a very tight and competitive labor market. One of these differentiators is SOAR, the Ciena Ownership and Rewards Program. SOAR will provide company shares to team members who have been with Ciena for one year or longer. This initiative is the first of its kind in Canadian seniors living, and I cannot think of anyone better suited to be invested as owners in a company than our team members. The rollout of this program is well underway and is estimated to represent an initial investment of approximately $3 million. We're also working on a number of initiatives to support the career growth of our frontline team, and to bridge the current labor gap in our sector. One of the government-sponsored programs is Big In, which supports frontline team members, in particular PSWs, who want to further their education in order to become a nurse. We are also participating in programs that offer placement at our residences for internationally educated nurses who require Canadian qualifications, and for college and university students to finish their education. Many of them will be offered permanent placements at C&R once they've completed the required practical work experience. With a team of approximately 12,000, our employees are our most important asset. Creating a positive experience for them and supporting personal and professional growth are key objectives as we grow our company and our team in the months and years ahead. With that, I'll turn it over to Karen for an update on our operations and financial results.

Thank you, Nitin, and good morning, everyone. I will start on slide 13 for financial results. With the operating environment continuing to improve in the fourth quarter, we saw a significant increase in resident move-ins across the retirement platform and admissions of residents accelerated at our long-term care community. We are also encouraged by the moderation of pandemic-related expenses and the continued pandemic funding support we are receiving from our government. These positive developments are reflected in our financial results. In Q4 2021, revenues increased by 3.2% year-over-year to over $174 million. Net operating income increased by 16.7% to $33.4 million this quarter compared to last year. Retirement-seemed property NOI increased by $2 million to $13.9 million compared to last year, primarily due to occupancy improvements, annual rental rate increases in line with market conditions, and decreases in net pandemic expenses. This was partially offset by higher agency staffing costs, utilities costs, and insurance premiums. Rent collection levels remained high at approximately 99% consistent with pre-pandemic levels. CNS long-term care same property NOI increased by 2.4 million to 18.5 million compared to last year, primarily due to annual inflationary funding increases, timing of retroactive pandemic funding, and a decrease in pandemic expenses. This was partially offset by lower preferred accommodation revenues from lower occupancy in private and semi-private rooms, which are not covered by occupancy protection funding, higher utilities cost and insurance premiums, and increased repairs and maintenance expenses. For the full year, same property NOI increased by 11.3% or 14 million to 137.5 million compared to last year. Total net pandemic expenses decreased by 7.6 million to 200,000 this quarter compared to last year. The decrease was mainly due to the moderation of pandemic costs and retroactive government funding of 2.6 million for unfunded expenses we incurred in 2020 and Q1 2021. Over the past two years, we have seen significant cost pressures on agency costs due to staffing shortages, increased insurance premiums in the seniors living sector, and rising utilities costs in line with the overall market. We expect that continued occupancy gains, rental rate increases in our retirement portfolio, and an improving operating environment will help mitigate these cost pressures and support our operating margins in 2022 and beyond. We expect pandemic expenses to further moderate as the pandemic subsides, while related government funding gradually declines. Moving to slide 14. During Q4, operating funds from operations increased by 29% to 18.3 million compared to last year, primarily due to higher NOI, lower administrative expenses, and lower interest expense on long-term debt, partially offset by higher current income taxes. Q4 OSFO per share increased by 28.9% to 27.2 cents. For the full year, OSFO per share increased by 11.7%. Adjusted funds from operations increased by 25.7% to $16.6 million compared to last year, primarily due to the same reasons of the increase in OSFO, partially offset by higher maintenance capital expenditures. ASFO per share increased by 26% this quarter to 24.7 cents. For the full year, ASFO per share increased by 4.5%. ASFO payout ratio was 94.7% for the quarter and 86.3% for the full year. Moving on to our debt metrics on slide 15. Our debt to gross book value improved by 350 basis points to 44.7% at the end of 2021, compared to 48.2% at the end of 2020, mainly as a result of reducing the drawdowns on our credit facilities. Debt to adjusted EBITDA improved to 7.9 years at the end of 2021, compared to 9.4 times last year. Interest coverage ratio improved to 3.7 times in 2021, compared to 3.1 times last year. and we have limited debt maturities over the next two years. Moving to slide 16, we continue to maintain a strong balance sheet. This was evident in the renewal of CBRS issuer credit rating and our senior and security venture rating of BBB with stable trends in October 2021. We also maintain significant liquidity, which has exceeded 200 million for the past eight quarters. In connection with the recently announced joint venture acquisition, we have secured 150 million acquisition term loans at 145 basis points over the floating VA rate for a 12 month term to support the financing of this transaction. We ended the year well capitalized with 226 million in liquidity and an unencumbered asset pool of 1.1 billion. This underscores the resiliency and strength of our business and supports our growth plans going forward. I will turn the call back to Nitin now for his closing remarks.

Thank you, Karen. Recent months have been marked with optimism at our company and strengthening fundamentals in the Canadian seniors living sector. Strong demand for the services and care offered in seniors living support our optimistic outlook and growth strategy for 2022 and beyond. Over the next 20 years, the 75-plus population is expected to grow by nearly 4% annually and outpace Canada's overall population growth by five times. At the same time, the uncertainty caused by the pandemic, coupled with rising construction costs, has led to a significant decline in new construction activity of retirement residences in North Canada, supporting strong occupancy rates for existing residences. We intend to capitalize on the improving fundamentals and the growing demand for quality senior living and put into motion several transformational initiatives over the past 18 months, including our joint venture acquisition with Sabra. We're also pleased about the added momentum in our long-term care redevelopment plans and the addition of two retirement residences in Niagara Falls and Brantford. Once completed, these developments will add approximately 1,500 long-term care beds and over 300 retirement suites to our portfolio. For 2022, we forecast gradual occupancy improvements in our in-place retirement portfolio and maintain our forecast for occupancy levels to reach approximately 87% to 89% by the end of 2022. In our long-term care portfolio, admissions of new residents accelerated for most of the fourth quarter, and this resulted in an increase in occupancy during Q4, and we anticipate continued improvements in 2022. Our strategic initiatives from making transformational changes to our operating platform to ambitious growth plans are expected to be a source of future growth for Siena and will benefit our team members, shareholders, partners, and ultimately Canadian seniors for years to come. Our strategy is grounded in the belief that it is a privilege to care for and serve Canada's seniors, ensuring they live with utmost comfort, dignity, and respect. On behalf of our management team and our board of directors, I want to thank all of you for your continued support and your participation on the call today. We are now pleased to answer any questions you may have.

Thank you. Ladies and gentlemen, if you have a question at this time, please press star 1 on your telephones. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Once again, to ask a question, press star 1. Our first question comes from the line of Jonathan Kelcher with TD Securities.

Thanks. Good morning. Good morning, Jonathan.

Good morning.

First question just on the occupancy. You guys had a good quarter and good start to the year. You're keeping your forecast for 87% to 89%. I think you're just at 86% right now. What are the chances that you think you may exceed the top end of that?

You know, at this stage, we are comfortable with our forecast. Jonathan, usually January, February, March are a little bit slower. We did not see that in January, which was great, but February and March are usually slower months, and we are seeing some of that softness from our early indicators so far for February. So at this stage, we are pretty comfortable with the 80%, 70%, 89%, and restrictions are just coming out where people can now tour again. And if that accelerates, obviously we'll, you know, continue to provide change that guidance and need it be in the quarters to come. But at the current time, we remain at 87% to 89%. Okay.

Now, are you guys offering much in the way of incentives to help drive occupancy?

So we did that in 2020 as a one-time thing. That's not really the strategy because, you know, you know, their usual incentives like half a month free and things like that, which, you know, which is pretty normal. But other than that, you know, for us it's really very specific sales and marketing program for each of the different communities because we do have very different assets from community to community.

Okay. And then I guess just switching gears on the new developments, the three projects that you got approval for in December, What are the thoughts on timing for starting those?

Two of those projects are in Scarborough, and one is in Mississauga. All three would take a significant amount of time from municipal approvals, considering that they're in the GTA area and difficult municipalities to get approvals. However, this is as good a cause as any. At this stage, we're not really sure of timing. And we also, you know, our goal is not to exceed 5 to 10% of our asset base on the development. So even though, let's say if you had approvals, we're not going to start six projects in a year. So we like the pace. We started one late last year. We are on track to start two this year, one being a campus. And we also have a retirement, you know, asset in Niagara Falls with Reitman. So I think two a year is a good pace for us. So, you know, we will slot these, three for 2023 and beyond.

Okay. And the rock cliff in Altamont, you're combining in one location. I would assume that's at the Altamont location. Is that correct?

That's correct. So we happen to have more than four acres of land in Scarborough, which we are really fortunate for, and we are doing this in partnership with Scarborough Health Network. and we will combine both of that, and then we will repurpose the current Rockcliffe site.

Okay. That's it for me. Thanks. I'll turn it back.

Thank you. And our next question comes from the line of Scott Frommsen with CIBC.

Thank you, and good morning. Just wondering what impact Omicron has had on net employee turnover. In other words, what impact on resignation levels?

you know, not really anything different than usual. You know, I would say from a senior living sector, Omicron was more of a staffing crisis than a healthcare crisis because thanks to the booster and the mild manner of this variation of COVID, you know, we did not see huge healthcare issues, but we did see staffing issues. So we have not seen significant change in employee resignation based on Omicron.

And Do you think that your differentiated strategy or your stock ownership, et cetera, and employer choice programs, do you think that's going to continue to help you attract employees against other options in either seniors housing or other sectors? Do you think that's going to prevent you from having to incur costs in excessive inflation?

So most of our frontline team members are unionized, so we follow union contracts about that pricing. You know, for us, we believe that there's not going to be one silver bullet which is going to solve all of it. So, you know, Siena Ownership Program is one of them. We had a huge vaccine contest. That was another, you know, having a purpose-driven culture because we recently did an employee survey We've got close to 20,000 comments from our team members, and being aligned to a purpose of taking care of seniors is a big reason why team members continue to choose this sector. So we don't think it's going to be one thing which will solve this. It's going to be a combination of that. You know, how do we take care of our current team members, and how do we attract them? And the second is how we actually increase the number of people in the sector. You know, so we talked about a few government programs, which we are really appreciative of. How do we get more immigrants into the healthcare space in the provinces where we operate? So, frankly, it's going to be a combination of all of those things, and which is going to need a really different way of thinking than what people have done in the past in partnership with overall healthcare sector, in partnership with government, especially if it relates to immigration. It will be more both federal and provincial. for programs. So, you know, this is going to be a crisis for all of us, and, you know, we will obviously do the best we can internally, but, you know, we will have to work together to solve it for overall Canadians.

Thanks. And just a final question on labor. What mechanisms do you have within the general union contract frameworks to ensure account for inflation indexing? Can we expect increases above or below general inflation?

Yeah, it's hard for me to say that each contract is different. You know, we have multiple unions and multiple contracts with them. Usually many of them would have, you know, other providers in it. You might have a bargaining unit which have 25, 30 properties of different owners and different ownership type. Usually, they stay pretty consistent with inflation, but one or two might change here or there. It's not really one big contract that I can comment on.

Okay. Thanks very much. Then I'll turn it over.

Thank you. Thank you. And our next question comes from the line of Joanne Chen with BMO Capital Markets.

Hi, good morning. Good morning, Joanne. Just as, you know, obviously some of the restrictions are getting lifted and, you know, with the ditching of vaccination passports, I guess how are you guys managing, you know, just with the – are you seeing a significant uptick in terms of visits and how will you plan on managing – in that situation to prevent, I guess, more outbreaks.

So I guess, sorry, Joanne, I just want to make sure we understand the question. Are you asking with Omicron wave kind of coming towards the end and restriction opening, how would it impact business? Is that your question?

Yes, exactly. And just to continue to make sure that, you know, obviously to minimize the number of outbreaks,

For sure. So we now have no restrictions on admissions in long-term care or tours in retirement homes unless there's an outbreak. And even during Omicron wave, you know, people could still, through our very limited portion of retirement suites, and they were being admitted to long-term care. So for us, you know, just opening up restrictions. Sorry, go ahead.

Oh, no, sorry. I was just acknowledging what you said. Apologies. Okay.

Yeah, no worries. So for us, I mean, this is really, you know, for really what it means for the residents and team members is their ability to have their lives back because, you know, in many cases people were confined to their rooms. So in many cases for existing residents, this obviously is a huge improvement in their living experience, but team members not being able, not have to wear isolation gowns and other things would, again, would be a huge benefit. It'll have a benefit from a pandemic cost perspective. And then from a retirement and both long-term care, you know, we do anticipate it accelerating admissions, both in admissions and both retirement and long-term care. And we do not anticipate a huge number of move-outs from a retirement portfolio.

Okay. And maybe just going back on, I guess, the staffing costs side of things, how should we think about kind of the runway over the near term on the staffing costs side of things?

Right. Hi, Joanne. So if I put into long-term care versus retirement, So while we have significant staffing shortages and therefore pressures on staffing costs, particularly in long-term care sites, most of those roles are funded through the government. And on an earlier discussion with Scott, too, is that because those are funded, the impact on NOI, while there is some, is not going to be materially changing going into 2022. And so when we look at retirement, we do think that with Omicron kind of subsiding, that we would be able to utilize less of agency staff And as we see our staff also coming back to work, that those costs could moderate.

Okay, that's helpful. And maybe just one last one for me on kind of going back on the development side with obviously some of the new projects, some of the redevelopments. Are you seeing any changes in thinking just given that, you know, with rising development costs right now and I guess potentially thinking about, I guess this was brought up earlier in terms of timing, but has that changed what you're thinking in terms of when to start and what not?

Yes, for sure. We are seeing rising development costs. We are not at a stage where this has given us a pause just yet, but there are significant changes in escalation. And there's also timing issues. We're hearing from other companies where their projects are delayed because they ordered windows and they're not going to be there for another four months. So you can't really open a building without them. So at this stage, we are seeing rising escalation costs. We're seeing supply chain issues. but not enough for us to take a considerable pause.

Got it. Okay, now that's helpful. That's good to hear. Okay, that's it for me. Thank you. I'll turn it back. Thank you.

Thank you. Our next question comes from the line of Tao Wooley with National Bank.

Hi, good morning. Hi, Tao. Good morning. In terms of, you know, like you guys made some investments in marketing over the course of the pandemic. I'm thinking about call center investments, that kind of stuff. And prior to this, we sort of hadn't seen, you know, these kind of, you know, this kind of occupancy performance or this lift that you're seeing right now. Can you just talk a bit about, I recognize the pandemic, you know, like that things were depressed and it's a bit of a rebound of the pandemic too, but I was wondering if you can talk a little bit about how your leasing and marketing functions are working now versus pre-pandemic and what some of the differences are that you are seeing right now.

Thank you for that, Tal. You know, I will not get into the detail of that because, for us, we think that is proprietary to us and the changes we made. and the things we're doing different. What I would say is that there's a big focus on community by community rather than the overall because we do have different kind of buildings in different markets. And really for us, in addition to sales and marketing, is the whole overview of a platform which rose to a spirit because we were not going after a name change. We were going after what do we stand for as a retirement platform. And that prompted a name change. So, you know, there are significant things we are working on in terms of, you know, increasing the resident experience, you know, moving to personalization, more choices, how do we become a bigger part of the community. For us, those are all, you know, it's a bit of a mix of all of those things and how do we go to market with those, how do we sell, how do our local people sell it. For us, that's what we're finding has been good for us. rather than just one thing making a difference.

Okay. And sorry, just going back before, it was a couple questions ago, you have been offering some like half-month incentives and stuff like that selectively or not?

You know, those are what I meant to say is that we offer usual incentives time to time. So usually a half-a-month rent will be something usual that retirement homes would offer, you know, in certain markets. So our view has not changed. You know, in 2020, we offered some bigger incentives for a short period of time, but we have not done that since then.

Got it. Okay. And then, you know, you highlighted the North Bay project that you're getting underway. I'm just wondering, like, for us to understand the economics, like, you're picking up, you know, some beds on that site. Like, can you give us a sense of what the uplift in NOI off that is? from adding the new beds. I'm still struggling a bit with thinking about the redevelopment projects, how to think about the NOI that you're replacing and what the potential growth opportunity is when you're adding some new beds here.

For sure, and that's a great question. You really have to look at it from a few different ways when you look at pure financial. Obviously, there's a huge operational impact and a huge resident impact of having a new building. So the first one is NOI, and we have 148 long-term care beds, and 50-year-old buildings, they only have a small number of preferred beds, probably 10%. where you can charge that extra $18, $19, because in C homes, you can only charge a certain amount of time, a certain amount of dollars for a private bed. In a 160-bed long-term care home, brand new, you will have 60% private beds, which is, you know, instead of having 15, you have close to 96 now. So there's incremental NOI because of that. There's incremental NOI because of the 12 additional beds. However, there's even a bigger impact at AFFO level because you have a construction funding from the government that flows into it. So, you know, it increases that construction funding or at least minimizes the loss of some of those construction fundings that are coming off. And the last one really is, you know, is the quality of the assets. So you have NOI coming from a C home, which the market would look at it differently. So you might still be getting a dollar, but it has a much higher cap rate versus a dollar from a brand new long-term care home built to the newest standard, which we expect those cap rates to be in like a 6%, 6.5% or so. So for us, it's really a play about all of those things when it comes to financial. It's just not NOI increase.

Okay. And You're going to close this deal with Esprit this year, and you've traditionally grown the retirement portfolio via acquisition of generally stabilized properties. I'm just wondering, as the long-term care redevelopment projects get greenlit, are Assuming the market cooperates, yes, you could grow through acquisition and hopefully issue equity at attractive prices to be able to finance that and keep your balance sheet in check. Is that how we should be expecting you to grow? Potentially, do you start looking maybe more at doing more development of retirement homes as well? How do you continue to build momentum in the growth of the retirement platform while you've got this process you have to go through on the long-term care side?

Sure. For us, our view is that development for our company shouldn't be more than 5% to 10% of our asset base, so call it $2.5 billion. So anywhere from $125 to call it $200 million of development. And we do have significant amount of development that we want to do in long-term care. And in some cases, we would add retirement, such as the one in Brantford. So if it's attached to a long-term care home, we will do that development with it, but not separately. So unless there are specific reasons where we did intensification, for example, the four sites we are buying has some excess land, so we can add some more suites. We have a couple of other retirement homes that we own that we are looking at intensification opportunities. So we will look at those from a development perspective for retirement homes, but mostly our development is going to be focused on long-term care or retirement attached to it. And our retirement growth is going to really come organically and second to acquisitions.

And do you think with the asset mix that you've got, you're going to be able to compete for retirement properties if the cap rates continue to trend in the direction they're trending?

Yeah, we really like the mix of both long-term care and retirement. You know, one provides stability of cash flow, which is reflected in our debt trading, and another one has the growth aspect built into it from retirement. So, you know, we are very comfortable how we are structured, and, in fact, we don't want to be tilting to one side completely either. So for us, you know, our focus and board's focus is a diversified company between both long-term care and retirement. And for diversity, for us, it means anywhere, you know, where there's no side of business less than one-third. So if long-term care becomes 60%, that will be just fine by us. And if retirement becomes 60%, that's just fine by us. It's just a moment in time.

And given that this is an operating business, it's not a REIT, you know, you're going to be integrating a fairly chunky acquisition this year and, you know, greenlighting a lot of development projects. Do you have, like, the right, or do you have enough management resources to continue, you know, to function at sort of this pace?

So that was a very important, you know, thing for us to consider. And, you know, for example, in 2021, you know, there was a period of time when Omicron or where COVID was not that severe, and there were other acquisition opportunities in 2021. but we decided that that was not the time for us. Our first focus was, you know, really starting when I came into the role in June of 2020, is to ensure that we first, you know, come out of crisis, you know, so from a healthcare view, so that was our first focus, how to ensure team members and residents are taken care of. The focus right afterwards to ensure that we have the right team and the senior executive team and the leadership level, so we did that, and the focus changed to our platform because we are an operating business, as you said, and you can't really be adding things to a platform which you're not comfortable with. So we made significant changes to our platform. Both retirement and long-term care would be launched shortly. So we do feel quite optimistic in our growth. And the way we have structured our teams is people who are focused on organic operations, let's call it that, we don't really want... you know, their focus to be on acquisitions. So we are quite diligent in keeping those teams different. Obviously, you know, we have to stretch some people if they're looking for opportunities to learn different things. But we want to be very diligent to make sure that we are not focusing on acquisitions at the detriment of organic growth because for us, you know, that is more important than acquisitions.

Okay. That's great. Thanks, guys.

Thank you. Thank you. And as a reminder, to ask a question, please press Star 1 on your telephone. Our next question comes from the line of Pammy Burr with RBC Capital Markets.

Hi, everyone, and good morning. Just really one question for me. I realize this might be tough, just given all the volatility and maybe the visibility issues in funding. But are you anticipating any further recoveries in long-term care pandemic costs this year, or is your baseline assumption for 2022 to effectively assume that the $17 million of retroactive recoveries received last year are, you know, you should basically just strip that out?

Hi, Tommy. Yes, so 2021 was an unusual year. Same was really for 2020. And as you pointed out, we received $17 million of retroactive pandemic funding relating to 2020 unfunded expenses. It is difficult to say if we would expect additional retroactive funding into 2022 because we are entering into a new funding year. However, the government has been very supportive of the sector, and so it is difficult to predict whether we would expect anything more. And to be prudent, probably not to factor any of that other than we do expect still some timing differences between our pandemic expenses versus the timing of any related pandemic funding.

Okay. And maybe just to follow up, how much is left to be recovered in terms of maybe what you've spent over the last couple of years? I don't know if there's still any catch-up funding from 2020, but what would you say is the estimate of what has not been recovered?

So if we look at 2021, our total unfunded pandemic expenses between retirement and long-term care was about $10 million. And three-quarters of that was in long-term care, and $2 million is in retirement. And no, retirement, we don't really expect much pandemic funding related to that. And if we look at the long-term care unfunded expenses of $8 million, again, it is difficult to say because we're still going through the process. And that would be the amount of unfunded for 2021. And as we entered into Omicron, that when we look at Q4, long-term care pandemic expenses versus Q3, we did see some slight moderation. However, in the second half of December, it did go up. And no, it is still early to say what those expenses would be for Q1. However, the government has come out and announced additional funding support.

Great. That's it for me. That's helpful.

Thanks, Karen.

No problem. Thanks, Bobby.

Thank you. And I'm showing no further questions. So with that, I'll turn the call back over to Mr. Jane for any further remarks.

Thank you, Andrew. And thank you, everyone, for joining our call. On behalf of our management team and our board of directors, I want to thank you for your continued support and look forward to speaking to you in the next quarter. Thank you.

Ladies and gentlemen this concludes today's conference call. Thank you for participating and you may now disconnect.