Sienna Senior Living Inc. (LWSCF) Q4 2022 Earnings Call Transcript

Sienna Senior Living Inc. (OTCPK:LWSCF) Q4 2022 Results Conference Call February 24, 2023 4:00 PM ET

Company Participants

Nitin Jain - President and CEO

David Hung - CFO

Conference Call Participants

Jonathan Kelcher - TD Securities

Himanshu Gupta - Scotiabank

Tal Woolley - National Bank

Pammi Bir - RBC Capital Markets

Operator

Ladies and gentlemen, invited to Sienna Senior Living Inc.'s Q4 2022 Conference Call.

Today's telephone is hosted by Nitin Jain, President and Chief Executive Officer; and David Hung, Chief Financial Officer of Sienna Senior Living Inc.

Please beryllium alert that definite statements aliases accusation discussed coming are forward-looking, and existent results could disagree materially. The Company does not undertake to update immoderate forward-looking statements aliases information. Please mention to nan forward-looking accusation and Risk Factors conception successful nan Company's nationalist filings, including its astir caller MD&A and AIF for much information.

You will besides find a much fulsome chat of nan Company's results successful its MD&A and financial statements for nan period, which are posted successful nan SEDAR and tin beryllium recovered connected nan Company's website, siennaliving.ca.

Today's telephone is being recorded and a replay will beryllium available. Instructions for assessing nan telephone are posted connected nan Company's website. And nan specifications are provided successful nan Company's news release. The Company has posted slides, which travel nan hosts’ remarks connected nan Company's website nether Events and Presentations.

With that, I will now move nan telephone complete to Mr. Jain. Please spell ahead, Mr. Jain.

Nitin Jain

Good afternoon, everyone, and convey you for joining america connected our telephone today.

Long-term fundamentals successful Canadian elder surviving stay beardown contempt an uncertain economical situation and a challenging labour market. Our Q4 financial results are a reflection of nan maturation imaginable embedded successful our business arsenic good arsenic nan existent economical challenges. Continued occupancy and complaint increases successful nan Retirement conception offset immoderate of nan important costs increases crossed both, our business lines and backing shortfalls successful nan Long-Term Care segment. Despite these challenges, we judge that having a balanced portfolio successful which our Retirement and Long-Term Care operations each make a important contribution to nan wide nett operating income, adhd to nan financial spot of our business and helps america execute sustainable semipermanent growth.

With respect to our operating results, mean aforesaid spot occupancy successful our status portfolio grew for nan 6th consecutive 4th to 88.6% successful Q4, which is up 440 ground points year-over-year and 20 ground points compared to nan 3rd 4th successful 2022. Average occupancy successful our acquisition portfolio was astir 85.3% which is an betterment of 310 ground points since we acquired nan 12 assets successful May of 2022.

Going forward, we will proceed to capitalize connected nan increasing request for elder surviving and expect further occupancy improvements. In 2023, we forecast mean occupancy for nan afloat twelvemonth to execute 90% successful our same-property portfolio and to transcend 87% successful our acquisition portfolio. We proceed to leverage our Aspira marque and signage programme to make beardown liking successful our residences. Qualified leads person accrued by astir 29% year-over-year successful nan 4th quarter.

Moving to descent 6. In our Long-Term Care communities, resident admissions progressed steadily passim 2022, pinch mean occupancy reaching 96.3% successful nan 4th quarter. Demand for Long-Term Care beds is higher than ever pinch nan accelerated summation of Canadian seniors. The 85 positive cohort is expected to triple complete nan adjacent 25 years. This will put further unit connected nan already agelong waiting database for Long-Term Care beds and connected Canada's infirmary systems. At nan aforesaid time, labour shortages, precocious ostentation and backing gaps are impacting our operations. Together pinch different assemblage participants and associations, we person been moving pinch nan authorities to reside this business and consciousness assured that will find a solution to guarantee nan semipermanent viability of this sector.

Elevating nan value of life and well-being of our residents is astatine nan halfway of what we do. We are very pleased that Sienna maintained nan highest accomplishment position of ASPIRE to Excellence successful Ontario, which is awarded by CARF and besides received an grant of Exemplary Standing from Accreditation Canada for our communities successful British Columbia. These are beardown indicators that our squad has demonstrated excellence successful nan value of attraction they provide.

Our nationalist shortage of healthcare workers continued to put immense unit connected our sector. Although a number of important authorities initiatives are underway, we expect staffing shortages to stay for immoderate time. In 2023, we will proceed to fortify squad engagement and retention by offering a compelling squad personnel acquisition and by creating a purpose-driven culture. We’ll besides proceed to amended our onboarding process, put successful squad personnel training and improvement and intensify our recruitment campaigns.

Our initiatives to amended squad personnel restitution and engagement person been reflected successful our caller engagement survey. Approximately 85% of our squad members consciousness that they are capable to do meaningful activity each day. This was nan 2nd consecutive twelvemonth of betterment successful an worker engagement score.

Recently, we person implemented a centralized callout and displacement scheduling strategy to meet a staffing needs connected a existent clip basis. The strategy provides greater elasticity and a much seamless process to capable staffing gaps. It besides helps pinch tighter controls and complete clip let squad members to optimize their schedules, and yet reduces our reliance connected outer agency staffing. To further trim nan effect of agency and agency related cost, we are finalizing an RFP process to trim nan number of agencies successful nan usage from astir 100 to little than 20. At nan aforesaid time, we are strengthening our statement position specified arsenic enforcing a minimum capable complaint period and surcharges while reducing agency rates by an mean of 10%.

Moving to our attraction connected development, past year, nan feasibility of our agelong word attraction redevelopment plans was challenged arsenic a consequence of rising building costs and quickly expanding liking rates. Together pinch different participants successful nan seniors surviving sector, we person been moving pinch Ontario authorities to reside this situation.

We are very pleased that successful precocious 2022, nan authorities announced a important clip summation to its semipermanent attraction building funding. As a result, we expect to person a full of 480 beds nether building by mid 2023, including projects successful North Bay, Keswick and Brantford. The task successful Brantford consists of 160 semipermanent attraction beds and 147 status suites arsenic portion of field of care. The field will person an estimated full improvement costs of astir $140 cardinal and a projected improvement output of astir 7.5%. In addition, Sienna has complete 1,000 beds successful nan readying stages successful nan Greater Toronto Area. We'll proceed to advocator for backing that is aligned pinch ostentation truthful that we tin move guardant pinch our redevelopment plans and amended semipermanent attraction successful Ontario.

We're besides approaching nan decorativeness statement for our associated task improvement pinch Reichmann Seniors Housing of 150-suite status residence successful nan Niagara Falls, which we expect to complete by nan extremity of this year. The estimated full superior investments for this task is astir $55 million.

With that I'll move it complete to David for an update connected our operating and financial results.

David Hung

Thank you, Nitin, and bully afternoon, everyone. I will commencement connected descent 11 for financial results.

In Q4 2022, full adjusted revenues accrued by 10.9% year-over-year to $193.2 million. This summation was mostly owed to occupancy and rental complaint maturation and further gross from nan 12 properties we acquired successful Q2 successful our Retirement segment, arsenic good arsenic flow-through backing for accrued nonstop resident attraction and higher preferred accommodation revenues from accrued occupancy successful our Long-Term Care segment, partially offset by occupancy clawbacks successful homes wherever we did not scope nan required 97% occupancy target.

Total nett operating income decreased by 2.8% to $32.5 cardinal this quarter, compared to Q4 2021. Our LTC conception decreased by $2.9 cardinal year-over-year, chiefly owed to higher operating costs and nan effect of nan waste of a semipermanent attraction organization successful Q1 2022. NOI successful our Retirement conception accrued by $1.9 million, chiefly arsenic a consequence of aforesaid spot NOI maturation and further NOI from our 12 caller status properties offset by higher operating costs.

Sienna’s LTC aforesaid spot NOI decreased by 11.3% to $16.4 cardinal successful Q4 2022, compared to past year, chiefly owed to higher operating costs, successful peculiar pinch respect to labor, arsenic good arsenic occupancy clawbacks. This was partially offset by an summation successful preferred accommodation revenues arsenic a consequence of higher occupancy compared to Q4 2021. We expect costs pressures to stay for immoderate clip astatine our semipermanent attraction operations and forecast our 2023 NOI for nan afloat twelvemonth successful nan LTC conception will stay astatine a akin level compared to 2022.

Last year, nan Ministry of Long-Term Care advised that it will not reopen nan 3rd and 4th beds successful ward rooms and has signaled that it intends to present phased successful revisions to nan backing for these beds. Changes which could effect 350 of nan 3 and 4 beds astatine Sienna were expected to statesman successful January 2023, but person been delayed until astatine slightest nan extremity of March.

In addition, we expect continued unfunded pandemic expenses of betwixt $2 cardinal to $3 cardinal successful Q1 2023 for our Long-Term Care segment, mostly arsenic a consequence of incremental labour costs.

Retirement same-property NOI accrued by 5% successful Q4 20 22 to $14.7 cardinal compared to nan past year, chiefly owed to occupancy improvements and yearly complaint increases. This was partially offset by higher costs for labour and food, arsenic good arsenic accrued attraction and spot taxes.

In 2023, we expect NOI maturation successful our Retirement portfolio to beryllium supported by occupancy improvements and complaint increases of astir 5%. These factors will lend to gross growth, while costs pressures will stay for immoderate time, successful peculiar pinch respect to staffing shortages, arsenic good arsenic precocious wide inflation. Considering each factors, we expect nan operating separator successful our Retirement conception successful Q1 2023 to beryllium akin to nan afloat twelvemonth separator of 35.7% successful 2022 and we further expect nan 2023 operating separator to amended by astir 150 to 250 -- 200 ground points for nan afloat year.

Moving to descent 12. During Q4 2022, operating costs from operations decreased by 3.1% to $17.7 cardinal compared to past year, chiefly owed to little NOI and higher liking expenses. Q4 OFFO per stock decreased by 10.7% to $0.243, chiefly owed to further shares issued successful March 2022, to finance nan Company's maturation initiatives. Adjusted costs from operations accrued by 4.5% to $17.3 cardinal compared to past year. The summation was owed to nan timing of attraction costs, partially offset by little OFFO. AFFO per stock decreased by 4% to $0.237 successful Q4 2022. The AFFO payout ratio was 98.7% for nan 4th and 99.3% for nan afloat year. In addition, we recorded restructuring costs of $6.6 cardinal successful relationship pinch nan imperishable closure of a semipermanent attraction organization successful 2023.

Looking astatine our indebtedness metrics connected descent 13. Our indebtedness to gross book worth decreased by 80 ground points to 43.9% astatine nan extremity of 2022 compared to 44.7% astatine nan extremity of 2021, chiefly owed to owe repayments pinch proceeds from spot dispositions earlier successful nan year. Debt-to-adjusted EBITDA accrued to 8.9 times successful 2022 compared to 7.9 times successful 2021, and liking sum ratio decreased to 3.3 times successful 2022 compared to 3.7 times successful 2021.

On December 9, 2022, DBRS confirmed Sienna's issuer standing and elder unsecured debenture standing of BBB pinch unchangeable trends. These ratings underscore nan resiliency and spot of our business and are a reflection of our beardown equilibrium sheet. We ended 2022 pinch astir $287 cardinal of liquidity, an summation of $61 cardinal compared to 2021. We besides had astir $1.2 cardinal of unencumbered assets, which represents a year-over-year summation of astir $80 million.

I will now move nan telephone backmost to Nitin for his closing remarks.

Nitin Jain

Thank you, David.

2022 has been a important twelvemonth for our company. We expanded our footprint successful Ontario and entered Saskatchewan and person successfully integrated 12 status residences into our operating platform. At nan aforesaid time, we’ve put galore initiatives into mobility to fortify squad personnel engagement and continued pinch enhancement to operating platforms to elevate nan value of life of our residents.

These initiatives will support america astatine a clip our assemblage remains nether immense unit amid a nationalist shortage of healthcare workers and economical uncertainty. In 2023, we’ll attraction connected operational excellence, we will proceed pinch a disciplined attack of our increasing gross streams successful some semipermanent attraction and status while reducing costs successful peculiar pinch respect to impermanent agency staff.

We’ll besides beforehand nan redevelopment of our semipermanent attraction portfolio and proceed pinch enhancements astatine existing residences, each while maintaining a diversified portfolio and a beardown equilibrium sheet. We are assured that nan important changes successful 2022 position arsenic good to execute connected our strategical objectives successful 2023 and thief america execute sustainable semipermanent success.

On behalf of our guidance squad and our Board of Directors, I want to convey each of you connected this telephone for your continued support. We are now pleased to reply immoderate questions you whitethorn have.

Question-and-Answer Session

Operator

[Operator Instructions] Our first mobility comes from nan statement of Jonathan Kelcher from TD Securities.

Jonathan Kelcher

First, conscionable connected nan LTC outlook pinch nan NOI being expected to beryllium level versus 2022. What benignant of assumptions are successful location connected pandemic expenses and reimbursements, and arsenic good arsenic what do you guys deliberation nan result will beryllium connected nan 3 and 4 furniture ward rooms?

Nitin Jain

I tin commencement by answering immoderate of nan questions and David tin specifically reside pandemic expenses. I would say, starting connected nan 3rd and 4th furniture rooms, location was -- I deliberation nan thought of closing nan 3rd and 4th furniture room for value of life they wholly aligned pinch and supportive of. And I deliberation nan activity pinch nan authorities is that location are things that would not trim -- expenses don't get reduced, if you person a building of 100 group and only 80 are successful it, you still person to squad nan full building, you person utilities successful nan full building, you person nan aforesaid administration. And truthful for -- then, authorities wide has been receptive of knowing nan issues astatine hand.

So astatine this stage, we proceed to consciousness assured that we will person a backing mechanism, which evidently reflects reduced number of residents successful those homes, but besides bespeak that nan costs has not changed and besides reflects astir a 9% backing spread betwixt what ostentation has been and what nan semipermanent attraction backing has been. So, we proceed to judge and expect that we will person a viable programme to proceed to money these homes, which person 3 aliases 4 furniture rooms.

Assumptions connected backing increases year-over-year. Our going successful presumption is akin to what we had had successful nan past. Having said truthful really nan inquire is -- a clear inquire is simply a 9% backing increase, because that is nan spread betwixt ostentation and what nan backing has been. And we person information going each nan measurement since 2000. And this is nan first clip successful nan play of past 25 years wherever nan semipermanent attraction backing has fallen earlier ostentation and nan spread is astir 9%, and that's what's needed to adjacent nan gap. David, do you want to reside nan pandemic expenses?

David Hung

Sure. Yes. So pinch respect to pandemic expenses, our pandemic expenses do proceed to incorporate -- to see costs that forestall and incorporate outbreaks, but progressively they are besides -- see costs for incremental staffing and agency costs, peculiarly successful our agrarian communities, wherever we knowledgeable staffing shortages. With respect to our assumption, our underlying presumption is really that nett pandemic expenses will enactment level comparative to 2022. So, successful 2022, our nett pandemic expenses were $8 million. But that besides included astir $5 cardinal of retroactive backing relating to 2021. And successful 2023, we would expect that our nett pandemic expenses will beryllium akin to 2022, astir $8 million.

Jonathan Kelcher

Okay. So conscionable -- sorry to spell backmost to nan -- inquire connected nan backing increase. You said, you are expecting what you’ve historically gotten, but asking for 9%. And that besides -- that kicks successful April 1st, if I recall, correct?

Nitin Jain

That's correct. So, I would say, I think, to reply nan mobility much directly, our outlook astatine this shape conscionable only includes what has been successful nan past, which is astir 2% aliases so. What we are expecting though aliases what we are advocating for is 9%, because that has been nan spread successful backing complete nan past 4 years. So, obviously, erstwhile that comes through, that outlook would change.

Jonathan Kelcher

And hopefully do nan better. Okay. Thanks. I'll move it back.

Nitin Jain

Thank you.

Operator

Our adjacent mobility comes from nan statement of Himanshu Gupta from Scotiabank. Please proceed.

Himanshu Gupta

Thank you and bully afternoon. So conscionable a follow-up connected Long-Term Care mobility by Jonathan there. So, connected Long-Term Care, really galore homes would you opportunity did not execute 97% occupancy accumulation costs year? And what was nan effect successful nan mislaid NOI because of that?

David Hung

Yes. Thanks for that question, Himanshu. So, location were astir 10 homes that did not execute nan 97%. Most were really very adjacent to 97%. And overall, nan effect successful Q4 was astir $800,000 successful position of occupancy clawback, and $1.3 cardinal for nan year.

Himanshu Gupta

Awesome. And for your guidance successful 2023, do you presume a akin tally complaint aliases do you deliberation recouping this $1 cardinal backmost successful your guidance?

Nitin Jain

In our guidance, we presume that astir of it would beryllium recouped back, because 2022 had -- still had important outbreaks. We are moving nationalist health, erstwhile you tin admit people, erstwhile you cannot. So I deliberation that has been a spot each complete nan spot from a argumentation position and process perspective. What we are really looking for is that it really should beryllium successful utmost cases wherever either location is nary demand, which is going to beryllium very astonishing considering nan 40,000 group connected a hold database aliases immoderate circumstances which are extracurricular of everyone's control. So, we expect nan mostly of our homes to get to 97%.

Himanshu Gupta

Awesome. Okay. That's helpful. My adjacent mobility would beryllium really overmuch of your 2023 NOI guidance is impacted because of phase-out of 3rd and 4th batch? I mean, fundamentally are you assuming immoderate antagonistic effect astatine each successful this guidance?

David Hung

We are not assuming immoderate effect from nan phase-out of nan 3rd and 4th beds.

Himanshu Gupta

Okay. So, if I were to opportunity that, is location much upside aliases downside to your level LTC NOI guidance, looking astatine some these items? If nan occupancy doesn't meet 97% is downside. If nan effect is location because of 3rd and 4th beds, again there's much downside to do. How would you deliberation that question?

Nitin Jain

Sure. That's a awesome question. So I would possibly reply successful a fewer different ways. The first is 3rd and 4th furniture rooms, we person not built successful immoderate impact. And you tin excessively consciousness that nan backing is evidently 1 point and nan effect connected NOI, but I deliberation it will, frankly, destabilize nan full C portfolio. And this is Ontario measurement problems, because there's still 30,000 beds, which are C homes and they'll put them importantly nether duress.

The 2nd portion connected 97%, truthful obviously, we are assuming that we'll get to mostly of our homes 97%. So, nan 1.3 cardinal that David said astir is frankly being eaten up, because you person costs which are moving overmuch higher to nan 1% aliases 2% backing summation that we are assuming astatine nan moment. So nan upside is not really nan correct word, frankly. The correct size is what we're aft that what we want to do is guarantee that nan semipermanent attraction backing is nan correct sized, because it's going to put nan assemblage astatine important challenge, past nan full assemblage is trying to build thousands of beds to meet these increasing demands of semipermanent attraction needs.

So I would say, whether it's upside aliases downside, I deliberation remains to beryllium seen. And arsenic we talked astir previously, we find authorities successful Ontario, BC and Saskatchewan, rather knowing of nan challenges and consenting to hear. So I deliberation we proceed to person very bully entree successful position of explaining what nan challenges are. Obviously, what remains erstwhile nan fund comes out, that's erstwhile we'll genuinely find retired what nan result is.

Himanshu Gupta

My adjacent mobility is connected nan Niagara Falls development. So, looks for illustration nan projected costs of building has gone up from $50 cardinal to $55 million. And yet nan improvement output is unchanged astatine 7.5. So, are you underwriting amended rates now? What led to that summation and yet nary alteration successful improvement yield?

Nitin Jain

Sure. The cost, frankly -- you're right, nan costs has gone up from astir $50 cardinal to $51 cardinal aliases $55 million. And fixed that those costs were from 2019, we frankly deliberation it's a caller borderline occurrence that costs only went up 10%. And a large chunk of it is evidently building financing that effect connected liking rates. So, we are very happy pinch nan result of it considering costs has gone up astir 30%, 40% and different projects. And we are seeing amended rates. I mean, we're seeing amended rates crossed a portfolio. So that's why nan output is not changing.

Himanshu Gupta

And possibly my past mobility is connected status location NOI margins. I deliberation you provided guidance of 150 to 200 basis-point description successful this year. How do you get that visibility and what is causing these margins to spell up?

Nitin Jain

Sure. I mean, really, we are besides expecting a alteration successful occupancy. So we ended nan twelvemonth astatine an mean of astir 88.6%. And we are calling an mean occupancy successful nan aforesaid spot portfolio of astir 90%. So, that's nan average. So you commencement astatine 88.5, your mean is 90. So that mathematically will put america adjacent to 92% successful arsenic our occupancy astatine nan extremity of adjacent year. So, conscionable from a mathematics perspective.

So we are factoring successful a important alteration successful occupancy, going from 88.6 to nan low-90s. And pinch that, obviously, astatine these occupancy levels, a bigger chunk of your gross is going into nan NOI. So, that gives america nan first comfort.

And past conscionable successful separator successful general, for example, nan separator are moving little than what we person successful nan past. However, erstwhile you look astatine our afloat twelvemonth NOI for Retirement, we are up astir 10%. We ended nan twelvemonth 2021 astatine astir 52.5 cardinal successful aforesaid property. We’re ending this twelvemonth astatine astir 58.5 million. So it's up significantly. And that's nan situation successful a rising -- aliases it's successful an inflationary environment. So for example, if you had a location which had a gross of 100 and your NOI is 50, and your costs is going up by 6%, truthful going up $3, truthful you're expanding your gross by astir akin magnitude because astatine immoderate shape location is simply a headdress to what you tin increase. Your NOI continues to increase, but your separator is going to trim a small bit. So, that's what we're dealing pinch astatine nan moment. And if we were not successful an inflationary environment, we would person expected our separator successful truth to beryllium higher, arsenic we are progressing toward these higher occupancy and astir stabilized levels.

Himanshu Gupta

Thank you. That's very helpful. So it looks for illustration NOI separator is down from pre-pandemic levels. But possibly NOI per doorway aliases per suite could still beryllium up. That's very helpful. And acknowledgment and I'll move it back.

Nitin Jain

Thank you.

Operator

Our adjacent mobility comes from nan statement of Tal Woolley from National Bank. Please proceed.

Tal Woolley

On nan Long-Term Care business, conscionable possibly if we could measurement backmost a small spot further. If we spell backmost pre-pandemic, this is benignant of for illustration a $85 cardinal benignant of NOI business. I'm wondering arsenic we look retired going forward, you've evidently provided immoderate circumstantial guidance for nan near-term and that's helpful. Can this business get backmost to that level of profitability do you deliberation aliases should we beryllium reasoning thing a small -- little rebound aliases overmuch little rebound than possibly what was initially hoped coming retired of nan pandemic a mates of years ago?

Nitin Jain

I would say, you are right, it's astir $85 million. I would set for -- we did waste 1 Long-Term Care location successful Q1 of 2022 a C people location to a important gain. So I would region that. There was astir a mates of cardinal dollars of NOI. We are unluckily closing a semipermanent attraction location because of immoderate building deficiency. And moreover though it had really nary NOI effect successful 2022, that's why we don't spot immoderate antagonistic effect successful 2023. And that was different $1.5 cardinal astir of NOI. So I would opportunity nan starting point, it mightiness not beryllium $85 million, it mightiness beryllium $81.5 million. But nan mobility remains nan same. And we proceed to judge that a large chunk of that is driven by nan backing shortfall, which is astir 9%, and that would relationship for astir two-third of nan quality betwixt what we are forecasting and that $82 million. The different portion of it is pandemic expenses. And moreover though nan world astir america has changed and for galore people, COVID is successful 1 measurement over. But arsenic I sojourn our communities, we still person screening, we still person group masking, we still person outbreaks, which puts important unit connected staffing and agency. So, location is an facet of that.

And we proceed to judge that because nan effect of COVID coming has been very different than it was three, 4 years agone and arsenic clip passes, it's going to go much and much less. So, that's why we consciousness assured that we tin get to that number, which was pre-pandemic.

Tal Woolley

Okay. And then, I cognize location person been immoderate chat to for illustration successful summation to backing increases, possibly immoderate activity pinch nan authorities astir regulating agency -- really agencies believe successful nan province. Has location been immoderate headway made connected that peculiar file?

Nitin Jain

I would opportunity there's been a batch of chat because it is -- nan rumor is twofold. One is obviously, there’s effect connected funding. But nan 2nd is really -- and arsenic important is nan effect it has had connected nan stableness of squad members. Because erstwhile you person agency successful your team, and they're new, they don't understand what's happening astatine home. So, astatine times, that evidently creates much activity for existent squad members, truthful gets into higher turnover eventually. And nan 2nd is nan effect connected resident experience. Because, particularly successful agelong word care, erstwhile you person analyzable healthcare needs of residents, and you're getting caller unit members connected a regular basis, it's really not that helpful. So frankly, it's a operation of each of those things. So, we don't cognize what nan extremity would beryllium successful position of resolving it, but we find there's much and much chat astir uncovering a viable process.

So, we don't -- we’re not trying to limit title aliases people's businesses. But we are now looking astatine a scarce resource, which, particularly nursing staff, and successful a spot wherever you request to person nurses and you're astatine times paying successful multiples of what your national wages are. So that has to get resolved. And we consciousness that there's traction connected getting thing done connected it.

Tal Woolley

Okay. And this is thing besides that -- like, it affects nan hospitals -- nan different parts of nan healthcare strategy that are owned by nan government.

Nitin Jain

Yes.

Tal Woolley

Okay. I'm conscionable wondering if we could locomotion done fixed that you've greenlit a mates caller improvement projects here, could you conscionable locomotion through, for illustration what you expect full superior spending to beryllium this year?

Nitin Jain

So we've sewage to beryllium very cautious connected really we do that, fixed what is happening to nan stock price, obviously, nan superior markets successful general. So moreover though we proceed to person very bully entree to capital, and David and his squad precocious went done immoderate refinancing activity and CMHC financing is very attractive, moreover though it doesn't use to semipermanent care. But because we person a number of unencumbered projects, we tin evidently move financing astir aliases money it done different ways.

So, this is thing which is apical of our mind. Making judge that we are afloat committed to doing redevelopment, particularly nan 3 projects we announced. But we person to do it successful a responsible measurement that it does not put undue unit connected our equilibrium sheet. So, truthful far, we consciousness comfortable pinch what we've announced, which is nan Brantford project. As we determine nan adjacent two, those are nan different things we are contemplating really champion to finance them. So, it's -- we group up for nan semipermanent without putting excessively overmuch unit connected nan short-term.

Tal Woolley

Can we put immoderate numbers astir that successful position of…

Nitin Jain

Maybe it's a period and a half to early. So we are successful nan tender process for -- to put 2 projects. We person fixed retired building costs successful nan past and we person been wildly wrong. So, we don't want to repetition nan aforesaid correction again. So for Brantford, for example, nan $140 cardinal that what we are placing here. That's tendered cost, projects person ordered building to commencement successful short successful short order. So we consciousness a batch much comfortable sharing those. The different two, high-level could beryllium successful nan aforesaid quantum combined, Tal. But I think, again, we'll person to hold for a spot of clip to get those costs finalized.

Tal Woolley

In your normal people attraction CapEx, wherever would you peg that correct now?

Nitin Jain

So, we ever disclose our attraction CapEx arsenic actual. So, David, you tin speak to our walk successful 2022?

David Hung

Yes. So, successful 2022, we spent astir $11 cardinal successful attraction capital, and we would spot that successful 2023 our attraction superior will increase, partially because of nan acquisitions that we made earlier successful nan year, but besides because of ostentation -- wide inflationary increases.

Tal Woolley

Okay. And I conjecture conscionable lastly, for illustration -- tin you conscionable talk a small spot astir wherever you are seeing financing, and you talked a small -- aliases we’re you’re seeing financing costs correct now? And you talked earlier astir you want to beryllium -- make judge that you are not stretching excessively acold pinch nan equilibrium sheet. Can you springiness america an thought of what that letter cover mightiness look like? What would you see to beryllium benignant of for illustration excessively overmuch leverage astatine this constituent successful time?

David Hung

Yes. I mean, I tin commencement and Nitin tin jump successful after. But pinch respect to financing, we are seeing a very charismatic marketplace correct now pinch CMHC debt. Just arsenic an example, we refinanced 1 of our status buildings successful Q4 for astir $45 cardinal and that helped america repay $40 cardinal of our acquisition word loan. So currently, CMHC indebtedness is wherever we are looking correct now. And we do person a number of unencumbered assets that we could usage to fundamentally refinance pinch CMHC debt. The complaint itself, what we sewage successful for this peculiar status home, it was nether 4%.

Tal Woolley

Okay. So really overmuch much CMHC financing theoretically could you beryllium capable to do?

David Hung

Yes. Probably -- I mean, we surely don't want to building our equilibrium sheet. We are very mindful of our indebtedness to gross book value, astir apt successful nan scope of $100 cardinal is what we would beryllium looking at.

Tal Woolley

Okay. And then, again, for illustration arsenic you commencement to return connected much development, for illustration what benignant of nan letter cover you'd for illustration to support that equilibrium expanse successful position of ratios?

Nitin Jain

So from a indebtedness to book value, I mean location are 2 ratios we are managing closely. One is nan indebtedness to book worth wherever we person a batch of room, we had astir 43%, 44%. And we said pinch development, we’re comfortable getting it person to 50%. But it will return its clip because moreover erstwhile we commencement these 3 projects, nan effect connected 2023 is smaller. Obviously, 2024 would beryllium a bigger walk year. And nan 2nd 1 is nan debt-to-EBITDA. So again, our extremity is to beryllium betwixt -- astir 8. I deliberation pinch development, it is going to spell a small spot higher. And that's what we are trying to lucifer that we don't really transcend it by excessively much.

Tal Woolley

And nan in installments standing agencies are cool pinch you pushing northbound of 9, do you deliberation that that's going to beryllium -- they'll let for that?

Nitin Jain

So we person had very bully chat pinch DBRS. So nan existent DBRS standing does not see a batch of development, but they cognize that location is simply a batch of improvement astatine nan horizon. So, I deliberation it really would dangle connected nan pace. As we said, nan 3 projects by itself and location are immoderate absorbing things we are looking astatine really champion to finance those. So, we evidently proceed to activity very intimately pinch them. They expect nan improvement to happen. And pinch that successful mind, obviously, our standing was reconfirmed. But that is thing will beryllium a continuous ongoing chat and a very important metric for america to guarantee that we sphere that in installments rating.

Tal Woolley

Okay. Thanks very much, gentlemen.

Nitin Jain

Thank you.

Operator

Our adjacent mobility comes from nan statement of Pammi Bir from RBC Capital Markets. Please proceed.

Pammi Bir

Thanks. Good afternoon. Just pinch respect to these persistent pressures connected labour costs and shortages, whether it's successful status homes aliases successful semipermanent care, successful your mind, is this really now a possibly imperishable structural rumor that could past benignant of good beyond nan adjacent twelvemonth aliases two?

Nitin Jain

Absolutely. Pammi, I deliberation location are 2 things we said, we judge that will beryllium existent for us. They're not going to capable places for seniors to live. Because we person a agelong waiting database successful Long-Term Care already. And Retirement building has slowed down significantly. And nan 2nd is, nan quality assets situation is present to stay. So you're perfectly right. We person a large push successful migration arsenic a state and each sorts of different things. But I would opportunity galore different countries are doing nan same. And that is why I deliberation that -- we enlistee a batch of group a year. I mean, past year, we recruited northbound of 5,000 people. So, we person a very bully talent acquisition team. The attraction really for america is really do we clasp connected to those group for a longer play of time, because there's a higher churn of people, successful this sector, whether it's driven by wages, whether it's driven by much flexibility, aliases different factors. So, that's what we're after. And that's why nan activity astir scheduling systems, nan attraction connected culture, attraction connected making judge our squad has paid competitively, that's going to beryllium that's going to beryllium a cardinal factor.

Pammi Bir

Nitin, possibly conscionable coming backmost to you, I wanted to conscionable explain your remark earlier. You mentioned nan 9% backing spread successful nan past 4 -- I deliberation you said 4 years. Is that nan mean yearly backing spread aliases nan full backing gap, successful position of I conjecture nan recoveries versus nan existent backing that was received?

Nitin Jain

Yes. Thankfully, it's mixed 9%, Pammi. Otherwise, we frankly would person a very different telephone today. No. So, it’s a mixed 9% backing spread during this time, and that, successful our mind will put america connected nan correct course. And evidently past backing changes connected yearly ground which enactment up pinch inflation.

Pammi Bir

And past conscionable possibly to -- conscionable to clarify, pinch your -- done Q1 to date, person location been immoderate recoveries of pandemic costs related to 2022 truthful far?

David Hung

No, location person not been any.

Pammi Bir

Okay. And past conscionable possibly closing nan loop connected nan -- connected nan questions astir superior and leverage and improvement spending. I'm conscionable funny astir nan payer ratio has now deed -- it's elevated -- 100%. Now, yes, you are assuming immoderate maturation successful nan status portfolio adjacent year, and possibly level semipermanent care. But nether what circumstances would you see aliases reconsider nan existent indebtedness payout?

Nitin Jain

Sure. We person ever talked about, I mean, nan questions we utilized to get for years nan nonstop opposite, because our payout ratios and 60% ratio, and 2 things person happened, which to return it from 60% to 98, aliases 99%. Now, 1 is obviously, nan effect of a pandemic, trim simplification of occupancy and retirement, past accrued expenses successful some lines of businesses. And nan second, which is peculiar to america and elder surviving is nan building funding, which utilized to -- they person it for our A homes, which were built previously, which has travel down by astir 6 cardinal to 7 cardinal complete nan past 4 years. So, those are nan 2 drivers which are -- which person been factoring that.

We proceed to consciousness assured connected nan betterment path, some from a building funding, that's why nan value of these 3 projects to commencement construction, and being capable to get and make nan backing spread betwixt what nan authorities is backing what we expect nan authorities to money going guardant and our request occupancy. But if we don't get to those -- nan spread of that -- nan semipermanent backing and we don't get occupancy, evidently and we don't get to commencement construction, that would beryllium nan clip that we will person to rethink this. But astatine this stage, we proceed to consciousness assured connected a betterment connected each those 3 fronts.

Pammi Bir

Thanks for nan color, Nitin. I will move it back.

Nitin Jain

Thank you.

Operator

There are nary much questions. Thank you, ladies and gentlemen. This does reason today's call. Thank you for your participation. You whitethorn now disconnect.