Below is three of the more interesting parts from the conference call transcript. New supply, demographics and govt funding. All quite bullish.
1. Lack of New Supply
Question: I’m not trying to age you, but you've been around for a cycle or two. You look at construction starts as a percentage of the seniors inventory. It looks to me to be like maybe a dangerously low level. Have you ever seen it this low and how does it resolve itself?
Nitin Jain, President and CEO:
You're not aging me, because I'm a newbie[Ph] to this sector, I've only been here for 10, because people have been doing it much longer than me. I would say these numbers are quite low. And there are two things, maybe multiple things at play. I think the first one is, for a long period of time, at least close to 20 years, we have not seen this level of interest rates, which has had a significant impact. And combined with it, we have also not seen the difference between rental rate increases and construction costs. So construction costs are 40%, and obviously, rental rates have not gone up by 40% in the last 3 or 4 years. And the last thing I would say, there is an understanding that this business has a big component of your platform. And so the ability for a new developer to just come in and open a retirement home is getting less and less.
I would say in 2019 and 2020, there would not be a week, where we would not get a phone call from someone who has land and wants to build a retirement home. You don't get those phone calls anymore, it will be sophisticated retirement operators, owners who are building new retirement homes, not people outside the sector. So I would say a combination of all those three has had a significant impact on supply. And I think it will take a bit of time for it to get better. I mean, these asset class takes three, four years from the beginning to end of construction, and that's aggressive, frankly, in GTA, it will be much longer.
So this short supply is, hey, to stay for a period of time.
2. Demographics
There's tremendous growth potential in Canadian senior living, with the oldest baby boomers now turning 80 in 2 years, and life expectancy see continue to increase. Canadian seniors in the 85 plus age group are expected to reach 1 million by 2026, and further grow by 25% from 2026 to 2031, and another 33% between 2031 and to 2036. At the same time, waitlists for long term care are getting longer and new supply of senior living accommodations has declined significantly in recent years. The favorable demographic trends continue, combined with the stability that has returned to our business gives us an optimistic outlook for 2024 and beyond.
3. Government Funding Increases
Question: What are the current industry expectations for rate increases for 2024, specifically for Ontario?
Nitin Jain, President and CEO:
So we expect something to come out in the March budget. It is hard to really comment, because there's only one party which decides that, which is the government. The conversation with government has been, there has been a lot of investments in Ontario and other areas, but other accommodation, which is how we keep the homes open, has frankly not been invested in. So the expectation would be a bigger increase than just cover inflation, but again, yet to be seen what comes out.