Chartwell Retirement Residences has announced its year-end and Q4 2023 financial results, showcasing a year of substantial growth and operational success. The company achieved a record increase in occupancy, implemented significant technology systems, and completed strategic portfolio optimization transactions.
Chartwell's net income saw a significant rise to $128.3 million for the year, up from $49.5 million in the previous year. The firm welcomed 2,210 new permanent residents in the final quarter, leading to an 84.9% same-property occupancy rate by year-end. Looking forward, Chartwell expects strong demand for its services in 2024, fueled by demographic trends and a slower pace of new construction.
Key Takeaways
- Chartwell Retirement Residences recorded a net income of $128.3 million in 2023, a substantial increase from $49.5 million in 2022.
- Same-property occupancy reached 84.9% as of December 31, 2023, with 2,210 new permanent residents in Q4 alone.
- The company reduced staffing agency costs by 44% and saw improvements in employee engagement and resident satisfaction.
- FFO from continuing operations climbed by 19.7% to $122.2 million.
- Chartwell expects an occupancy rate of 85.7% in April 2024 and plans to grow its portfolio through acquisitions and development opportunities.
Company Outlook
- Chartwell predicts strong demand in 2024 due to demographic growth and a slower pace of construction activity.
- The company is set to optimize its asset portfolio, focusing on core properties and divesting non-core assets.
- An anticipated occupancy and revenue growth trajectory, with an expected 85.7% occupancy in April 2024.
- Plans to maintain leverage at 7.5 times while exploring development opportunities within the portfolio.
Bearish Highlights
- No specific bearish highlights were mentioned in the summary provided.
Bullish Highlights
- The sector exhibits favorable supply/demand characteristics, supporting long-term growth prospects.
- The company has a strategic partnership with Batimo and is considering third-party acquisitions to enhance its portfolio quality.
- Chartwell anticipates strong growth in occupancy and rents within the sector.
Misses
- The company did not provide estimates for the growth portfolio's NOI margin due to its diverse property mix.
Q&A Highlights
- Factors driving occupancy gains include targeted digital marketing and affinity partnerships.
- Expectations for occupancy growth remain positive, with performance varying across different markets.
- The Welltower (NYSE:WELL) transaction is expected to close, with the NOI margin for 2024 projected to increase from 34% to 38% on a same-property basis.
- Acquisition of two Batimo properties is anticipated, with a low to mid-6 cap rate.
- The Ballycliffe sale is expected to close in the first half of the year, and the company is actively seeking additional acquisition opportunities.
In conclusion, Chartwell Retirement Residences (TSX: CSH.UN) has reported a strong financial performance for 2023, with significant growth in occupancy and income. The company's strategic initiatives and favorable market conditions have positioned it well for continued success in the coming year. With a focus on portfolio optimization, cost reduction, and development opportunities, Chartwell is poised to capitalize on the robust demand within the retirement residence sector.
Full transcript - None (CWSRF) Q4 2023:
Operator: Good morning, ladies and gentlemen and welcome to the Chartwell Retirement Residences Year End and Q4 2023 Financial Results Conference Call. I would like now to turn the meeting over to the CEO, Vlad Volodarski.
Vlad Volodarski: Thank you, Carl. 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; Jeffrey Brown, Chief Financial Officer; and Jon Boulakia, Chief Investment Officer and Chief Legal Officer. Before we begin, I direct you to the cautionary statements on Slide 2, because during this call, we will 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 and 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 2023 MD&A under the headings 2024 Outlook and risks and uncertainties and forward-looking information for a discussion of risks and uncertainties. These documents can be found on our website or on the SEDAR+ website. Turning to Slide 3. 2023 has been an unprecedented year of learning change and growth for our company. We have been learning new ways of driving results faster through higher empowerment of people in our residences and offices. We have become more agile in how we market, sell, and operate our properties. And we have made progress in repositioning our property portfolio towards high-quality, high-growth properties, and strong markets. What is not changing is our dedication to our vision of making people's lives better and are focused on delivering personalized, memorable experiences to our residents. In 2023, our teams delivered exceptional increases in employee engagement and resident satisfaction scores, record occupancy growth, several significant technology systems implementations, and completed transformation of portfolio optimization transactions. These achievements, combined with the reimagining of our corporate support service models, will serve as a strong foundation for profitable growth of our business in years to come. Thank you to all Chartwell employees for your commitment to our residents, their families, and each other and for your deep and personal connection to our shared values and goals. I will now turn the call to Karen to provide an operational update.
Karen Sullivan: Thanks Vlad. Moving to the Slide 4. In Q4 2023, we welcomed 2,210 new permanent residents to Chartwell homes across Canada, including 862 in the month of December alone and a total of 7,211 for the year. All of these permanent move-ins or PMI numbers are unprecedented in our history. Our net PMIs less permanent move-outs was plus 1,411 ending our same-property occupancy as of December 31st at 84.9%. Our sales process improved as evidenced by a 1.5% increase in our closing ratios to 14%. The number of personalized tours from marketing sources increased by 24% year-over-year as our targeted digital marketing strategies resulted in higher quality leads. Our new approach to Google (NASDAQ:GOOGL) Ads resulted in a 205% decrease in investment, while delivering 130% more conversions. Our prospect pool grew to 51,000, an increase of 28% year-over-year. In addition, we have collected 25,000 new marketing contacts, people who have agreed to be contacted, but have not yet chosen a specific Chartwell Residence, who we will remarket to through Facebook (NASDAQ:META). We also started the year with a January Open House, which generated a strong pipeline of new leads for our residences and similar initial contacts or IC volume to our September Open House, which was the best week in 2023 for marketing leads and total ICs. Historically, our September Open House generates twice as many ICs as January. In Q4, we entered into two new affinity partnerships with Scotia Wealth Management and the Alberta Retired Teachers Association to offer them one month free rent in exchange for exclusive access to educate their members and promote Chartwell. Turning to Slide 5, we reduced our staffing agency cost by 44% in 2023 compared to 2022 based on a number of very targeted strategies. This included reducing the number of agencies we are using through an RFP process in both Ontario and Quebec, specific strategies to recruit and retain nurses, working with specialized organizations to bring in new immigrants, and improving our onboarding approach. We have also implemented an electronic health record in over 70 of our residences in Ontario and BC and we'll complete this initiative in these two provinces within the next two months. We also rolled out Care Assist, a standardized approach to care services pricing and billing codes in Ontario and BC and more recently in Quebec. We will begin rolling out the electronic health record in Quebec beginning in Q3. Not only will this assist our frontline care staff with assessments and care plans, but should have a positive impact on our care revenue, which increased by over 14% in 2023 compared to 2022. Finally, we continue to focus on individual strategies for specific homes to improve occupancy. One example of this is a new contract with Alberta Health Services for 44 funded designated assisted-living units in one of our Calgary retirement residences, which will dramatically increase our occupancy and provide additional care services to residents in this market. Our first resident moved in on February 20th and we expect all 44 to be in place by the end of Q2. I'll now turn it over to Jeff to take you through our financial results.
Jeffrey Brown: Great. Thank you, Karen. As shown on Slide 6, net income in 2023 was $128.3 million compared to $49.5 million in 2022. 2023 net income included a gain on sale from the Ontario long-term care platform, which was completed on September 6th, 2023. FFO from continuing operations was up 19.7% to $122.2 million as compared to 2022 and FFO from total operations increased 4.9% to $133.2 million in 2023 compared to 2022. FFO growth was driven by strong operating results at our property portfolio. 2023 same-property occupancy increased 250 basis points to 81.1% and our same-property adjusted NOI increased 14.3% or $23.6 million. 2023 FFO growth was partially offset by higher finance costs from rising interest rates and $10.8 million of higher G&A expenses, primarily due to $4.7 million of higher unit-based compensation costs related to the increase in value of our trust units, $2.4 million of CFO transition costs, and $1.6 million of higher performance-based compensation costs. Looking at Q4 2023, net loss was $13.2 million compared to net income of $47.5 million in Q4 2022; primarily due to lower gain on asset sales; negative changes in fair values of financial instruments, primarily due to increase in trading prices of Chartwell trust units; higher impairment losses; lower income from discontinued operations due to the sale of the Ontario long-term care platform; and higher G&A expenses. These were partially offset by higher deferred tax benefit, higher resident revenue, and lower direct operating expenses. In Q4 2023, FFO from continuing operations was up 41.4% and FFO from total operations increased 17.2% compared to Q4 2022, as operating results in our core property portfolio continued to show strong improvement. In Q4 2023, our same-property occupancy increased 460 basis points to 84.1% and our same-property adjusted NOI increased by $9 million or 21.5%. FFO growth was partially offset by $4.1 million of higher G&A expenses, primarily due to higher unit-based compensation costs of $2.8 million due to the increase in value of our trust units and $0.7 million of higher performance-based compensation costs. Moving to Slide 7, which summarizes our same-property operating platform results. all of our platforms posted occupancy gains in Q4 2023 compared to Q4 2022. Our Western Canada platform same-property adjusted NOI increased $1.7 million or 11.6%, our Ontario platform same-property adjusted NOI increased $5.5 million or 24%, and our Quebec platform same-property adjusted NOI increased $1.8 million or 39%. Turning to Slide 8. At March 7th, 2023, liquidity amounted to approximately $368.4 million, which included $32.4 million of cash and cash equivalents and $336 million of borrowing capacity on our credit facilities. In 2024, we have $181.6 million of mortgage debt maturing at the weighted average interest rate of 3.1%. We expect to renew or refinance these loans during the year. We also have a $125 million term loan maturing in May 2024. We expect to refinance or repay this loan with the proceeds from the sale of our non-core assets. At March 7th, 2024, 10-year CMHC-insured mortgage rates are estimated at approximately 4.3% and five-year conventional mortgage financing is available at approximately 5.4%. I will now turn the call back to Vlad to wrap-up.
Vlad Volodarski: Thanks Jeff. Moving to Slide 9, our 2024 outlook is based on the continuation of favorable industry dynamics that benefited the senior housing sector in 2023. We expect strong demand for our services, driven by the demographic growth of the population of people over the age of 75, slower pace of construction activity, continuing shortage of long-term care beds, and obsolescence of some of the existing inventory. We expect these favorable conditions to support occupancy and revenue growth in our portfolio in 2024. We expect continued moderation of inflation and interest costs in 2024 positively impacted -- impacting our operating and financing costs. We expect our April 2024 occupancy to be 85.7%, 80 basis points higher than our December 2023 occupancy, reversing the usual seasonal declines experienced in prior years. We anticipate continuing occupancy growth in 2024 as we continue executing our proven sales and marketing strategies. We expect to achieve rents and services rate increases of approximately 5% in 2024 and as a result of this expected occupancy and rate growth, we expect our same-property adjusted operating margin to increase to approximately 38% in 2024 from 34% in 2023. We will continue our work reimagining corporate support services where we make data insights, tools, and training available to our residents management to empower more independent, faster data informed decision-making. This will allow us to make this corporate support more effective and cost efficient. We expect these initiatives to result in sustainable reduction of our G&A costs to offset the reduction of management fees associated with the wind up of our joint venture with Welltower. With the improved operating results, strengthening of our balance sheet, and additional liquidity generated through non-core asset sales, we expect to grow our portfolio with newer high-quality properties through our partnership with Batimo and through potential third-party acquisitions. We have also recommended feasibility and planning work on several development opportunities within our portfolio. We will continue to optimize our asset portfolio through accretive investments in our core properties and dispositions of non-core properties in 2024 and beyond. While we work to position our portfolio for long-term success, it is important to note that we operate in a sector with exceptional supply/demand characteristics, which are likely to continue for many years to come as illustrated on Slide 10. Demographic growth of the senior population combined with the existing post-pandemic pent up demand and improving customer sentiment towards retirement living, meets all-time low construction starts and the continuing shortages of long-term care beds across the country. These dynamics, combined with the obsolescence of some of the existing inventory over the next 10 years, will support strong growth in occupancy and rents and services rates in our sector. Our teams remain highly committed to capitalize on these positive dynamics to deliver sustainable, long-term growth to all our stakeholders. As is now becoming our tradition, I will close our prepared remarks with a story from one of our residences. The pictures shown on Slide 11 are from Chartwell Imperial Place in British Columbia, where celebrating milestones has reached a whole new level of importance. Recently, our resident Lifestyle Consultant, Nicola discovered a remarkable group of long-time residents, including Gwen, who has been living at Imperial Place since 2007. In total, six residents celebrated a decade or more at Chartwell Imperial Place last year, inspired by their decade-long connections, Nicola, together with front desk manager, Ashley and the foodservices team orchestrated a special celebration. The residents and their families were treated to a special evening of festivities, which included a gourmet steak dinner, accompanied by wine and specialty coffees. They even created customized designed decoupage glass medals for the residents to wear. This initiative is a great example of the commitment and creativity of our amazing employees who are always looking for ways to create exceptional experiences that are personalized and memorable. Thank you for your attention this morning. We would now be pleased to answer your questions.
Operator: Thank you. We will now take questions from the telephones lines. [Operator Instructions] The first question is from Jonathan Kelcher of TD Cowen. Please go ahead.
Jonathan Kelcher: Thanks. Good morning. First question, just on the occupancy gains that you've seen so far this year that are not really typical, what's been driving that? Has it been like the warmer winter or maybe give a little bit of color on that?
Karen Sullivan: I think that has helped everything from the outbreak season hasn't been as bad as in previous years to the pent-up demand that we have been expecting. So, -- and then a lot of our strategies in both marketing and sales. I just think it's, frankly, a combination of all of those things, a lot of effort and some things sort of going our way.
Jonathan Kelcher: Okay. And then on the 38% margin target, you gave some color on what you expect rate increases to be. But what's your thinking on occupancy to get to that 38%? Is it sort of similar growth that we saw in 2023 or does it accelerate?
Vlad Volodarski: Yes, it's a combination of all things that really drive the margins. It's growth in rental and services rates that we indicated continuous growth in occupancy at a pretty healthy pace that we've seen in the last 18 months or so and continuous work on controlling our expenses.
Jonathan Kelcher: Okay. And then -- and sorry, and Karen, just on the stuff -- the prospect pool at 51,000 versus the 25,000 contact list, what's the difference between those two?
Karen Sullivan: The 25,000, these are people who -- they're not -- they haven't said, hey, I want to come to this home or this home. They have said, I might be interested in the future. And so we're serving them content and information as they continue the journey to make a decision around that. That's what the difference is.
Jonathan Kelcher: Okay. And the 51,000 are people that have toured or said I want to come look at this place or this home?
Karen Sullivan: Yes.
Jonathan Kelcher: Okay. And then your closing ratio the 14% you talked about, would that be against the 51,000? Am I thinking about that correctly?
Vlad Volodarski: No, that's against initial contact. So, that's against people who first contacted us and then move-ins over initial contact. So, that's the 14% ratio.
Jonathan Kelcher: Okay. I'll -- that's helpful. I'll turn it back. Thanks.
Operator: The next question is from Pammi Bir of RBC Capital Markets. Please go ahead.
Pammi Bir: Thanks. Good morning. Regionally, you clearly have some good traction in all three of your core markets. If you think about this year, where do you expect sort of the biggest gains? And any markets maybe that you expect will probably just -- or may just continue to lag?
Vlad Volodarski: We expect to continue gaining occupancy in all of our markets where we operate. We historically talked about four markets where we had more challenges than in the others, Quebec City, Calgary, Durham region, and Ottawa. Quebec City has been recovering the fastest of all these four markets. They are gaining occupancy at a really rapid pace throughout 2023 and in 2024. Calgary has started coming back. The issue there that our properties were primarily independent living. Karen spoke about one example where we're adding government-funded care that will drive occupancy on that particular building and the other ones are coming back at a pretty healthy pace now. Durham region started recovering at the back end of 2023 and they continue into 2024 and Ottawa had seen some occupancy gains in 2023. Some of it came from some of the closures that are happening -- that happened in the marketplace at that point of time. They are still on a positive occupancy trend now, but Ottawa market will continue to be challenging in 2024 as well given the oversupply and continuous new supply coming into that market.
Pammi Bir: Thanks Vlad. That's helpful. And just going to your comments and Karen's comment on that agreement with, I think, it was Alberta Health. Have you been able to do those types of arrangements in other markets? And are there more of those types of opportunities available as you kind of think about the next couple of years?
Karen Sullivan: Alberta is a unique market for funded assisted-living, so we have other DFL that's in some of our homes, particularly in Edmonton. So, that was an opportunity in this home in Calgary to add those, but there isn't funded assisted-living, for example, in Ontario.
Pammi Bir: Right. Okay. And then maybe just coming back to, again, the outlook for occupancy. You had previously talked about getting to pre-COVID levels by the end of this year, which would put you at kind of 89%, obviously, you've made some very good traction there so far this year. So, is that still the expectation? It looks like your 2025 outlook hasn't changed. So, I think your 95% is the target still, but just curious if that 89% is still what you're aiming towards?
Vlad Volodarski: Yes, we're pushing as hard as we can to gain as much occupancy as possible in this positive environment and so yes, our expectation is to continue to grow occupancy and to get to 95% by the end of 2025 or earlier.
Pammi Bir: Even better. Okay. Just on the -- last one for me. On the G&A, it has been tracking heavier as we've seen over the last year or so and I think in Q4 as well. You talked about realizing some savings in 2024, but there's also expected to be some restructuring costs. So, just wondering if you can maybe frame that for this year and what sort of the G&A overall may look like? And if you could -- you do have an estimate of the -- estimated, I guess, restructuring costs related to the Welltower JV?
Vlad Volodarski: Yes. So, our expectation is that on the run rate basis, our G&A will be reduced in line with the management fees that will go away with the Welltower transition when that happens. 2024 will have some noise in the numbers because the changes in the G&A in part are driven by the timing of the closing of the Welltower transaction, which we're hoping to have in Q2, but exactly when in Q2, we don't know yet. Depending on the approvals we're waiting on the lenders' approvals to get this transaction closed. And then the estimate of severance costs, I'm not prepared to give you at this point in time, but we are committed to make sure it's very clearly disclosed in our filings when we incur actual costs.
Pammi Bir: Okay. And then just on that last point, will that all hit in one particular quarter? Or is it -- will it kind of be spread out over the course of the year or?
Vlad Volodarski: It may be spread out the majority though will probably be in one quarter.
Pammi Bir: Okay. I will turn it back. Thanks very much.
Operator: [Operator Instructions] The next question is from Himanshu Gupta of Scotiabank. Please go ahead.
Himanshu Gupta: Thank you and good morning. So, just looking at the NOI margin in Q4, it was down around 100 basis points on quarter-over-quarter basis. So, what led to that quarter-over-quarter decline in NOI margin?
Vlad Volodarski: Well, we are not -- I think it's maybe not the right to look at the margins on a quarter-by-quarter basis. There's some seasonality impacts and the timing of different costs. We didn't have a linear cost structure, it's a step cost structure. So, when properties hit certain occupancy levels, you can expect some increases in margins. In the next quarters, you might have nothing even though the occupancy continues to increase. So, generally, our revenues were up by a significant amount, 10%, I think, year-over-year and direct operating expenses increased in line with that. They're actually a lot lower than that, but because of the occupancy increases. There's also some timing of marketing costs in Q4 and performance-based incentives for our teams that exceeded their targets for this year that hit Q4 that you didn't have in Q3.
Himanshu Gupta: Okay, fair enough. Let's take a look at the NOI margin for 2024. And I think you provided for the same-property from 34% to 38%. How about the growth portfolio, like what are your assumptions regarding the growth portfolio?
Jeffrey Brown: Yes. Hi Himanshu. We're not able to provide estimates on the specifics of the growth portfolio because there's quite a diverse mix of properties in there. But on the same-property basis, we are anticipating it to grow from 34% to 38% in 2024.
Himanshu Gupta: Okay. And Jeff the growth portfolio is basically the Welltower assets, which we are keeping, is it fair to say that?
Jeffrey Brown: Yes. The Welltower assets we are keeping because of the change in our ownership levels move into the growth portfolio for this year.
Himanshu Gupta: Okay. And based on the disclosure you provided, I am getting to around 36% NOI margin for your growth portfolio. So, is it fair to assume that 36% also goes to 38%?
Vlad Volodarski: Himanshu as I said, so there are other properties other than Welltower properties in the growth portfolio, some of the properties that we acquired that have not hit stabilized occupancy levels, some of the development properties that have not hit stabilized occupancy level. So, it's not just Welltower portfolio. And at this time, we're not able to provide any guidance for the margins on that.
Himanshu Gupta: Okay. Okay, fair enough. Okay. So, maybe turning attention towards the acquisition side, two Batimo properties, looks like you will end up acquiring. What kind of cap rate should we assume? And it looks like these are stabilized properties here?
Jonathan Boulakia: Yes. There are two properties that we're actively working on to acquire, and we would expect to pay once we finalize the pricing, we would expect to be in the low to mid-6 cap rate.
Himanshu Gupta: Low to mid-6. Okay. And sticking to the balance sheet, what kind of leverage exit assumption do you have for the year-end? I mean assuming the NOI margin pans out, assuming that occupancy thing happens as well, what is the target leverage by the end of the year?
Vlad Volodarski: Well, our long-term targets is to run the company at below 7.5 times and interest coverage over 3 times. Specific timing of when we are achieving these is dependent not only on the operating performance at our property portfolio, but also on the timing of the non-core asset sales closing and potential growth initiatives that we have in our pipeline, but we are committed to get to those targets over time.
Himanshu Gupta: Okay. Okay, fair enough. And then the Ballycliffe, looks like that sale is not happening in the near-term, do you have a sense of timing on Ballycliffe closing?
Jonathan Boulakia: Yes, we would expect it to close in the first half of the year. So, by the middle of summer, we would expect it to close, but it's still in construction and so that's our best expectation now.
Himanshu Gupta: And Jonathan will the price we've renegotiated now or should we still assume a very similar disposition price for that?
Jonathan Boulakia: Yes. So, the sale agreement can be terminated by either side if we don't meet the April 1st date, which we will not. But we see puts and takes on both sides and evaluation of the asset. So, at this point, our expectation is that we would sell it for at least the price that we disclosed.
Himanshu Gupta: Okay. Okay. Thank you. And then, Vlad, I think in your prepared remarks, you mentioned about even excluding development opportunities and more acquisitions. So, when you say acquisition, these are outside of Batimo as well? Or you were talking just about those two properties which you are buying in there, another two properties, which you could be forced to buy?
Jonathan Boulakia: Sure. So, I can take that. So, we are partly referring to Batimo. We have the two that are in the, I guess, immediate pipeline and two more that have reached stabilization and -- but we are seeing a number of opportunities across the geographies that we're in, and we are actively looking at some of those opportunities and underwriting them. Nothing to discuss right now, but we are seeing a number of opportunities.
Vlad Volodarski: And on the development side, Himanshu, sorry, we have a number of, as you know, a number of potential development opportunities within our portfolio on the sites that we already own. And through our portfolio management activities, we identified a number of other potential opportunities. So, there's a lot of work being done on feasibility analysis on all of these. The numbers don't quite yet pan out, but with the continuous growth in rental rates and hopefully, some moderation in construction costs and interest rates, my expectation is that some of them will come very close. And when they do and we're comfortable to proceed, we might commence development in some of these sites.
Himanshu Gupta: Okay. And sorry, back to that leverage question. So, all these acquisitions and development will be done in the context of keeping leverage at 7.5 times?
Vlad Volodarski: That's the target.
Himanshu Gupta: That’s the target. Okay. All the very best. Thank you and I will turn it back.
Vlad Volodarski: Thanks Himanshu.
Operator: [Operator Instructions] The next question is from Jake Stivaletti of CIBC. Please go ahead.
Jake Stivaletti: Thank you. Good morning. I'll keep this brief. In terms of the pace of margin expansion, should we look at it in terms of the kind of the regular seasonality? I know the occupancy gains kind of blew the whole seasonal trend out of the water. So, are we expecting with the same seasonality as normal or is that margin expansion in 2024 expected to be kind of steady throughout the year?
Vlad Volodarski: Yes, I'd really prefer to look at the margins on an annual basis. There's different things that can happen during a shorter period of time that can move it a little bit one way or another. For now, if you have to, yes, let's assume the usual seasonality.
Jake Stivaletti: Okay. Yes, understood. And then still on the same topic and I guess looking at it on an annual basis, when you kind of reach that stabilized maybe 95% occupancy level, how should we think about margin expansion there? Will that exceed pre-COVID levels or do you kind of have a range in mind when you're at that stabilized occupancy?
Vlad Volodarski: Well, for sure, it will have to exceed the pre-pandemic levels because we have not been at 95% occupancy pre-pandemic. So, clearly, occupancy is the biggest driver rate and occupancy biggest driver of the margins in our business. And so when we get to 95% occupancy margin should be significantly higher than the 38% that we are expecting this year.
Jake Stivaletti: Okay. Thanks. That’s it from me. I'll turn it back.
Operator: There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Volodarski.
Vlad Volodarski: Thanks everybody for joining us today. And as always, if you have any questions, please do not hesitate to give any one of us a call. Good bye.
Operator: Thank you. The conference has now handed. Please disconnect your lines at this time. Thank you for your participation.
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