Extendicare Inc
TSX:EXE
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Extendicare Inc
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Good morning, ladies and gentlemen. Welcome to Extendicare Inc. Second Quarter Conference Call. Please be advised that this call is being recorded. I would like to turn the meeting over to Ms. Jillian Fountain. Please go ahead, Ms. Fountain.
Thank you, Dana. Good morning, everyone, and welcome to Extendicare's 2018 Second Quarter Results Conference Call. With me today is Tim Lukenda, our President and Chief Executive Officer; Elaine Everson, our Vice President and CFO. And today, we have with us Alan Torrie, your Chairman.Our 2018 second quarter results were disseminated yesterday and are available on our website, along with the supplemental information package. The audio webcast of today's call is also available on our website, along with an accompanying slide presentation, which viewers may advance themselves.A replay of the call will be available from noon today until midnight on August 24. Replay numbers and passcode have been provided in our press release, and an archived recording of this call will also be available on our website.Before we get started, please be reminded that today's call may include forward-looking statements regarding our future operations. Such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors in our public filings with the Securities Commission and suggest that you refer to those filings.As we discuss our performance, please bear in mind that all figures are in Canadian dollars, unless otherwise noted. With that, I'll turn the call over to Tim.
Thanks, Jillian, and good morning, everyone. We operate across the spectrum of seniors' care and across the country to meet the needs of a growing seniors population in Canada.As you can see on Slide 3, our services are provided under various brands that, together, cover the continuum of seniors' care. We are a unique investment opportunity in the Canadian market positioned to meet the needs of the Canadian senior when and where they need us.Turning to our Q2 and year-to-date financial results beginning on Slide 4. First I will highlight our Canadian and divisional operations, and Elaine will speak to our consolidated results later in our presentation. Revenue improved by 2.5% for the quarter and 2% year-to-date, driven by funding enhancements in LTC and home health care, continued growth in retirement, including the recent acquisition, and in our management consulting and group purchasing divisions, partially offset by volume reductions in our home health care operations. EBITDA improved by 17% in the quarter, an 8.5% year-to-date, with margins of 9.9% and 8.6%, respectively. This quarter's results were favorably impacted by the timing of Good Friday. On a year-to-date basis, the improvements from our retirement, management consulting and group purchasing divisions and lower administrative costs were partially offset by declines in our LTC and home health care operations, which I'll cover shortly.Our reported AFFO of $17.1 million improved by 20.3% this quarter and by 18% year-to-date to $31.8 million, reflecting improvements in earnings and lower current income taxes, partially offset by increased capital maintenance expenditures.Turning to our long-term care operations on Slide 5. NOI is down by $400,000 this quarter and by $1.3 million year-to-date due to overspending under the LTC envelopes and labor-related accrual adjustments. And year-to-date comparison is further moderated by a prior period revenue pickup of $800,000 in Q1 2017. Our average occupancy improved sequentially this quarter from Q1 2018, although remained slightly below the same 2017 period due largely to the intense flu season and in part due to the fill-up of our new 24-bed addition in Alberta.This addition to our LTC in Edmonton was completed in February and reached stabilized occupancy in April. It is anticipated to contribute approximately $600,000 of NOI annually.On the LTC redevelopment front, as previously announced, we received approval recently of 2 -- for 2 of our redevelopment applications: one in Stittsville, a growing Sudbury (sic) suburb of Ottawa; and the other in Sudbury. Both are 256-bed centers and we are optimistic that we will be breaking ground on them later this year.In addition, we were granted 158 new LTC beds in connection with the redevelopment of 3 of our other LTC projects in Sault Ste. Marie, Sudbury and Peterborough, which projects are still in that government's review process. We are encouraged by the emphasis the new government has put on new LTC beds to reduce ALC pressure in hospitals.We plan to participate in further request for new LTC beds to leverage the redevelopment of our older centers and where beneficial, to enhance a new campus of care opportunities. In all, we have 21 centers in Ontario to redevelop, and we continue to work collaboratively with the ministry to move all of our projects through the approval process.Turning to our Esprit Lifestyle division on Slide 7. We continue to achieve significant growth in occupancy and NOI from these operations. This quarter, we benefited from the acquisition of Lynde Creek Manor, and it, along with Douglas Crossing and 2 communities underdeveloped, comprised the nonsame-store category. Combined, these operations improved NOI by $900,000 this quarter and by $1.1 million year-to-date, and we achieved organic growth of $1 million quarter-over-quarter and $2.2 million year-to-date from 7 communities, 4 of which are in lease-up.Occupancy at our 4 stabilized communities was 92.6% at the end of June 2018, showing improvement from the end of the first quarter and in comparison to June of 2017. This is down slightly from the end of December due to higher attrition experienced during the winter. Our lease-up community saw an improvement in occupancy from 68.6% at the end of 2017 to just under 81% at the end of June. And in July, they achieved 85%. We are very pleased with the continued growth of our retirement operations through acquisition and development. As previously mentioned our new 103 Suite Douglas Crossing welcomed its first resident on October 30, 2017. And after just 9 months, it's already at 91% occupancy. This is significantly ahead of schedule. And as a result, we have a 47-suite addition under construction that's due to open this November. Interest for this site has been robust with 39 deposits on hand for the addition. The total retirement community of 150 suites has an expected NOI yield of 8.6%.In addition, we have 2 development projects under construction in attractive markets in Bolton and Barrie, Ontario that are anticipated to deliver NOI yields of 7.6% and 8%, respectively. These sites are targeting to accept residents in early 2019 to Bolton Mills and in early Q3 2019 to the Barrieview. To date, we have 18 deposits on hand at Bolton Mills and are busy with tours and inquiries at the recently opened presentation center for The Barrieview, and we have 4 deposits on hand thus far. With the Barrieview Retirement Community, we are exploring opportunities to partner with TELUS to create a smart retirement home, which we hope will provide a prototype for future projects.We are exploring technologies that will enable independence by helping connect our residents with the information they need to stay well longer as well as technologies that will help our wellness teams connect more effectively with our residents, and with health care providers both within and outside of Extendicare.Following completion of these 2 communities, our Esprit platform, which we launched a mere 2.5 years ago will be up to 11 communities with 1,052 suites.As indicated, we completed the acquisition of Lynde Creek this quarter for cash of about $34 million. We are pleased with the addition of this unique and desirable community to our growing retirement portfolio. In addition to the high-end retirement residence of 93 suites, the acquisition comprises a 113-unit townhome development, we refer to as The Village in the form of a life lease, a unique model, for the Canadian retirement marketplace. The Village provides a source of future occupants for the retirement residence and an opportunity for us to offer our home health care services, enabling the seniors to remain in their homes longer. The acquisition also includes a 3.7 acres of surplus land overlooking ravine creating an ideal opportunity to expand our service offering with an independent living development.Another opportunity to expand our service offering and create a campus of care is our Port Hope Retirement Community, Empire Crossing. This acquisition also came up with excess land when we acquired it in 2015. With the 63 suites now stabilized, we are planning to double its size with the addition of independent living suites. We are also exploring the addition of separate, dedicated memory care and assisted-living residences on the site, creating another campus of care community.Turning to our home health care business on Slide 11. Our home health care operations continued to be impacted by volume declines quarter-over-quarter. However, from Q1 2018, the volumes were relatively unchanged. Initiatives to attract PSWs in a tight labor market are underway, which we expect will allow us to capitalize on growth in demand. Specifically, we have introduced new compensation grids to attract and retain new and experienced PSWs. Early indications would suggest that we have experienced success with this initiative. Also, we have recently successfully launched new enterprise software to replace 3 legacy systems. The rollout of the new software is anticipated to be completed by the end of 2019 and is expected to enhance ParaMed's operational capabilities significantly. Despite the drop in volumes over 2017, the impact on our quarter-over-quarter revenue and NOI was mitigated by funding enhancements, a favorable mix of services, the timing of the stat holiday and some cost-savings.Our other Canadian operations consist of our Extendicare Assist Management and Consulting Services, and SGP Purchasing Partner Network, our group purchasing division. These business units continue to see growth during 2018 with the addition of last quarter of 3 managed centers, 416 beds by Assist and new contracts thus far in 2018 for SGP, representing over 5,100 residents and growth of 12% from a year ago. NOI was up $700,000 or 27.6% this quarter and $1.5 million year-to-date. We continue to experience increased demand for our day-to-day management services and clients are turning to us for assistance with their redevelopment efforts, where we provide analysis, application support, and development services. In fact, Extendicare Assist recently secured a contract to provide consulting services to Lakeside LTC Center of the University Health Network in connection with the redevelopment of their long-term care center.With that, I will turn things over to Elaine to review our consolidated results. Elaine?
Thanks, Tim, and good morning, everyone. Tim has focused his remarks around our Canadian operations and specifically the NOI of the operating division. And I will touch briefly now on our reported consolidated results as outlined on Slide 14.The improvement in NOI this quarter from our Canadian operations of $3.7 million or 11.3% was offset in part by a lower contribution from our remaining U.S. operation, bringing our increase in consolidated NOI to $2.4 million this quarter with a NOI margin of 13% compared to 12.4%. And a reduction in our administrative and lease cost brought the improvement in our adjusted EBITDA to $2.7 million over the same period of 2017.The decline in earnings of our remaining U.S. operation relates to income of the Captive on its investment health to settle self-insured liabilities remaining from those former operations. The investment income was nominal this quarter compared to $1.3 million last year. Similar factors impacted the consolidated NOI for the 6 months ended June with the $2.9 million or 4.6% improvement from our Canadian operations, partially offset by lower Captive investment income of $2.7 million, resulting in a relatively flat consolidated NOI of $65.6 million, with a NOI margin of 11.9% compared to 12.1%.The earnings of the Captive do not impact our AFFO, as the settlements of liabilities is funded by the investment. AFFO this quarter and for the 6 months reflects the improvement in adjusted EBITDA and lower current income taxes, partially offset by an increase in the amount of maintenance CapEx and interest expense this quarter. We anticipate our effective tax rate on FFO will be in the range of 16% to 18% for the 2018 year. Our payout ratio was 62% of Canadian AFFO compared to 74% in Q2 of 2017, and on a year-to-date basis, was 67% in 2018 compared to 79% in 2017.Now turning to our financial position on Slide 15. Our total long-term debt at June 30, was $535 million and relatively unchanged from year-end, with scheduled debt repayments partially offset by construction loan draws.At June 30, our weighted average interest rate was 4.8% and the weighted average term to maturity on the debt was 8 years. Our debt to GBV was 46.5%, and EBIT to interest coverage was relatively unchanged at 3.2x.We ended the quarter with cash on hand of $64.8 million, representing a decrease of $63.4 million from the end of last year, primarily attributable to the acquisition of Lynde Creek in the second quarter, gross capital expenditure, purchases of common shares under our normal course issuer bid and costs incurred in connection with the refinancing of our convertible debentures this past quarter.During the second quarter, we were able to release a further USD 4.5 million of the Captive's reserve following an independent actuarial review, confirming the adequacy of our provisions for potential claim settlement. And as a result, we plan to repatriate a further USD 7.5 million of cash from the Captive in the third quarter, bringing the total repatriated since the sale in 2015 to USD 28.5 million. With that, I would now like to turn it back to Tim for his concluding remarks.
In conclusion, Q2 of 2018 reflected increases year-over-year in revenue, EBITDA and AFFO, reflecting a strong performance year-to-date by our Esprit retirement division as well as continued growth in our management services and group purchasing. We have undertaken a number of initiatives to address the PSW scarcity in Ontario that has moderated our ability to meet growing demand for home care services. We believe that home health care continues to be a critical component of the health care delivery system to meet the needs of a growing seniors population throughout Canada, and we are enhancing our foundation to capitalize on this market-leading position.We are also optimistic about the momentum we have with the redevelopment of our Ontario C beds and envision this to be the start of an extended LTC development phase for Extendicare across the province involving 21 centers and over 3,400 beds. This market leadership position and redevelopment is providing opportunities to leverage our consulting and design services through Extendicare Assist, and we anticipate more of this to come. We are delivering on our strategy as well as to enhance our nongovernment funded revenue through the growth in our Esprit platform with additional organic development underway.I would like to close by saying as we embark on our 50th anniversary, our mission is helping people live better. The quality of our care and quality of life of our residents and clients is our #1 priority and gives purpose to everything we do. On a personal note, I recently announced that I will be stepping down from my role as President and CEO of Extendicare as soon as my successor is identified. Well, there is never a perfect time for a transition of this nature, it was decided in discussions with the board that this would be the time to begin an orderly transition of my role to a new person to lead the company through its next phase of growth and continuing success.That concludes our remarks. We'd now be happy to take any questions that you may have.
[Operator Instructions] And the first question is from Lorne Kalmar from TD Securities.
You guys had a pretty good quarter on the home health operations there at 11.4% margin. Do you guys think -- I guess, where do you guys see that going through the back half of the year?
Lorne, it's Elaine. The quarter at 11.4% margin was impacted as we indicated by the timing of Good Friday and a number of other funding adjustments and mix. I think if you look at the year-to-date margin of 9.8%, I would suggest that we don't really expect a lot of change in that over the balance of the year in the near term. We're continuing to make investments around our PSWs and recruitments. So I think, looking forward and focusing on the year-to-date margin would be the appropriate way to look at it.
Okay, great. And then could I just get a little more color just around the $1.3 million of additional revenues. Is that -- what is that exactly related to?
Are you on the home care side?
Yes, still on the home care side. Yes, yes, sorry.
The additional revenues in the quarter and year-to-date, we had some funding increases announced on the home care side both on the -- with respect to PSW and nursing, so those funding increases with certain increase in revenue.
And those will carry through, right? Those aren't one-time increases?
Those are not one-time things. Those will carry through, that's correct.
Okay, great. And then lastly, are you guys seeing much on the acquisition front for retirement homes now?
We continue to see product that's coming around. We're trying to be selective on markets and opportunities. We prefer newer buildings in suburban-type markets. And so we're kind of being selective on the acquisition front as we are -- at the same time as we discussed building our own buildings, which allows us to pick the markets and be quite targeted in where we want to develop the buildings and the type of services that we want to offer in those buildings. So we are seeing both or we're doing both. But right now our focus, of late, has been more on the development side of our own.
The next question is from Chris Couprie from CIBC.
Congrats on the retirement. Just maybe finishing up on the home care, couple of questions there. The rollout of the new software that you're anticipating by the end of Q3 '19, can you just elaborate on what that's going to do for the business.
Sure. Prior to our acquisition of the Revera home care Business when we doubled the size back in 2015, we actually had 2 operating systems of our own in ParaMed. Then we bought the Revera home health care system and they had a different operating system, and so we've been operating with these 3 different systems that create a lot of inefficiencies in our flow and process. We've been -- we're moving towards what is considered to be the industry standard software operating system for home health care, and it's kind of an end-to-end solution that allows us to improve the efficiencies in the intake, the scheduling, the deployment, the billing. So it's truly an end-to-end system, where we'll be dealing on one platform as opposed to the multiple platforms and the complications that causes. So it's all of those things and we're looking forward to getting to that end state by -- hopefully, by the end of '19 where we'll be up and running across our platform on that new system.
So what will that do though? Will it lead to higher volumes? Will it lead to just lower costs?
Yes. So it's a combination of things. It should be some efficiencies in our overhead and our -- the way we operate our branches and the system overall. But also, probably more importantly, it's the working out any wrinkles in the scheduling and helping us deploy our resources -- our human resources as effectively as possible to make sure that we're capturing the opportunities that are presented to us in the way deploy our staff.
Okay. So I guess the latter is a little more to quantify, but what in terms of overhead efficiencies, any kind of cost-saving target that it would result in?
I don't think we've identified a target at this point for that, Chris. We'll think about that and if we have something that we can quantify, we'll report that in the future. But it's going to be something that we realize over time as this is implemented.
Okay, great. And then just on the PSSO, we haven't really heard anything about this organization in a while. Kind of know where the liberals stood on home care as well as the NDP, but the PCs didn't seem to really have anything in their platform calling out home care. Just wondering if you have any idea where the current government stands on home care?
Yes. We don't have a specific pronouncement as of yet Chris, you're right. But we're confident that the future of that agency is unlikely to unfold. We believe that the new government sees that as part of their theme for the election was reducing unnecessary government, and duplication or wasted cost in the government processes, and we've been positioning all along that, that's a duplicate offering and adds to overhead for the system as a whole unnecessarily without improving the system in any way. So we've had discussions through directly and through our group of providers with the new government and they clearly understand our position on that new agency and the lack of benefit that it brings to the delivery of home care in Ontario. So we're quite confident that they'll see it that way and that, that agency won't get underway.
Any chance that the structure of home care contracts could change with the PCs?
Yes. We don't know that. It's a good question. I think the PCs have indicated that they're going to look at a lot of different sectors and the way services are delivered to try to find different efficiencies or improvements on the system. What we think is important is that with our leading position in the sector and the voice that we have in discussing these kinds of things with the government that we'll help shape that future state. So being a good provider, having the resources, having the platform will position us well for however that system evolves. And there are certainly opportunities for improvement in the system and its design that we think will happen over time and we wanted to be at the table and we are at the table in having those discussions as for a future statement. Nothing has been decided to this point.
Okay. And just last question on home care before I turn it back. What happened in BC? I thought there was supposed to be a recovery in the hours this quarter?
There hasn't been a lot of development in BC. The volumes, I think, are fairly stable. It's under an existing contract, but no significant development in the quarter in BC, Chris.
Yes, I don't have great visibility on that either Chris. I think there is some issues at the government level in terms of how they're administering their budgets and perhaps some rationing on the hours that they're being -- that they're delivering or that they're asking us to deliver. That seems to have been rationed to do some budgetary constraints that are ongoing, but we don't have good visibility for that. We think longer-term, there is certainly the same kind of demand trends and desire for more home care, but we think it's a current budgetary challenge that they're facing.
Got it. So we shouldn't really be forecasting a rebound necessarily in the back half?
We just don't know. It's hard to say.
The next question is from Matt Logan from RBC Capital Markets.
In the retirement segment, can you remind us which homes are still in lease-up? And how we should think about the occupancy trajectory in the back half of the year?
Sure. Just grabbing the list for you of those still in lease-up. We have Uxbridge, which is our Douglas Crossing that is the -- it's fairly stable, but the opening of that is -- the opening of that is in the fall, so there'll be a lots happening there. Of our portfolio, the ones that are stabilized are our Empire Crossing, the Lynde Creek that we acquired in the quarter and our Riverbend and Stonebridge communities in the west. Everything else is still sort of in lease-up, in various stages of lease-up and -- but occupancy is growing strong and we're seeing a greater trajectory on them.
Okay, fair enough. Maybe could you give us a little more color on what distinguishes a smart retirement home, that sounds like a pretty exciting initiative with TELUS.
Yes. It's very much -- we're very excited about it, but it's in its early stages right now, Matt. What we want to do is take some of the efforts that a company like TELUS has had to develop the smart home and the way they're using technologies in the home and try to apply that and more to the retirement environment. So we think there is the focus on trying to enable independence and helping people stay in retirement longer and that could be things like monitoring, using technology to help monitor, provide vital signs eventually. Those types of things that we think are really exciting future possibilities as well as helping them connect both socially and with medical providers and others in the community in terms of medical records, information, appointments, the things they want to do as well as the social opportunities in terms of interaction through iPads or other things to connect with family members and others in the community. So it's a far-ranging vision that is really at its early, early stages. So we're not saying we're there and that we're ready to cut a ribbon on some -- on a smart home type thing. But what we're trying to do is use our Barrieview development that's underway in Barrie as a kind of testing ground to start implementing and deploying these technologies with a view and a vision to evolving that over time.
Interesting. Would this be something that you could rollout to your existing homes over time, as the initiative progresses? Or would this be more geared towards new builds?
Either way. Most of the technologies we think are things that we could do wirelessly. And in other ways that don't require specific design elements or wiring at the construction phase. And so the ability to do most of that wirelessly, we're going to do it based on market opportunities. And we hope that it provides -- that this pilot will provide opportunities to roll it out to other locations, new and existing.
That's great. Just on your LTC redevelopments in Ottawa and Sudbury. What do you think are the general time lines for those 2 projects?
What we're hoping with those once we've now been greenlighted and we're hoping to be in the ground this year. Construction itself can take...
I would say probably I'd be on the conservative side saying 24 months. It's probably between 18 and 24 months. I think we were looking at Stittsville and sort of, if we can get in the ground this fall targeting late 2020 for an opening date.
But then the difference with a long-term care development versus a retirement is that the fill up once it's opened is much more -- is much quicker, it's almost immediate, right. Because we'll be moving residents from the existing location over to a new location. So it would fill up over the course of a month or 2, not the typical time that it would take for retirement even shorter depending on how we manage that transition.
And in terms of the existing homes, I guess, would these be new builds that the residents stay in place? And then once the new home is open, they just kind of move down the street?
Generally, that's the concept, yes. Where these are new developments that are going to replace existing developments in both of those markets. Where exactly the residents come from -- we have multiple facilities in each of those markets. So where the residents come from is something that we're working out through the transition process and that we identify and work with the ministry on how that phasing is going to work. But yes, the residents that are in existing buildings that will move over to the new buildings.
But there won't be any disruption, while the construction is progressing, is kind of what I'm getting at.
No. These 2 are completely greenfield projects, not connected to the existing properties.
Perfect. And in terms of development yields, how should we be thinking about the returns of the projects?
On those LTC projects, it's hard to put it all in one bucket and give you indication. Everyone is different, as you can appreciate depending on the size of the building, depending on greenfield retrofits, but we're confident that all of the ones that are on the table are delivering returns that are comfortably in excess of our cost of capital.
The next question is from Doug Loe from Echelon Wealth Partners.
Just kind of a secondary question about your U.S. self-insured liabilities which, obviously, isn't an overly key topic in your operations anymore, but I see that the gap between accruals and the cash investments you've set aside, that gap continues to be wide and you released some reserves in the quarter, you're going to release some more in Q3. Just sort of wondering if time lines to when your U.S. legal risk gets fully resolved? Is this -- should we just kind of project the historic trends linearly to assume that this will all wind down, say by the end of next year or early 2020? Or there -- could we maybe expect an acceleration of resolution of outstanding proceedings? I can see that wind down faster and have you released the reserves into your existing operations in Canada? And I'll leave it there.
Good question, Doug. And you've been around long enough to know, there've been other quarters where we've had to talk about other less pleasant news on that front. We're very pleased with the way that's winding down. It continues to wind down with surplus funds being able to be released as we did this quarter. We expect that it will, in an orderly fashion, wind down kind of in the time frame that you indicated over the next year to 2. But we are exploring opportunities if it makes sense to accelerate that. We don't have anything definitive at this point. We're going to be opportunistic and decide from a cost-benefit standpoint whether to just let it ride the way it is or to look at crystallizing that remaining portfolio. Now at some point in time, whether that's earlier or later, we believe that there's additional funds that we'll be able to bring back into Canada as a result of that.
The next question is from [ Josh St. Paul ] from Laurentian Bank.
I want to focus on your long-term care portfolio. This quarter, your NOI was about $1 million lower than what it was in Q2 '17 as well as in Q2 '16. So is it mainly related to the Good Friday? Or is there anything else?
Yes, that was probably one of the significant factors. There's probably 2 or 3 main drivers to that. The Good Friday timing impacted the comparability over the quarters. We have flow-through funding envelopes in Ontario and timing of spend and magnitude of spend in those can impact your comparability. And then we've also had some 1 collective agreement settlement that happened in the first part of this year that created a little lumpiness in the first part of the year. So those are the factors that can impact your comparability quarter-over-quarter. And -- but I think if you look at the year-to-date perspective, the impact of those will flatten out -- particularly the labor one will flatten out. I think that -- and I guess, the last comment I'd make if you're looking at trending year-over-year, first half of the year versus the last half of the year tends to have a bit of a variance in your margins with first half of the year being impacted by winter months, utilities, stats, those kind of things. So there's a number of factors.
All right. Now moving onto home care. So based on what you know in terms of new funding rates and your efforts towards improving the labor situation. Where do you think, the home care margins will settle down in, say, 2019 or end of 2019 like the long term?
I think it's hard to give you any particular guidance, but I think that if you look at our year-to-date margin this year, we're coming in at about 9.8%. I think that I wouldn't anticipate any significant change over that in the near term. But as we make our investments in the PSWs as we get our staffing to the levels we need them, we see upside. I mean, there is potential to deliver some of the more growing demand. So I see longer-term growth, but I can't really give you a target number at this point. But with that investment in the PSWs, our new systems, the growth and demand that we're seeing in the market, we'll see future upside.
Okay. Let me ask you differently. So before your Revera acquisition, your margins were in the 11% range. Do you think with the new portfolio and everything, you'll be able to go to that level at some point?
We've indicated in the past that we expect to. We've had some bumps along the way in the integration and challenges related to shortages in the market of the PSWs that have slowed that trajectory or caused some bumpiness along the way. But yes, we believe that we should be able to get there and that's our -- our longer-term goal will be to be there or higher.
Okay. And now to the retirement portfolio. Where do you think your occupancy will be by year-end, including the lease-up properties?
You know what I think if you look at the trajectory quarter-over-quarter in our lease-up communities, I think -- I don't have a combined -- we tend to look at community by community and the things that fill. I think if you look at the trajectory of our lease-up communities' occupancy, we're seeing that continue to grow. But a specific percentage, I don't have that in front of me for you. We can take that away and see if we can guide you at all.
[Operator Instructions] And the next question is from Chris Couprie from CIBC.
Just a one follow-up from me. I know it's very early days on the CEO search, but any color as to how that's going in terms of what type of individual is being sought? Is it someone that's more focused on the development side, given the LTC redevelopments that you have to do and the growing retirement home development platform?
With us on the call today is Alan Torrie, our Chairman, and I'd ask Alan to perhaps address that from his perspective.
Yes, sure. Thanks, Tim, and good morning, everybody. First of all, just by way of a bit of background here, Tim has been our CEO over the past 10 or 11 years and has really led the organization through the significant transition through the exit and sale of the assets in the U.S. to the new establishment of the Canadian platform. And we're all very grateful for the contribution he's made. Looking forward, in discussions between Tim with his own personal and professional objectives and with what the board sees as the needs of the company going forward, we came to this mutual agreement that now is a good time to make the transition and part of it is around the types of things that we expect the company to be doing and the types of value creation that we want to have going into the future. So we're going to keep within the executive leadership of the company within the board itself, a real balance between the asset side of the business and the health care side of the business. But, definitely, because of the nature of the regulatory environment we're in and the importance of the responsibility we have for the people that occupy our facilities on the health care side that we really are wanting to make sure that as we go forward, as Tim has done in the past that we keep our eyes focused on that significant responsibility, while at the same time ensuring that we've got the proper facilities, proper approach to the resources, both capital and human to make sure that we keep the right balance for the growth of the company going forward. We're quite enthusiastic about the company as it moves ahead in a Canadian context because of the diversification of the platform and the competitive advantage we feel that will give us going forward as we horizontally integrate it, but also the opportunities we have to continuously improve our execution on the performance side. So if you put all of those ambitions together into one picture, the individual that will be coming in to lead the company going forward will be able to cover all of those things through themselves and also through the team that is there and will be built around that. So as far as the search goes, we're -- as we have indicated, we're in the process of identifying the way forward, the appropriate candidate. Tim is here and we're expecting to have a very normal and productive transition. So we thank Tim for that standards that he's brought us to. We look forward to what we'll be able to do in the future with the new leadership.
So you're considering both internal and external candidates?
We're not -- yes, we're looking at everything, every possibility and we're narrowing it down. So we would consider the full gamut and we're not leaving any stone unturned.
There are no further questions at this time. I'd like to turn the meeting back over to Ms. Fountain.
Thank you, Donna. That concludes our call for today. This presentation is available on our website as are the call-in numbers for an archived recording. Please do not hesitate to give us a call if you have any further questions. Thank you, again, everyone, for joining us. Goodbye, and have a good weekend.
Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.