Sienna Senior Living Inc
TSX:SIA
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Sienna Senior Living Inc
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Ladies and gentlemen, welcome to Sienna Senior Living Inc.'s Q2 2019 Conference Call. Today's call is hosted by Lois Cormack, President and Chief Executive Officer; and Nitin Jain, Chief Financial Officer and Chief Investment Officer of Sienna Senior Living Inc.Please be aware that certain statements or information discussed today are forward looking and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to the Forward-looking Information and Risk Factors section in the company's public filings, including its most recent MD&A, for more information. You will also find a more fulsome discussion of the company's results in its MD&A and financial statements for the period, which are posted on SEDAR and can be found on the company's website, siennaliving.ca.Today's call is being recorded, and a replay will be available. Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides, which accompany the host's remarks, on the company's website under Events & Presentations.With that, I will now turn the call over to Ms. Cormack. Please go ahead, Ms. Cormack.
Thank you, Sherry. Well, good morning, everyone, and thank you for joining us on our Q2 call this morning.Our Q2 results are reflective of a balanced, large-scale platform where retirement provides organic growth and long-term care delivers stable, predictable returns. Sienna's Q2 2019 same-property NOI grew by 1.4% year-over-year. On a per share basis, diluted OFFO decreased by $0.018 year-over-year. This was largely due to a year-over-year increase of $775,000 in mark-to-market adjustments to our share-based compensation or $0.012 per share as a result of Sienna's increasing share price. In the first 6 months of 2019, Sienna's stock price increased by over 20%.During the quarter, we have continued to strengthen our balance sheet and ended Q2 with debt-to-gross book value of 46.6%. This is a reduction of 280 basis points year-over-year. I am pleased that for the second consecutive year, we are increasing our distribution to shareholders with an approximate 2% increase in Sienna's monthly dividend.Now turning to Slide 5. At an average occupancy of 98.3%, our long-term care portfolio remained virtually at full occupancy with waiting lists for each of our residences. Long-term care same-property NOI increased by 1.2% in the quarter.Now moving to Slide 6. Average Q2 occupancy in the Retirement portfolio declined by 3.2% year-over-year to 88.4%. There are a number of factors that are contributing to the softness in occupancy, including higher resident attrition rate in the portfolio that we acquired last year, excess supply in the Ottawa market, the continued harmonization of the Retirement platform, some disruption associated with property upgrades in the properties that we acquired in 2018 and an extensive renovation at one of our retirement residences in BC. Now despite the softness in occupancy, NOI growth was 1.6% in the Retirement portfolio as a result of rental increases and adjustments to operating expenses.Now moving to Slide 7. We have been focused on a number of initiatives to improve occupancy in our Retirement portfolio, which include intensified marketing campaigns in every local community we serve to increase awareness and attract prospective residents by profiling homes locally through a variety of channels. We are also implementing improvements to the sales platform and making ongoing enhancements to our operations and sales teams.In June, we launched a new website designed to support our targeted community campaigns, and we are striving to attract and retain an experienced team aligned with the Sienna values. We continue to invest in our people strategy. Recognizing the importance of employee feedback and team member satisfaction, we have recently implemented a new team engagement survey to monitor and measure engagement on a more frequent basis.Now turning to Slide 8 with supply and demand. Fundamentals in the Canadian senior living sector remains strong as the sector continues to scale up to accommodate the growth of the over-75 population. The key challenge is to match the rapidly growing demand for seniors residences with new supply. While some volatility is expected in the near term as the market is adjusting to new supply, our recent analysis based on data provided by CBRE highlights that by 2023, demand for retirement residences will outpace supply in Sienna's key markets. Our analysis, which is summarized in our MD&A, further indicates that there could be a short-term oversupply in some of Sienna's markets. While this may lead to some occupancy pressures across the retirement sector, we believe that Sienna's geographically diverse and balanced portfolio of retirement and long-term care residences should serve as a competitive advantage. With the majority of Sienna's retirement residences located in markets where future demand is expected to exceed supply, our platform is well positioned to take advantage of the growing demand.I will now turn the call over to Nitin for further details on Sienna's financial results.
Thank you, Lois, and good morning, everyone. I will start on Slide 10. Net operating income for the quarter grew by 1.4% or $539,000 compared to the same period last year for a total NOI of $39.9 million. This increase was largely as a result of organic growth. Note that the acquisitions from 2018 are included in our same-property results, offset by softer occupancy in our Retirement segment and the timing of expenses. The Retirement division generated same-property NOI of $17.4 million, an increase of 1.6% over the prior year. This was driven by a combination of market rate adjustments and rate increases, offset by variable expenses and softer occupancy. Sienna's same-property long-term care NOI for the quarter increased by 1.2% to $22.5 million as a result of inflationary increases. Diluted OFFO per share decreased by 4.8% year-over-year or $0.018 to $0.356. This decrease was largely the result of increased mark-to-market adjustments on share-based compensation as a result of Sienna's increasing share price.Diluted AFFO per share was $0.368 in Q2, down $0.032 from the prior year. This was due to lower OFFO as well as a decrease due to timing of maintenance capital expenditure of $1.9 million in Q2 2019 compared to $1 million in the prior period. We continue to anticipate maintenance capital expenditure in the range of 1.3% to 1.4% of revenue for the full year in 2019.As Lois mentioned, we had committed $5 million for capital improvements to make enhancements to the 10 retirement residences acquired last year and had also set aside $2 million in renovation capital for the retirement property we acquired in BC in 2016. We expect most of the work in connection with these capital improvements to be materially completed by early next year.Now moving to our financial position on Slide 12. We continue to strengthen our balance sheet. At the end of Q2 2019, Sienna's debt-to-gross book value was 46.6%, a reduction of 280 basis points from Q2 2018. Sienna's debt-to-EBITDA declined to 6.7x in the quarter compared to 7.5x in Q2 2018.Our interest coverage ratio remained high at 4x, and our weighted average cost of debt was lower by 20 basis points year-over-year to 3.7%, highlighting our refinancing initiatives over the past 4 quarters. We will continue to effectively manage upcoming debt maturities and focus on maintaining a healthy level of liquidity and a favorable credit rating for Sienna's Series B Debentures. We ended the second quarter with approximately $129 million in undrawn credit lines and cash, which we -- can be used to further drive the company's strategy. As a strong vote of confidence on the execution of Sienna's strategy, we are pleased to increase Sienna's monthly dividend by approximately 2% from $0.0765 per share to $0.0780 per share or to $0.936 annually going forward. The increase will commence on September 13, 2019, payable to shareholders of record on August 30, 2019.With that, I'll turn the call back to Lois.
Thank you, Nitin. For the balance of 2019, we intend to further harmonize our Retirement operating platform and focus on initiatives that will position Sienna for continued growth. These initiatives include investing in our team, intensive marketing campaigns, implementing an enhanced sales platform and making further suite and amenity upgrades in the Retirement portfolio.We remain optimistic about future development opportunities. Our focus is developing senior living campuses, which provide a wide range of options and services to seniors in one location. Three such projects in the pipeline which remain subject to some planning and feasibility studies have received the first level of approval from the Ministry of Health.We also continue to pursue intensification opportunities at existing retirement residences. We are currently finalizing plans for an expansion at our Kingsmere Retirement Residence in Alliston, Ontario. In July, we welcomed our first residents to the recently completed expansion of Island Park in Campbellford.Looking ahead, we expect the long-term care portfolio to deliver growth consistent with 2018. In the Retirement portfolio, we expect occupancy for the next 1 to 2 quarters to be comparable to where we ended Q2, resulting in an estimated year-over-year growth range from flat to low single digit for 2019. With an exceptional team, a strong operating platform, a solid balance sheet and a strategy in place, I am confident in the company's future. Thank you for your participation on our call today. And we will now be pleased to answer your questions.
[Operator Instructions] Our first question comes from Brendon Abrams with Canaccord Genuity.
Nitin, just to be clear, is the Baybridge portfolio included in same property for this quarter?
Yes. Your voice is a little bit light, Brendon, but yes, it is included and everything is same property because the last transaction we closed was in March 28, 2018. So starting in Q2, everything is same property.
Okay. Good. I just wanted to confirm that. And on the distribution increase, perhaps you could just provide some color on that. Are you targeting a specific payout ratio? Or you just thought the business could support kind of a higher dividend at this time?
Sure. So again, this is a dividend policy we review with our Board every quarter, and our objective is to pay a sustainable dividend. Because of our diversified platform, it's more than half of our NOI coming from long-term care. For example, in 2018, our long-term care segment generated close to $88 million in NOI, and we paid around $62 million in dividend. So just that business alone covers most of our dividend.Our dividend payout ratio has been on the lower side, around 62.5%, and we do not really target a specific payout ratio. Our focus has been managing our balance sheet, which, as we shared in our MD&A and our remarks earlier, we believe we have a very strong balance sheet. We have ample capital to grow, so we believe it's a good time to put a dividend policy in place.
Okay. And just with respect to occupancy, obviously it trended down the last few quarters. I don't think you're alone in terms of the industry. But what -- in your view, what kind of needs to change here where we see some stabilization in occupancy levels and it starts to trend upward again? Is it supply levels moderating? Is it the demand side? In your view, what kind of needs to happen over the next little while to reverse the trend?
I think every market is unique, Brendon. It is a local business, so it very much depends on where you are and what's happening in that community. So for example, the Ottawa area is extensively oversupplied, as we've been calling out now for several quarters. And with the acquisitions that we did last year all being same property now, we actually have 4 properties in the Ottawa market in and around -- within the periphery of that market, which is oversupplied. So that's certainly having an impact on us. And that's really just going to take time for that market to settle down because over the long term, as you know, if you know the CBRE studies, by 2023, there is a growing demand in that market, as in every other market, but there also continues to be new supply coming into that market. So it really is a function of what's happening at every local level where you are, and so we're doing a number of things.For us, there were a number of things that caused the softer occupancy that we called out, including some upgrades that we're doing to the properties and renovations and so on. So I think it's very dependent on a community, but we know that we've got a good strategy in place, some very solid marketing strategies, and local relationships and so on that we believe are the right thing for us.
Our next question comes from Jonathan Kelcher with TD Securities.
First, on -- that's a good disclosure on the new supply that you've put in there. That's very helpful. And I think, Lois, you talked -- short term, you expect some oversupply, although by 2023, it looks like the supply is only 50% of estimated demand. Now just first before I ask that one, on the disclosure, is that new supply that's in the ground?
That supply that -- so CBRE did this for us, like we were interested clearly in the markets that we're in. And so this is new supply that we're aware of today that's known to be -- it's somewhere between planning -- or it's between planning and near opening. So that's what's known today.
Okay. And then you talked about oversupply near term. Do you have any sense when that turns?
Well, again, it's very local. So in some communities, there is -- there won't be excess supply because we may, for example, be the only operator in that area. So there's no issue. Though in others like, for example, Durham, where we know there's short-term pressure because of excess supply, and we're just kind of waiting to see what happens. We know that in South Surrey, there's a couple of new developments coming on within the next year. And again, they're very unique and also depends not only what's coming on when but what it is and whether it will compete with our product or not. So we're just kind of keeping our eye on that market as well.
Okay. And you talked about having lower labor costs relative to your lower occupancy. How much can you control that?
Well, it is -- there is -- as you know, a large percentage of the costs are fixed. But when occupancy does drop, we're able to reduce some of our operating expenses, particularly around dining room service and depending on how many residents would be receiving assisted living and care services. So we're able to reduce some variable expenses when there is a drop in occupancy, and we manage that very closely to make sure that we're still delivering great service to our residents.
Okay. And then just for Nitin. The taxes were lower this quarter on new, I guess, legislation. Do you -- what do you expect for current taxes over the balance of this year?
So Jonathan, previously we guided -- before this accelerated investment incentive came around, we guided around $8 million to $9 million of cash taxes for 2019, and our current forecast would be between $7 million to $8 million.
Our next question comes from Chris Couprie with CIBC.
Just wanted to follow up on the supply disclosure. When you're looking at the supply under construction, what's the kind of catchment area that you're looking at here in terms of relative to where your properties are? For example, in Ottawa, I think you only have one property that's in Ottawa proper. So I just want to kind of get an understanding of how the classifications work.
Well, typically, the way it works is supply normally comes within -- if it's in an urban area, it's within sort of a 10-kilometer radius. If it's in kind of a tertiary market, it would be a larger area, usually, again, drawing on -- if it's in a town, for example, like Campbellford, we tend to draw from all of Campbellford and a little bit beyond. So it really depends on the nature of the community and whether it's primary or tertiary. But what we can say specific to the Ottawa area is that there's just excess supply not only in Ottawa proper, but the whole surrounding area like Orléans and outside of Ottawa, right? Moving into [ Campville ] and Beaumont and all of those areas, there's a lot of supply.
Okay. So your classifications don't necessarily correspond with CMHC's?
Not necessarily. Like, again, we know what the movement is to each of our residences. And we map by postal code, so we know where our residents are coming from and what percentage come from there. The other function is when families move to an area, and this is often the case in areas like Kanata. When families move in, their parents will follow shortly after, maybe moving from Toronto or some other area.
Okay. Switching gears. The -- I'm not sure if you called it out and I missed it. What is the impact of Good Friday on this quarter compared to the prior year?
Yes. For Retirement, that's pretty small, less than $100,000. And now just to clarify, year-to-date, there is no impact, right, because we -- Q1 and Q2 got reversed. And in long-term care, the impact would be a bit bigger, close to $400,000.
Okay. Great. And then just maybe thinking about the acquisition outlook. So there was a large portfolio that traded earlier this year. Can you maybe just talk about what you're seeing, how the pipeline looks, especially given occupancy pressures in -- within certain geographies?
Yes. We would say that there's always opportunity for acquisition. Vendor expectations are high. We're always looking for whether we're -- it has to be strategic for Sienna where we know that we can add value and fits with our investment criteria. We can say there's nothing imminent, but we can't really comment beyond that.
Our next question comes from Pammi Bir with RBC Capital Markets.
Just maybe coming back to the new supply discussion. Do you have a sense of what that new supply is as a percentage of the existing inventory in those markets?
I think what we can comment on is, Pammi, where does it impact us. I mean there is not a very good data source in Canada which tracks everything. So I think the disclosure we provided is probably as good information as we have at this time, where -- properties that we have or number of suites that we have and what are the new suites coming in which would have an impact on us.
Yes. And again, it would depend on each local community what -- how many are opening over what period of time and then in which community because it really is a very local business.
Yes. I know. I understand. I was just thinking about, for example, again, if Ottawa is that particular market or Central Ontario where there's 1,300 suites, that catchment area, I was just curious if you had a sense of what the actual inventory in that market was, including your own inventory. Like is it 5%? Is it 10% that's under -- or planned -- being planned in that particular market?
Yes. It's a good question. We just really don't have a good line of sight on that at present.
Okay. Just if you think about the same-property NOI by region, do you have a sense of what that looks like, the same-property NOI growth between BC and Ontario?
I mean this is something we don't disclose just because our -- both sides of the business, if you split them, are pretty small. And if you -- small numbers could have a pretty big impact on a percentage basis, but BC would have a higher same-property growth versus Ontario.
Okay. Just to maybe clarify. Ontario was still positive, though, right, I would think?
Yes. I think when you look at Ontario, you kind of have to look at excluding the Ottawa region because as we have been talking about for past few quarters, that market is oversupplied. So if you exclude the Ottawa region, for sure it would be positive.
Okay. If you look a little further ahead into 2020, how are you feeling about the outlook for the retirement home segment organically in terms of NOI?
Yes. Well, we think it's going to take a few quarters to stabilize and get our occupancy where we want it. Again, we have to always call out the exception of the Ottawa market because we don't see a lot changing in that -- in the -- probably in the medium term. So -- but overall, we would expect to stabilize into kind of low single digit in 2020.
Okay. That's helpful. And then just maybe lastly, some of the projects that you cited, the 3 long-term care projects and Kingsmere, what's the sort of magnitude of investments that we should be thinking about on these 4 projects?
So for Kingsmere, so the Allan Park project, we said that the cost of that is around $14 million roughly, and we expect to earn double-digit development yield on it. The Kingsmere one would be similar, a similar kind of investment, call it, $14 million to $16 million. We don't have the right numbers at the moment. For the 3 campus projects, again they are subject to quite a bit of feasibility still left to go, call it, roughly 500 long-term care suites, another 220 retirement suites or so. So call it close to $200 million to $250 million of investment over the next 3 years if they're financially feasible.
Okay. And then I guess -- I think you talked about the returns on the long-term care projects in the past. But are you still comfortable with that range, I guess, until you've done your feasibility studies? But is that sort of the ballpark we should be thinking?
Yes. We've received preliminary approval, but there's still work to do with government on the funding program for this. So every operator's in the same boat with us. We're still working with the new government on a program to get these projects moving and, yes, make it feasible for all operators.
And I think the only thing I will add, Pammi, just on the previous question of the investment, based on construction financing and amount of cash we would generate on an annual basis, we can do that development on our balance sheet. So that is our current intent.
Our next question comes from Troy MacLean with BMO Capital Markets.
For the new properties being built, the new supply you're seeing, are the operators getting aggressive on rents in order to fill the buildings? Or are they setting their rental rates near where existing market is?
It depends, Troy. I think every operator is a bit different. I was in London earlier last week, and there was a new supply that had gone into that market and they were undercutting going in. And some do this where they'll open and they just reduce the rent very low until they're full and then they try and increase it over time to market. Others don't. Others go in with the pricing that they want and maybe do sort of onetime incentives. And what often happens is it's older product in a market that may have to look at their strategy if they're being impacted.
Would you say kind of quarter-over-quarter that you're seeing more operators do that? Or is it just the ones that usually do that are the ones doing it now, but there's no change from the larger operators?
I think it really depends market by market what the dynamic is and whether it's a primary or tertiary market. And how much supply is in that market depends on kind of what the operator does. I think there are some operators that tend to have a strategy that go in lower and others don't or the kind of the reverse where they stick to what they want.
And the lower occupancy, that hasn't had an impact on the annual lift you get from your existing tenants, correct?
Right. So the -- yes, it has no impact on the current tenants. That's correct.
And then just my final question is around acquisitions. Given the amount of supply, would you buy a property and lease up now maybe if you got maybe a breakout appraised value? Or would you only look to buy stabilized properties right now?
I think it depends what it is and where it is. We look at a lot of things when we look at an acquisition. So it would depend.
And then I lied, I have one more question. Just given the challenges in Ottawa, you own 4 properties there, is that a market where you'd look to add over time? Or just how quick people are to add supply in that market. You're probably happy with the exposure you have and wouldn't want to increase that.
Yes. I think we're happy with what we have at this point.
Our next question comes from Tal Woolley with National Bank.
I just wanted to start off on long-term care. With respect to any further sort of government announcements or updates, do you have a sense of when we might sort of get further clarification on some of the preliminary guidelines and -- or thoughts they had around the long-term care sector?
Well, it's a good question. I mean they have just reorganized with a new minister for long-term care, which we like. Directionally, we think that's good because there's a lot in the long-term care file, as you know. So we think that's good. They've also announced a new deputy. So we expect that they're getting briefed.We've got -- had really good access. We've been able to meet with a number of MPPs and ministry officials. So we don't know. We can never predict policy or timing, but we do like directionally some of the policy directions of this government and putting the new leadership in place, so the additional leadership, I would say. So -- but we don't have a sense of timing.
Okay. And then maybe just to go back on pricing strategy in Retirement. 2023 is 4 years away, and I'm just wondering like the -- you talked about some of the other strategies your competitors are -- might -- or some of your competitors might be employing in the market. But given that it is sort of a 4- to 5-year horizon like to when you think that the markets will come back and balance for you, do you consider like alternative sort of pricing strategies right now? Or do you just sort of hang -- trying to hang on to where market is and if it causes vacancy, you'll live with it?
Oh, no. We -- like every property is unique, and so we do a number of things. We never -- if you're asking do we reduce rent, no. We don't do that. What we do, do is we would reduce -- if there's a market, and we just did this recently, where we were able to create a number of suites which were more independent and there were seniors that wanted a more independent lifestyle, so we were able to change the service package to create a very independent lifestyle number of suites. In other areas, we would do onetime incentives and campaigns like that, but we don't really ever kind of do an adjustment to rent unless there's also a corresponding change in service level.
Okay. And then just on balance sheet and capital return to shareholders. It's been 18 months since your last big portfolio acquisition in Retirement. And I know you've got to think about future long-term care redevelopment and what that might bring. That does seem to be proceeding quite slowly. How do you think about managing the balance sheet, maybe enhancing the dividend, again, just given how -- like, your net CapEx this year is basically 0, right? And so I'm just -- I'm wondering how you're sort of thinking about this as this rolls out because it does seem to be taking some time for these capital needs to come to you.
So I mean for us, we have always kind of looked at it even though it's quite well connected on what you're going to acquire in your balance sheet. But we've kind of always looked at it differently. Like we haven't acquired things just because we had capital available. Both equity and debt have been available to us for quite some time. And I think one of the reasons for that is that usually, we have a good use of proceeds when they do that or we are shoring up our balance sheet in either case.So I think capital is not a constraint or it's -- that's not how we really think of acquisitions. I think a little bit more if it's putting proceeds to a development if it's an acquisition, I think that's where we will go get -- raise capital.
I guess -- sorry, maybe I'll ask the question a different way. If it takes some time for you to see more long-term care redevelopment projects get approved and start moving ahead in a retirement market, you're not really finding the assets you want, do you think the Board, yourself, sort of like reconsider what your capital return policy is, though?
I mean for example, as long-term care is taking a bit of time, what we have done is investment development in both Allan Park, you're looking at Kingsmere. And alongside, we have talked previously that we are also looking at stand-alone retirement residence. You don't have to be market specific if you don't want to be in a place where there's oversupply.So I wouldn't limit ourselves to just acquisition and LTC development. Just the fact that your -- had one expansion project completed, one we are in final stages. We're also looking at opportunities for stand-alone retirement. So I think there's multiple ways for us to invest capital. But again, if that changes, as we talked about before, dividend policy something, we review with our Board on a quarterly basis, and we will continue to do that.
[Operator Instructions] Our next question comes from Mario Saric with Scotiabank.
I have more of a higher-level question just touching on the relationship between, let's say, more traditional residential rental and retirement homes from a supply perspective. So I guess like new supply growth in the senior space isn't a new phenomenon, but it is relatively new in the purpose-built multifamily rental space.So like when we look at provinces like Ontario that are pushing for more multi-res rental, particularly in kind of urban, transit-oriented locations, I'm just curious to hear, how do you think the appetite or the increased appetite for multifamily rental construction may impact retirement home supply trajectory, if at all? Just curious to hear whether you think the 2 are in direct competition or if there's any tension between the 2.
I mean I think one of the things we talked about, there is new supply, but the rising cost of construction and supply of land is an issue because a lot of times, the alternate use for where you might be building a retirement home could be a multi-residential, and that product, when it's trading at 4% cap, has very different economics. So I think that pressure is a good thing because it does limit oversupply in certain areas as the multi-res demand is pretty strong. So in our view, it's helpful.Secondly, a lot of times, when we look at especially new stand-alone retirement residences, a lot of times it could be in conjunction alongside with a residential development as well because that goes along quite well. So we think there's synergy in one sense. And in the second sense, it does help reduce some of the oversupply.
Got it. And have there been any examples, I guess, within your portfolio or close to your portfolio where a development that was planned to be a retirement or a seniors' home converted to a multi-res?
Sorry, not -- just I'm not sure I -- we're following the question.
I'm just wondering if there's been any examples within kind of your geographic areas where the ultimate use of a development turned from a retirement home into a multi-res development.
Oh, yes. We're seeing that, I mean, I think with the rising construction costs that a lot of planned projects are being reevaluated, and there are several in the last couple of years that either haven't gone ahead or the developer/operator has kind of looked at other options. And some of them, we're not really sure whether -- where they landed, whether they just didn't proceed at all or whether they're still looking at other opportunities for seniors apartments or something else.
Got it. Okay. And then maybe just tying it back to one of Jonathan's earlier questions in the CBRE study with the 2023 kind of projections. The developments that are reflected in that, are they in enough progress? Are they -- have they -- is there enough progress in them that they're committed as retirement homes?
It's a mix. Some of them are -- could be opening within the next 6 months or couple of months, and others are just currently planned, have sites that -- and they're going through zonings. So it's a real mix. And again, that's over a period of time as well. So there's -- it's not really clear what the breakdown is. And as Nitin said earlier, there's really not a good database to give you insight into that.
Yes. I'm just trying to get a sense of whether there could be some downside to those new supply numbers going forward for a variety of reasons, and one of which could be increased multi-family supply.
Our next question comes from Yash Sankpal with Laurentian bank.
If we separated the 10 property -- the acquisition portfolio, what could we see in terms of occupancy changes between the existing portfolio and the acquisition portfolio?
Again, I think, Yash, this is not how we look at our business. I mean internally, we -- there it's -- we have property-level occupancy. So I think once you get on that path, it's a -- it gets a bit of a disclosure challenge because you're now explaining 5, 10 basis points and $20,000 making a difference here or there. I think what we talked previously is if you remove the Ottawa properties, our same-property NOI would be positive. I think that would probably -- as much disclosure that we want to get further breakdown from Retirement. I mean the softness would be both in the properties that we acquired last year and our portfolio.
I was just trying to -- that's fine. Okay. And if we look at the rental growth, it still appears strong. So I was just wondering, in the markets that are not seeing a lot of new supply, how is the rental growth progressing there?
I mean the rental -- like the annual rental growth is around -- less than 3%, which a mixture of accommodation and care services. And usually, that doesn't have a lot of dependency on occupancy. I think where there would be difference is when someone moves out and a new person is coming in. If it's an oversupplied market, obviously the market rate would be pretty similar to what you might be charging your current residents. And in areas where we are at near full occupancy, we do have a few of those properties as well. You would have a bit more pricing power there. So it is very location specific.
So have you noticed any difference in terms of what you were able to charge in, say, 2017, 2018 versus in 2019 in those markets which are not seeing new supply?
You just talked about...
As Nitin said, I think it's -- on average, 3% per year would be the average increase. Is there something else you're getting at, Yash?
No, no. I was just trying to see if the overall market's seeing slower rent growth or for the markets that are not seeing new supply, rent growth is intact.
I think we haven't seen a lot of change in the average, Yash. Like it is around 3%. Obviously, the markets which are not oversupplied and where we have full occupancy -- close to full occupancy, the market rate -- there would be a differential between a current resident and market rate. That's where the difference would be. But the annual rate increases are similar.
All right. And on the Ottawa market, what is the average cap rate in that market right now for a retirement home property, an average property?
Well, if you look at CBRE's recent cap rate release, I mean it -- they don't do it by area within. They have the cap rate for Ontario, and I think it's -- for A-class properties, it's 5%, 5.5% to 6%.
Yes. I mean the cap rates haven't really seen any change in Ottawa. So again -- so every operator or builder, when they build a home, they need a market study for -- to get financing. So the reason there's lot of oversupply in Ottawa then eventually all of that supply is needed, it's a bit of short-term thing. So people are actively building in that market. And they're building because to them, it makes financial sense. So there is no change to cap rates, frankly, in any of the markets.
That's interesting. Would you be a seller in that market at this point or a buyer?
And again, I think it'll be property specific what -- it's in lease-up, if it's stabilized. So I think there are a lot of factors in it rather than a blanket statement, Yash.
We do have a follow-up question from Pammi Bir with RBC Capital Markets.
Just -- I just wanted to clarify the comments around new supply. In the MD&A, you described it as under construction, but the commentary today sounds more it's like a mix of what's in [ pre-paying ] and under construction. Can you just maybe reconcile that?
I think it's more maybe nomenclature from our side, Pammi. I think what -- we don't really have a -- at a property level as to what stage of construction our property could be in. So if they have land and if they are planning to start construction, it could be included in this list, but it could change.
Yes. It's basically projects that are known today that have indicated they're going into senior living like retirement, and they're looking for either site plan approval or they're -- they have the zoning or they have a building up or they're in opening. Like it could be anywhere along that trajectory. So it could take anywhere from 0 to 5 years depending on where they're at, to be honest.
Ladies and gentlemen, thank you for participating in today's question-and-answer session. I would now like to turn the call back over to management for any closing remarks.
Well, thank you, everyone, for joining our call this morning, for your support of Sienna. And we hope that you enjoy the rest of your summer. Thank you, and have a good day.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect and have a wonderful day.