Q4/23 First Look: Results Beat on Strong LTC NOI Growth
Our Take: Sienna reported a solid quarter that featured strong results from the
LTC segment and further improvements in occupancy metrics within the retirement
portfolio. Management also introduced FY2024 guidance, which calls for high-
single-digit SPNOI growth in the retirement portfolio and low- to mid-single-
digit growth in the LTC portfolio.
Q4/23 Results. OFFO/share (f.d.) was $0.303, +25% y/y and ahead of our estimate
and consensus at $0.248/$0.26. The beat versus our estimate was largely due to
higher LTC NOI, with slightly lower retirement NOI providing a partial offset (higher
expenses), along with lower current taxes. AFFO/share (our calculation) of $0.276
was also ahead of our $0.231 estimate [Exhibit].
Operating Activities
LTC (52% of NOI). Q4/23 SPNOI (excluding pandemic costs/recoveries and
incremental agency costs) was +14% y/y (FY2023: +6%) due to higher flow-through
funding for direct care, annual inflationary funding increases, higher occupancy, and
preferred accommodation revenue.
Retirement (48% of NOI). Retirement same-property occupancy increased +130bps
q/q (+20bps y/y) to 88.2%, with management focusing on below-average occupancy
homes. Excluding net pandemic costs/recoveries and incremental agency costs,
SPNOI growth increased 12% y/y on higher occupancy and annual rent increases.
For 2024, management anticipates SP occupancy gains of ~150bps to 89% from
87.6% in FY2023 (long-term stabilized goal remains 95%), along with margin
improvement of 50-100bps (excluding the Elgin Falls retirement development
currently in lease-up), driven by improving revenue and cost-saving initiatives.
Cost-saving Initiatives. Agency costs were $1mm higher q/q, but ~61% lower y/y
and in line with pre-pandemic levels.
Balance Sheet
Q4/23 leverage (Debt/GBV) was +20bps q/q to 44.6%, while liquidity was $307mm
(Q3/23: ~$324mm).
Sienna increased its ownership in Nicola Lodge (256-bed LTC community in Port
Coquitlam, BC) to 70% from 40% as part of the previously announced two-stage
transaction, with the remaining 30% to be acquired between November 2024 and
March 2026.
Sienna completed its Elgin Falls retirement project in Niagara Falls, ON in Q4/23
(70% interest). First move-ins occurred in January 2024.