(=) LTC NOI guidance at mid-to-high single digit % growth in 2023 y/y: With Q3 beat, our Q4 estimate is in line with management guidance (so don’t expect our Q4 estimate to go up).
(=) Similar to last time, SIA expects RH NOI margins to improve 100 to 150bp y/y in 2023. Our model implies 120bp y/y increase which is right in line.
(+) LTC occupancy increased 40bp q/q at 98.4%: Sienna LTC total occupancy was 98.4% (up 170bp y/y) vs 98.0% in Q2, above occupancy target of 97%. SIA mentioned that they expect the current occupancy trends to continue for the remainder of the year.
(=) Entered AB market with a property management arrangement with Sabra (US peer). Also, SIA to acquire remaining stake in LTC in BC. Update on ongoing developments – Niagara Falls RH completed and lease-up begins in early 2024. LTC re-development projects ongoing but no new updates.
(+) No major unsecured debenture maturity until Q4/24: Next major debt maturity in Nov. 2024 ($150M unsecured debenture). $30M mortgages expiring in Q4/23 and ~$60M in 2024. There were some CMHC-insured financing done during the quarter to pay down Credit Facility.
(=) Funding changes with respect to 3rd and 4th beds in multi-bed rooms- no new update in this filing: As previously mentioned, effective Apr’23, some funding will stay for a couple of years but some envelope will be phased out gradually. SIA has ~350 3rd and 4th beds in ON and there will be some impact (not quantified so far). No new information related to funding requirements for LTC development: In December 2022, ministry announced an increase to construction funding subsidy up to $35 per bed per day over 25 years for projects with a construction start by Aug 31, 2023. Subsidies offset the spike in costs/inflation and makes them economical, thus SIA expects to have 480 beds under construction by mid-2023. Total estimated development pipeline of $275M with expected yield of 7.5% to 8.0% (more details in our full note tomorrow).