TD post CC - tgt price $21 THE TD COWEN INSIGHT
Q1 was another strong ops quarter for SIA with retirement occ on a path to mgmt's 95%
target. Mgmt raised its retirement SPNOI growth target to 10%+ which will be driven by
margin and occ improvements. LTC ops are back to longer term low single digit NOI growth,
but this will be supplemented nicely by an accretive development program which we don't
believe is fully appreciated by investors.
Impact: SLIGHTLY POSITIVE
On track to add $600mm in assets by Q3. Acquisitions remain a focus for growth with
management reviewing a current pipeline of $150mm-$200mm. YTD, Sienna has
announced $163mm in acquisitions and mgmt expects to remain active in its core ON/BC/
AB markets for the remainder of the year.
Increased retirement SPNOI growth target to be 10%+. Mgmt noted that strong Q1
results (+16.7% SPNOI growth) showing continued improvements in occupancy as well
as margin improvements has given them confidence to raise 2025 growth targets in the
retirement segment. Sienna is well positioned to reach its target 95% SP occupancy by
Q1/26. Occupancy was 92.5% (+260bps y/y) as of Q1. Beyond occupancy gains, plans to
achieve the 100-150bps margin expansion target include increasing care revenue and
further optimizing staffing to reduce costs.
Accelerated margin improvements expected from portfolio optimization. Mgmt previously
identified five retirement assets for its repositioning initiatives with completion timelines
of 12-18 months as of Q1. Occupancy at these properties has improved 500bps y/y to
79.9%. These properties have also shown good momentum in margin improvements with
~500bps y/y increase to 26%, and we expect margin improvements to continue to outpace
SIA's stabilized portfolio. Mgmt is targeting margins in the ~38% range, consistent with its
stabilized property portfolio.
Brantford and North Bay LTC projects to be completed earlier than expected. Mgmt now
expects both LTC homes to be completed by Q3 (previously Q4) with costs unchanged.
SIA is currently evaluating a few new LTC development projects (including one in the GTA)
but noted that this will depend heavily on so far unannounced government construction
funding. Targeted yields for development remain in the 8% range. Each project is expected
to be ~2-3% accretive to AFFO/unit.
Our NAV/unit estimate is +4.5% to $18.60 on higher retirement/LTC NOI and lower cap
rate overall (-11bps). Our 2025/26 AFFO/unit estimates are ~+4% in 2025 and remain
largely unchanged in 2026.