May 16, 2025
Sienna Senior Living Inc.
Well-placed in an anxious market
Our view: Post largely in-line Q1 results, we believe SIA continues to setup well amid ongoing equity market anxiety. The uptick in 2025 retirement SP NOI growth guidance is encouraging, as the benefits of operational strides and robust fundamentals continue to surface. Significant enhancements in govt funding and improved cost controls have also put the LTC platform on stronger footing to deliver steady, moderate organic growth. A more active pace of capital deployment is also moving portfolio quality up the curve. In short, we think valuation is well-supported. Sector Perform, $19 PT (+$1).
Key points:
Operating metrics headed in the right direction. Total SP NOI increased a strong 8.5% YoY, with retirement out front (+16.7%), followed by LTC (+2.2%). Retirement strength was driven by higher rents, care revenue, and occupancy. On the latter, SP occupancy slipped sequentially to 92.5% (-40 bps QoQ, +260 bps YoY), mostly on seasonality. Importantly though, SIA’s SP-occupancy target of 95% by Q1/26 seems increasingly within reach, supported by its proven, locally targeted sales/marketing strategies, strong demand, and minimal new supply. Combined with improved billing of additional care services, staff optimization, and platform efficiencies, SIA bumped up its 2025 retirement SP NOI growth guidance to >10% (vs. prior 10%). We see the updated outlook as achievable, particularly considering the strong Q1. In LTC, we expect inflationary type growth to continue.
Investment activity on pace to hit ~$600MM, with more in the pipe. With capital to deploy from its $144MM equity raise in February, SIA expanded its presence in Ottawa via an $85MM retirement acquisition ($496K/suite, ~6.8% cap rate after synergies; Q3/25E closing). Combined, with ~$290MM (~6.5% cap rate) of other acquisitions completed/in-progress and $220MM (8.3% yield) of anticipated LTC development completions, SIA’s on pace for a substantial ~$600MM of investments by Q3/25 as it continues to strike a balance between growth and stability through retirement and LTC assets. With more under review across its core markets, our forecasts reflect $200MM of additional acquisitions through 2H/25.
Forecasting healthy growth. Our 2025E/26E OFFOPS are $1.27 (+$0.02)/ $1.34 (+$0.01), with revisions for higher NOI, partly offset by higher interest costs. Excluding one-time amounts, our 2024A-26E OFFOPS CAGR is 4%, below its seniors housing comps (8%), yet modestly above the sector (3%). Our current/1YR FWD NAVPS increase $0.50 each to $17.50/$18.50.
Maintaining Sector Perform, PT raised to $19 (+$1) on the uptick in our FWD NAV and a higher target multiple (3% premium to FWD NAV vs. prior parity), supported by an improving growth profile. SIA is trading at 1% above NAV (16x 2025E AFFO/7.2% implied cap rate), below its seniors housing peers (17% NAV premium) and ahead of the sector (17% discount). From our perspective, current levels are well-supported by its portfolio composition, a decent growth profile, and strong balance sheet.