MARKHAM, Ontario, Nov. 09, 2023 (GLOBE NEWSWIRE) -- Sienna Senior Living Inc. (“Sienna” or the “Company”) (TSX: SIA) today announced its financial results for the three and nine months ended September 30, 2023. The Consolidated Financial Statements and accompanying Management’s Discussion and Analysis (“MD&A”) are available on the Company’s website at www.siennaliving.ca and on SEDAR at www.sedar.com.
Sienna’s strong year over year growth in the third quarter, which marks the Company’s fourth consecutive quarter of improvements in Adjusted Funds from Operations (“AFFO”) per share, underscores our continued focus on operating efficiencies, enhancing team member engagement and the successful reduction of agency staffing to pre-pandemic levels, and resulted in net operating income (“NOI”) growth and a double digit increase in the Company’s Operating Funds from Operations (“OFFO”) per share.
“Over the past two years, we have relentlessly put initiatives into motion to distinguish Sienna as an operator and employer of choice in Canadian senior living,” said Nitin Jain, President and Chief Executive Officer. “These initiatives, which supported our strategic priorities of bringing down agency costs, improving team member engagement and stabilizing occupancy, are all reflected in the nearly 12% year over year increase in our Q3 OFFO. Combined with our strong balance sheet, minimal near term exposure to debt maturities, and significant improvements in our debt metrics, we are excited about the opportunities that lie ahead for our Company.”
Operating Highlights
- Same-property NOI increased by 7.0% to $37.5 million in Q3 2023, compared to Q3 2022, including
- a 6.1% increase in the long-term care segment and
- a 7.9% increase in the retirement segment
- Long-Term-Care (“LTC”) Occupancy – Average occupancy increased by 250 basis points (“bps”) year over year to 98.4% in Q3 2023;
- Retirement Same Property Occupancy – Average same property occupancy of 86.9% in Q3 2023:
- strong leasing and stabilizing resident move-outs resulting in four consecutive months of average same property occupancy gains since the end of Q2 2023, with occupancy reaching 88.0% in October 2023.
- Substantial Reduction in Use of Staffing Agencies resulting in agency costs returning to pre-pandemic levels, including a 59% year over year reduction of agency costs to $4.8 million in Q3 2023, compared to $11.6 million in Q3 2022; quarter over quarter, agency staffing costs declined by $1.2 million.
Growth and Expansion Highlights
- Acquisition of Remaining Ownership Interest in Nicola Lodge, Port Coquitlam, British Columbia – On September 14, 2023, Sienna entered into an agreement to acquire the remaining 60% interest in Nicola Lodge, a 256-bed long-term care community managed and partially owned by the Company. A best-in-class complex care facility, Nicola Lodge was built in 2016 and offers long term care with specialized services for bariatric care, dementia and mental health care.
The transaction will take place in two stages, each comprising a 30% interest to be purchased for approximately $26.5 million, before closing costs, and representing a yield of approximately 6.75%. The purchase will be financed through the assumption of a pro rata share on the in-place mortgage loan with a 5.01% interest rate and cash on hand. Subject to lender and regulatory approvals, the first closing is anticipated to take place during Q1 2024, at which time the Company will gain majority ownership, with the second closing to occur between November 2024 and March 2026.
- Expansion into Alberta – On November 1, 2023, Sienna entered into a management contract for a 70-suite retirement residence in a prime location in Calgary with Sabra Health Care REIT, Inc. This is the Company's entry into the Alberta market and a reinforcement of its key relationship with a strategic partner.
Financial performance - Q3 2023
- Total Adjusted Revenue increased by 5.6% in Q3 2023 to $199.8 million, compared to Q3 2022. In the Retirement segment, the increase is mainly driven by annual rental rate increases, and care and ancillary revenue. In the LTC segment, increased flow-through funding for direct care, annual inflationary funding increases and higher occupancy contributed to the increase in total adjusted revenue.
- Total NOI increased by 8.0% to $37.8 million, compared to Q3 2022, resulting from a $1.6 million increase in the Retirement segment, driven by same-property NOI growth and the acquisition of a campus of care in Q1 2023. Total NOI increased by $1.3 million in the LTC segment, mainly due to annual inflationary funding increases and higher preferred accommodation revenue.
- Same Property NOI increased by 7.0% to $37.5 million, compared to Q3 2022, including a 6.1% increase to $19.2 million in the LTC segment, and a 7.9% increase to $18.3 million in the Retirement segment.
- OFFOper share increased by 11.8% in Q3 2023, or $0.029, to $0.275. The increase was primarily attributable to higher NOI, lower general and administrative expenses, partially offset by higher current taxes and interest expenses.
- AFFOper share increased by 18.5% in Q3 2023, or $0.042, to $0.269. The increase was primarily related to the increase in OFFO, lower maintenance capital expenditures due to timing, offset by a decrease in construction funding income.
- AFFO payout ratio was 87.0% for Q3 2023.
Financial performance in the nine months ended September 30, 2023
- Total Adjusted Revenue increased by 10.0% or $54.2 million to $597.8 million, compared to the nine months ended September 30, 2022. In the Retirement segment, the increase is mainly driven by rental rate increases and occupancy growth. In the LTC segment, increased flow-through funding for direct care, annual inflationary funding increases and higher occupancy contributed to the increase in total adjusted revenue.
- Total NOI increased by 11.5% to $113.1 million, compared to Q3 2022, resulting from a $7.2 million increase in the Retirement segment, driven by same-property NOI growth and the acquisition of a campus of care in Q1 2023. Total NOI increased by $4.4 million in the LTC segment, mainly due to annual inflationary funding increases and higher preferred accommodation revenue.
- Same Property NOI increased by 8.7% to $109 million, compared to Q3 2022, including a 9.7% increase to $59 million in the LTC segment, and a 7.5% increase to $50 million in the Retirement segment.
- OFFOper share increased by 13.9%, or $0.100, to $0.822, compared to the nine months ended September 30, 2022. The increase was primarily attributable to higher NOI, lower general and administrative expenses, a favourable tax adjustment of approximately $1.5 million relating to 2022, partially offset by higher current taxes and interest expenses.
- AFFOper share increased by 11.6%, or $0.082, to $0.787, compared to the nine months ended September 30, 2022. The increase was primarily related to the increase in OFFO, lower maintenance capital expenditures due to timing, offset by a decrease in construction funding income.
- AFFO payout ratio was 89.2% for the nine months ended September 30, 2023.
Financial position
The Company maintained a strong financial position during Q3 2023:
- Paid down credit facilities and entered into financings with lower cost CMHC insured mortgages;
- Maintained high liquidity at $324 million as at September 30, 2023, compared to $259 million as at September 30, 2022;
- Increased Debt Service Coverage Ratio to 2.0 for the three months ended September 30, 2023, compared to 1.8 for the three months ended September 30, 2022; and
- Extended Weighted Average Term to Maturity of its debt to 5.7 years as at September 30, 2023, from 4.9 years as at September 30, 2022.
Financial and Operating Results
|
Three Months Ended |
Nine Months Ended |
| $000s except occupancy, per share and ratio data |
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
| Retirement - Average same property (1) |
86.9% |
87.5% |
87.3% |
86.6% |
| Retirement - Acquisition, development and others - Average occupancy (2) |
97.1% |
n/a |
86.6% |
72.2% |
| Retirement - Average total occupancy |
87.1% |
87.5% |
87.2% |
86.4% |
| LTC - Average private occupancy |
89.6% |
84.0% |
87.9% |
82.1% |
| LTC - Average total occupancy (3) |
98.4% |
95.9% |
97.7% |
94.5% |
| Total Adjusted Revenue (4) |
199,840 |
189,192 |
597,794 |
543,625 |
| Same property NOI (4) |
37,499 |
35,048 |
109,296 |
100,557 |
| Total NOI (4) |
37,837 |
35,020 |
113,051 |
101,376 |
| OFFO per share (4) |
0.275 |
0.246 |
0.822 |
0.722 |
| AFFO per share (4) |
0.269 |
0.227 |
0.787 |
0.705 |
| AFFO Payout ratio (4) |
87.0% |
103.1% |
89.2% |
99.6% |
(1) Effective June 1, 2023, the results of the 12 joint venture retirement residences acquired in Q2 2022 ("Acquired Properties") were reclassified from "acquisitions" to "same property" in the table above. Accordingly, "same property" includes results of the Acquired Properties from June 1, 2023 onwards.
(2) Includes results of the Acquired Properties from January 1, 2023 to May 31, 2023.
(3) Excludes the 3rd and 4th beds in multi-bed rooms in Ontario.
(4) Total Adjusted Revenue, Same property NOI, Total NOI, OFFO per share, AFFO per share, AFFO payout ratio are non-IFRS measures. These measures do not have standardized meanings prescribed by IFRS and, therefore, may not be comparable to similar measures used by other issuers. These measures are used by management in evaluating operating and financial performance. Please refer to the heading "Non-IFRS Performance Measures” on page 2 of the MD&A.
Changes to Board of Directors
Sienna is pleased to announce the appointment of Ms. Barbara Bellissimo to its Board of Directors, effective today.
Ms. Bellissimo is a seasoned executive with over 30 years of experience in the insurance and the financial services sectors. She is a former head of one of the top property and casualty insurers in Canada and held several influential senior executive roles in Canada and the United States. Ms. Bellissimo is renowned for her leadership and development of culture on her teams. She is also an experienced corporate director and an active community leader with board affiliations in the health sector, the arts, and academia. Ms. Bellissimo currently serves as the Board Chair of the Southlake Regional Hospital Foundation.
Also, today Ms. Paula Jourdain Coleman announced her resignation as a director and Chair of the Quality Committee of the Company after having served on the Board of Directors for nearly a decade following Sienna’s acquisition of Specialty Care Inc., a senior living company of which she was Chair and Chief Executive Officer, and where she led its transformation from four small rural homes into a vibrant organization. Throughout her career, Ms. Jourdain Coleman helped shape senior living in Ontario, including as past President of the Ontario Long Term Care Association (OLTCA) and the Ontario Retirement Communities Association (ORCA). Ms. Jourdain Coleman’s resignation is effective on January 1, 2024.
As part of the ongoing renewal of Sienna’s Board, effective immediately, Ms. Bellissimo has been appointed to the Audit Committee and the Compensation, Governance and Nominating Committee.
“Barbara’s extensive experience in the financial services and insurance industries, coupled with her insights as corporate director and her commitment as a community leader will support our company as we continue to grow and evolve,” said Shelly Jamieson, Chair of Sienna’s Board of Directors. “On behalf of our Board of Directors, I also want to thank Paula, who brought her invaluable knowledge and industry experience to Sienna and has been instrumental in our successful growth and transformation over the past 10 years.”
“We look forward to benefiting from Barbara’s unique expertise and are excited about the extensive knowledge and new perspectives she will bring to our organization,” said Mr. Nitin Jain, President and CEO of Sienna. “I also want to thank Paula for her decade-long dedication to Sienna that helped shape our journey towards becoming one of the leading owners and operators in Canadian senior living.”
Outlook
Long-term demand fundamentals in Canadian senior living remain strong, driven by the rising needs of seniors, who make up the fastest-growing demographic in Canada. Strong leasing and the stabilization of resident move-outs during the third quarter resulted in monthly occupancy increases since the end of Q2 2023. In addition, rental rates have risen significantly in most of Sienna's markets. These positive factors in combination with Sienna’s successful cost reduction strategy have supported the Company’s strong results and give reason for an optimistic outlook for the balance of the year and beyond.
At the same time, the current higher interest environment may increase our interest expenses in the coming years. However, with no major debt maturity until Q4 2024 and ample sources of attractive financing options, we are well positioned to execute on our strategic initiatives.
Retirement Operations – Average occupancy in the Company's same property portfolio was 86.9% in Q3 2023. Lead indicators have strengthened significantly in recent months and occupancy levels have stabilized. Sienna’s community outreach efforts, combined with a robust sales platform, will continue to support occupancy during the last quarter of the year. Average same property occupancy growth to 88.0% in October, the fourth consecutive month of occupancy gains, indicates an improving occupancy trend for the balance of 2023.
Based on the Company’s occupancy forecast, average same property occupancy is expected to be approximately 88% in Q4 2023. Going forward, we will continue with our focused marketing and sales initiatives, working towards our target for stabilized average occupancy of 92.5% in our same-property portfolio.
Considering all factors, we anticipate an approximate 100 bps - 150 bps growth in the 2023 operating margin in our retirement segment for the full year of 2023 compared to 2022. This expected improvement is primarily driven by increased average annual rates upon renewal in line with inflation, continued improvements with respect to labour market conditions and the results of our focused cost management.
Long-Term Care Operations – A stable post-pandemic operating environment supported the strong performance of Sienna's LTC portfolio during Q3 2023. Average same-property occupancy reached 98.4% during the third quarter and supported year over year NOI growth in Q3 2023.
Although the operating environment has improved significantly and Sienna made great strides in reducing costs wherever possible, the Company is still facing funding shortfalls in its long-term care segment as a result of high inflation in recent years. Together with other sector participants, Sienna continues to work with the government to address these shortfalls.
For the balance of the year, Sienna expects to benefit from a stable operating environment, its focused cost management and continued improvements with respect to staffing. We anticipate that current occupancy and cost management trends will continue for the balance of 2023, and expect LTC NOI growth for the full year of 2023 to be in the mid to high single digit percentage range compared to the same period in 2022.
Developments – Sienna’s three projects currently under construction, including the redevelopment of a long-term care community in North Bay, the development of a campus of care in Brantford and the development of a joint venture retirement residence in Niagara Falls, are expected to lower the Company’s AFFO payout ratio by mid to high single digit percent, once completed and fully operational.
Significant Potential for Growth in NOI - Sienna sees significant growth potential in its business over the next several years and is actively working on a number initiatives which may contribute to the Company’s NOI expansion including:
- Occupancy growth in the Company’s retirement segment, including incremental NOI should we reach our target for stabilized average occupancy of 92.5% in our same-property portfolio, which would represent a 560 bps increase from our average occupancy of 86.9% in Q3 2023;
- Contributions from acquisitions and new developments, including incremental NOI from:
- The Company’s 50% joint venture interest in 12 retirement properties, acquired in 2022 for $189.8 million;
- The Company’s Woods Park Care Centre, acquired in early 2023 for $26.3 million, and expected to generate an unlevered yield of 6.75%;
- The completion of Sienna’s 70% joint venture interest in the development of a 150-suite retirement residence in Niagara Falls for $38.5 million, which has an expected development yield of approximately 7.5%; and
- The Company’s planned acquisition of its remaining 60% interest in Nicola Lodge, expected to generate an unlevered yield of 6.75%.
- Substantial reduction of net pandemic expenses and incremental agency costs, which were $8.2 million in 2022, as the operating environment continues to stabilize and we actively manage incremental agency costs, while working with governments to ensure that operators are fully funded for all costs of resident care; and
- Catch-Up Funding from the Ontario government to address funding shortfalls to offset the significant inflationary and cost pressures operators have experienced over the past years. Each percentage point in additional Other Accommodations funding would represent an approximate annual funding increase of $1.2 million for Sienna.
These initiatives, individually and collectively, could have a significant positive impact on the value of Sienna’s business, enhancing its financial performance with growth in NOI and OFFO, and supporting the Company’s AFFO payout ratio.
Conference Call
Sienna will host a conference call on Friday, November 10, 2023 at 9:00 a.m. (ET). The toll-free dial-in number for participants is 1-800-715-9871, conference ID: 9383036. A webcast of the call will be accessible via Sienna's website at www.siennaliving.ca/investors/events-presentations. It will be available for replay until August 10, 2024 and archived on Sienna’s website.
About Sienna Senior Living
Sienna Senior Living Inc. (TSX:SIA) offers a full range of seniors' living options, including independent living, assisted living, memory care, long-term care, and specialized programs and services. Sienna's approximately 12,000 employees are passionate about cultivating happiness in daily life. For more information, please visit www.siennaliving.ca.
Risk Factors
Refer to the risk factors disclosed in the Company’s MD&A for the three and nine months ended September 30, 2023, and its most recent Annual Information Form for more information.
Forward-Looking Statements
Certain of the statements contained in this news release are forward-looking statements and are provided for the purpose of presenting information about management’s current expectations and plans relating to the future. Readers are cautioned that such statements may not be appropriate for other purposes. These statements generally use forward-looking words, such as “anticipate,” “continue,” “could,” “expect,” “may,” “will,” “estimate,” “believe,” “goals” or other similar words and are based on the Company’s expectations, estimates, forecasts and projections. These statements are subject to significant known and unknown risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied by such statements and, accordingly, should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved. The forward-looking statements in this news release are based on information currently available and what management currently believes are reasonable assumptions. The Company does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.
FOR FURTHER INFORMATION, PLEASE CONTACT:
David Hung
Chief Financial Officer and Executive Vice President
(905) 489-0258
david.hung@siennaliving.ca
Nancy Webb
Senior Vice President, Public Affairs and Marketing
(905) 489-0788
nancy.webb@siennaliving.ca
