Sienna Senior Living Inc. Reports Third Quarter 2022

By Globe News Wire On Nov 10, 2022

MARKHAM, Ontario, Nov. 09, 2022 (GLOBE NEWSWIRE) — Sienna Senior Living Inc. (“Sienna” or the “Company”) (TSX: SIA) today announced year-over-year growth in its financial results for the three and nine months ended September 30, 2022. 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.

Occupancy gains and rental rate increases helped offset cost increases as a result of labour shortages and high inflation during Q3 2022.

“Strong occupancy gains in our retirement segment, reaching a level not seen in over three years, supported our third quarter results amid continued cost pressures and an expected economic slowdown,” said Nitin Jain, President and Chief Executive Officer. “As we adjust our business in a more challenging economic climate, we continued to put initiatives into motion to stand apart as an operator and employer in Canadian seniors’ living, backed by a solid balance sheet. We further expanded Sienna’s liquidity position in October through a $100 million upsizing and two-year extension of our unsecured credit facility, a strong vote of confidence in the future of our Company and our sector.”

Operating Highlights

Strong Retirement Occupancy Gains – Average same property occupancy up 680 basis points (“bps”) to 88.4% in Q3 2022, and further increased to 88.6% in October 2022.
Successful Integration of 2022 Retirement Acquisitions – Occupancy in Sienna’s 12 retirement residences acquired in Q2 2022 reached to 88.1% at the end of Q3 2022, excluding one property in lease-up, a 490 bps increase since June 30, 2022 and demonstration of the successful integration into Sienna’s retirement platform.
Continued Long-Term-Care (“LTC”) Occupancy Improvements – Average occupancy excluding beds unavailable due to capacity limitations or isolation requirements reached 96.7% in Q3 2022.
Same-property NOI increased by 0.1% to $32.8 million, compared to Q3 2021, including a 15.2% increase in the retirement portfolio and a 9.2% decrease in the LTC portfolio.
Rising costs expected to continue into 2023, putting continued pressure on operating margins.

Financing Update

On October 26, Sienna upsized its unsecured revolving credit facility by $100 million to $300 million and extended its maturity term by two years to March 2027. Borrowings under the Unsecured Revolving Credit Facility can take place by way of Canadian Bankers’ Acceptance Rates at 145 bps per annum over the floating BA rate, or at the Canadian prime rate plus 45 bps per annum.

Financial performance – Q3 2022

Total Adjusted Revenue increased by 11.0% in Q3 2022 to $189.2 million, compared to Q3 2021. In our Retirement segment, the increase is mainly driven by occupancy growth, annual rental rate increases in line with market conditions, and additional revenues from the 12 properties acquired in Q2 2022. In our long-term care segment, flow-through funding for increased direct care provided to residents as well as higher preferred accommodation revenues contributed to the Company’s Total Adjusted Revenue.
Total NOI increased by 4.8% to $35.0 million, compared to Q3 2021. The increase is mainly due to a $3.7 increase in the retirement segment, driven by both same-property NOI growth as well as additional NOI from the 12 retirement properties acquired during Q2 2022, offset by a $2.0 million decrease in the long-term care segment mainly due to higher operating costs and net pandemic costs, partially offset by higher LTC same property revenue.
Same Property NOI increased by 0.1% to $32.8 million, compared to Q3 2021, including a 15.2% increase to $15.0 million in the retirement portfolio and a 9.2% decrease to $17.8 million in the LTC portfolio.
OFFO per share decreased by 9.6% in Q3 2022, or $0.026, to $0.246. The decrease was primarily due to higher administrative expenses and higher interest expense, partially offset by an increase in NOI. However OFFO per share improved by 3.8% from $0.237 in Q2 2022.
AFFO per share decreased 3.0% in Q3 2022, or $0.007, to $0.227. The decrease was primarily related to the Company’s equity offering in 2022.
AFFO payout ratio was 103% for Q3 2022.

Financial performance – Nine months ended September 30, 2022

Total Adjusted Revenue increased by 10.0% or $49.3 million, to $543.6 million, compared to the nine months ended September 30, 2021. The increase is mainly driven by occupancy growth, rental rate increases and additional revenues from the 12 newly acquired properties in our retirement segment as well as flow-through funding for increased direct care provided to residents, annual inflationary increases and higher preferred accommodation revenues from increased occupancy, offset partly by lower revenues from the disposition of properties in the year.
Total NOI decreased by 6.7% or $7.3 million, to $101.4 million, compared to the nine months ended September 30, 2021. The decrease is mainly due to higher LTC retroactive pandemic funding received in Q1 2021, offset partly by higher same property NOI from the 12 recently acquired retirement properties.
Same Property NOI decreased by 7.2% to $97.6 million, compared to the nine months ended September 30, 2021, including a 14.1% increase to $43.7 million in the retirement portfolio and a 19.4% decrease to $53.9 million in the LTC portfolio, largely due to higher LTC retroactive pandemic funding received in Q1 2021.
OFFO per share decreased by 17.6% to $0.722 per share, compared to the nine months ended September 30, 2021. The decrease was primarily due to lower NOI in the LTC segment mainly due to retroactive pandemic funding received in Q1 2021 related to pandemic expenses incurred in 2020, partially offset by higher NOI in the Retirement segment.
AFFO per share decreased by 15.9% to $0.705 per share, compared to the nine months ended September 30, 2021. The decrease was primarily due to a decrease in OFFO and the Company’s equity offering in 2022, offset partly by lower maintenance costs as a result of timing of expenses.
AFFO payout ratio was 99.6% for the nine months ended September 30, 2022.

Financial position

The Company maintained a strong financial position during Q3 2022:

Lowered debt to gross book value by 230 bps to 43.3% compared to Q3 2021;
Increased debt to adjusted EBITDA from 7.8 times to 9.0 times, compared to Q3 2021;
Increased liquidity to $259 million as of September 30, 2022, representing an increase of $34 million from December 31, 2021; and
Ended Q3 2022 with average cost of debt of 3.6%, a 20 bps increase compared to Q3 2021.

As a result of the upsizing of the unsecured revolving facility on October 26, 2022, the Company’s liquidity position increased by $100 million and was $351 million as of November 9, 2022.

Financial and Operating Results

	Three Months Ended						Nine Months Ended
$000s except occupancy, per share and ratio data	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Retirement – Average same property occupancy		88.4	%		81.6	%		87.2	%		80.0	%
LTC – Average total occupancy		89.7	%		86.2	%		88.4	%		82.7	%
LTC – Average total occupancy excl. 3 and 4 ward beds and isolation beds		96.7	%	n/a				95.2	%	n/a
Total Adjusted Revenue⁽¹⁾	$	189,192		$	170,423		$	543,625		$	494,319
Same property NOI⁽¹⁾	$	32,830		$	32,657		$	97,603		$	105,198
Total NOI⁽¹⁾	$	35,020		$	33,403		$	101,376		$	108,695
OFFO per share⁽¹⁾	$	0.246		$	0.272		$	0.722		$	0.876
AFFO per share⁽¹⁾	$	0.227		$	0.234		$	0.705		$	0.838
AFFO payout ratio⁽¹⁾		103.1	%		100.0	%		99.6	%		83.8	%

^{(1) Total Adjusted Reven}^{ue, Same property NOI, T}^{otal NOI, OFFO per share, AFFO per share,}^{AFFO p}^{ayout 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.}

Outlook

Retirement – Sienna’s retirement operations reached an average same property occupancy rate of 88.6% in October 2022, and the Company forecasts to end 2022 at a similar level, supported by continued investments in sales and marketing initiatives and its operating platforms. In addition, as a result of the successful integration of the 12 recently acquired retirement residences in Ontario and Saskatchewan, Sienna expects occupancy trends of these 12 residences to be in line with the overall retirement portfolio of the Company as it continues to capitalize on the growing demand for quality seniors living.

Sienna further expects year-over-year NOI growth in the retirement segment in 2022 to be supported by occupancy improvements, rental rate increases in line with market rates and added scale from acquisitions. These factors are expected to contribute to revenue growth, while cost pressures will remain for some time due to labour shortages, increased insurance premiums, higher utility rates and high overall inflation. In addition, the Company expects continued unfunded pandemic expenses in its retirement segment of less than $1 million in Q4 2022.

Taking all factors into account, we expect Q4 2022 operating margins to be similar to Q3 2022.

Long-term Care – In Sienna’s LTC portfolio, average same-property occupancy, excluding the unavailable 3rd and 4th beds in multi-bed rooms due to capacity limitation and isolation beds, reached 96.7% during the third quarter. In February 2022, the Government of Ontario reinstated occupancy targets of 97% required for full funding. Given the long waiting list for long-term care beds, Sienna anticipates to meet the required occupancy targets at the vast majority of its care communities for full funding in 2022 and beyond.

With respect to government-funding for our long-term care operations, the Company anticipates cost pressures to remain for some time due to labour shortages and high overall inflation and utilities costs. Together with other participants in the seniors’ living sector, Sienna is working with the government to receive funding that is aligned with the significant inflationary and cost pressures. In addition, the Company expects continued unfunded pandemic expenses of between $3 million to $4 million in Q4 2022 within its long-term care segment.

Developments – Current supply chain issues and high inflation are key considerations as the Company moves forward with its development program planning. Sienna is closely monitoring cost escalations with respect to material and labour and their impact on construction starts, estimated development yields and economic feasibility for current and future projects.

Conference Call

The toll-free dial-in number for participants is 1-800-715-9871, conference ID: 1149537. 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 November 10, 2023 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, 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 nine months ended September 30, 2022, 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