MARKHAM, Ontario, May 11, 2023 (GLOBE NEWSWIRE) -- Sienna Senior Living Inc. (“Sienna” or the “Company”) (TSX: SIA) today announced its financial results for the three months ended March 31, 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 significant progress with respect to a number of strategic initiatives and its effective cost management resulted in strong year-over-year financial results in Q1 2023.
“As we move further into 2023, we have many reasons to be encouraged,” said Nitin Jain, President and Chief Executive Officer. “Strong demand for our retirement residences supported significant year-over-year growth in our same-property NOI, our long-term care communities continued to stabilize, and our focus on cost management is showing early signs of success. In addition, slowing inflation and a pause to interest rate hikes are further adding to our optimistic outlook for the balance of the year.”
Same-property Net Operating Income (“NOI”) increased by 9.9% to $34.7 million in Q1 2023, compared to Q1 2022, including
a 11.0% increase in the retirement segment and
a 9.1% increase in the long-term care segment
Retirement Occupancy Gains – Average same property occupancy is up 300 basis points (“bps”) year over year to 88.2% in Q1 2023, and 350 bps in the Company’s acquisition portfolio to 85.7% since the acquisition of 12 retirement residences in May 2022;
Rising Rates – Sienna continued to achieve average annual rate increases of approximately 5% in the Company’s retirement segment in Q1 2023;
Long-Term-Care (“LTC”) Occupancy – Average occupancy increased to 96.8% in Q1 2023;
Focused Cost Management resulting in
a reduction in agency staffing cost of 35% year over year in Q1 2023, and 29% quarter over quarter compared to Q4 2022; and
a decrease in general and administrative expenses through a workforce reduction and not replacing vacant positions at the Company’s corporate office, expected to result in annual savings of approximately $3.0 million.
Government Funding Updates
Funding Update on 3rd and 4th Beds in Multi-Bed Rooms – Continued full funding of Other Accommodations per diems until March 2025, with gradual reductions of nursing and personal care funding for Sienna’s approximate 350 3rd and 4th beds in Ontario, which will not be reopened for resident admissions;
Funding Increases for Resident Care, Programs & Food and Other Accommodations - The Government of Ontario announced a 2.7% increase in its flow-through funding, which covers the cost of care, programs and food, and a 2.0% increase in Other Accommodations funding.
Construction Under Way in Brantford and North Bay – Construction is progressing well at two projects, including
a $140 million campus of care in Brantford, Ontario, where Sienna is replacing 122 Class C long-term care beds with 160 Class A beds and adding 147 retirement suites with an estimated total development cost of approximately $140 million, and projected development yield of approximately 8.0%; and
a $80 million long-term care redevelopment with an estimated 7.5% development yield in North Bay, Ontario, replacing 148 older Class C beds with 160 new beds.
Retirement Joint Venture in Niagara Falls Nearing Completion – Construction of a 150-suite retirement residence in Niagara Falls is scheduled to be completed in Q4 2023. The estimated total capital investment for 100% of the project is approximately $55 million. Pre-leasing indicators for the retirement residence have been strong.
Financial performance - Q1 2023
Total Adjusted Revenue increased by 14.5% in Q1 2023 to $199.6 million, compared to Q1 2022. In the Retirement segment, the increase is mainly driven by occupancy growth, annual rental rate increases in line with market conditions and share of revenue from joint venture. In the LTC segment, flow-through funding for increased direct care and annual inflationary funding increases contributed to the increase in total adjusted revenue.
Total NOI increased by 13.0% to $36.3 million, compared to Q1 2022, resulting from a $3.9 million increase in the Retirement segment, driven by same-property NOI growth as well as additional NOI from the 12 retirement properties acquired in 2022, and a $0.3 million increase in the LTC segment, mainly due to lower net pandemic and incremental agency expenses as a result of retroactive funding of $3.0 million, compared to $2.2 million in Q1 2022.
Same Property NOI increased by 9.9% to $34.7 million, compared to Q1 2022, including a 9.1% increase to $19.3 million in the LTC segment, and a 11.0% increase to $15.3 million in the Retirement segment.
OFFO per share increased by 5.9% in Q1 2023, or $0.014, to $0.253. The increase was primarily due to higher NOI and lower administrative expenses excluding non-recurring restructuring costs, offset by higher interest expense.
AFFO per share increased by 2.5% in Q1 2023, or $0.006, to $0.249. The increase was primarily related to higher OFFO, partially offset by higher maintenance capital expenditures and a decrease in construction funding.
AFFO payout ratio was 94.0% for Q1 2023.
The Company maintained a strong financial position during Q1 2023:
Increased liquidity to $308 million as at March 31, 2023, representing an increase of $21 million from December 31, 2022;
Paid down $29 million of its Revolving Credit Facility, financing it with lower cost CMHC insured mortgages; and
Lowered Debt to Adjusted EBITDA ratio to 8.4 for the three months ended March 31, 2023, compared to 8.7 for the three months ended March 31, 2022.
Financial and Operating Results
Three Months Ended$000s except occupancy, per share and ratio dataMarch 31, 2023March 31, 2022Retirement - Average same property occupancy88.2%85.2%LTC - Average total occupancy (2)96.8%93.8%Total Adjusted Revenue (1)199,611174,282Same property NOI (1)34,65931,529Total NOI (1)36,30932,138OFFO per share (1)0.2530.239AFFO per share (1)0.2490.243AFFO payout ratio (1)94.0%96.3%
(1) 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. (2) Excludes the 3rd and 4th beds in multi-bed rooms in Ontario
Long-term demand fundamentals in Canadian seniors living are stronger than ever. In addition, recent macroeconomic developments, including slowing inflation and a pause to interest rate hikes, coupled with Sienna's cost management strategy, are further supporting Sienna’s optimistic outlook for 2023 and beyond.
Retirement - With the Company’s successful marketing and sales initiatives, supported by strong demographic trends, Sienna has been able to increase annual average rates in the Aspira retirement segment by approximately 5%, and expects occupancy to further strengthen during the reminder of the year.
Sienna anticipates average same property occupancy for the full year in 2023 to be approximately 90% and average occupancy in our acquisition portfolio to exceed 87%. The Company further expects the 2023 operating margin for the full year to improve by approximately 150 bps - 200 bps compared to 2022.
Long-Term Care - In Sienna's LTC portfolio, average same-property occupancy reached 96.8% during the first quarter.
Some cost pressures are expected to remain for some time due to labour shortages and inflation and Sienna has been actively working with LTC associations and governments to have funding adjusted to accommodate significant inflationary pressures.
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:
Continued occupancy growth in the Company’s retirement segment, including incremental NOI should the Company’s target for stabilized average occupancy of 92.5% in its same-property portfolio be reached, which would represent a 430 bps increase from the average occupancy of 88.2% in Q1 2023;
Contributions from acquisitions and new developments, including incremental NOI from:
The Company’s acquisition of a 50% joint venture interest in 12 retirement properties in 2022 for $189.8 million;
The Company’s acquisition of Woods Park in early 2023 for $26.3 million, which is expected to generate an unlevered yield of 6.75%; and
The completion of the Company’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%.
Substantial reduction of net pandemic expenses and incremental agency costs, which were $8.2 million in 2022, as the pandemic subsides and the Company actively manages 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 the Company’s business, enhancing its financial performance with growth in NOI and OFFO, and supporting Sienna’s AFFO payout ratio.
Sienna will host a conference call on Friday, May 12, 2023 at 10:30 a.m. (ET). The toll-free dial-in number for participants is 1-800-715-9871, conference ID: 5537911. 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 May 11, 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, 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.
Refer to the risk factors disclosed in the Company’s MD&A for the three months ended March 31, 2023, and its most recent Annual Information Form for more information.
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.
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