Sienna Senior Living Inc. Reports Fourth Quarter and Year-End 2022 Financial Results
Sienna Senior Living Inc. Reports Fourth Quarter and Year-End 2022 Financial Results And Advances Long-Term Care Redevelopment Initiatives
MARKHAM, Ontario, Feb. 23, 2023 (GLOBE NEWSWIRE) -- Sienna Senior Living Inc. (“Sienna” or the “Company”) (TSX: SIA) today announced its financial results for the three months and year ended December 31, 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.
2022 was a significant year for Sienna, positioning the Company well for sustainable long-term growth in a more challenging macro-economic environment in 2023.
“Our Q4 results are a reflection of the growth potential embedded in our business, as well as the current macro-economic challenges we face,” said Nitin Jain, President and Chief Executive Officer. “In 2023, we intend to capture the growth potential inherent in our retirement segment, advance our long-term care redevelopment initiatives, and continue with our platform enhancements. These initiatives, coupled with the support of our strong balance sheet and liquidity, position us well to execute on our strategic objectives and help us achieve sustainable, long-term success.”
Continued Retirement Occupancy Gains – Average same property occupancy up 440 basis points (“bps”) year over year to 88.6% in Q4 2022, the Company’s sixth consecutive quarter of occupancy improvements; Continued strong lead generation, with qualified leads up 29% year over year compared to Q4 2021, is expected to support further occupancy gains in 2023.
Rising Rental Rates – Annual rate increases in the Retirement portfolio of approximately 5%, in line with market rate increases.
Long-Term-Care (“LTC”) Occupancy – Average occupancy, excluding beds unavailable due to capacity limitations or isolation requirements, reaching 96.3% in Q4 2022;
Same-property Net Operating Income (“NOI”) decreased by 4.4% to $31.2 million in Q4 2022, compared to Q4 2021, largely as a result of an 11.3% decrease in the LTC portfolio, offset by a 4.6% increase in the retirement segment.
Rising costs expected to continue into 2023, putting continued pressure on operating margins in both the retirement and long-term care segments.
Portfolio Update and Development Highlights
$26.3 Million Acquisition of Woods Park Care Centre Finalized – On January 3, 2023, Sienna finalized its previously announced purchase of Woods Park Care Centre in Barrie, Ontario, comprising 55 private-pay independent living suites and 123 government-funded Class A long-term care beds.
LTC Redevelopments Supported by Increase in Construction Funding – In December 2022, the Government of Ontario announced a supplemental increase to the construction funding subsidy for eligible projects of up to $35 per bed, per day over 25 years for projects with a construction start by August 31, 2023. Based on this additional funding, Sienna expects to have 480 beds under construction by mid-2023.
Closure of LTC Home – In early 2023, the Ministry of Long-Term Care formally approved the closure plan of one of Sienna's LTC homes in Ontario, which sustained significant damage linked to the original building design and construction predating Sienna's ownership. In connection with this closure, Sienna recorded restructuring costs of $6.6 million.
$100 Million Upsizing of Unsecured Revolving Credit Facility – On October 26, 2022, Sienna upsized its unsecured revolving credit facility by $100 million to $300 million and extended its maturity term by two years to March 2027;
DBRS “BBB” Credit Ratings Confirmed – On December 9, 2022, DBRS confirmed Sienna’s issuer rating and senior unsecured debenture rating of “BBB” with stable trends;
$1.2 Billion Unencumbered Asset Pool – The Company increased its unencumbered asset pool by $80.3 million in 2022 to $1.2 billion as at December 31, 2022.
Financial performance - Q4 2022
Total Adjusted Revenue increased by 10.9% in Q4 2022 to $193.2 million, compared to Q4 2021. In the Retirement segment, the increase is mainly driven by occupancy growth and annual rental rate increases in line with market conditions. In the LTC segment, flow-through funding for increased direct care provided to residents, as well as higher preferred accommodation revenues, partly offset by occupancy clawbacks from homes that did not meet the 97% occupancy level, contributed to the increase in total adjusted revenue.
Total NOI decreased by 2.8% to $32.5 million, compared to Q4 2021, resulting from a $2.9 million decrease in the LTC segment, mainly due to higher operating and net pandemic costs, offset by a $1.9 million increase in the Retirement segment, driven by both same-property NOI growth as well as additional NOI from the 12 retirement properties acquired in 2022.
Same Property NOI decreased by 4.4% to $31.2 million, compared to Q4 2021, including a 11.3% decrease to $16.4 million in the LTC segment, offset by a 4.6% increase to $14.7 million in the Retirement segment.
OFFO per share decreased by 10.7% in Q4 2022, or $0.029, to $0.243. The decrease was primarily due to lower NOI, higher cash interest expenses and additional shares issued in March 2022 to finance the Company’s growth initiatives.
AFFO per share decreased 4.0% in Q4 2022, or $0.010, to $0.237. The decrease was primarily related to lower OFFO, partially offset by lower spend on maintenance capital.
AFFO payout ratio was 98.7% for Q4 2022.
Financial performance - Year ended December 31, 2022
Total Adjusted Revenue increased by 10.2% or $68.3 million, to $736.8 million, compared to the year ended December 31, 2021. In the Retirement segment, the increase is mainly driven by occupancy growth, rental rate increases and additional revenues from the 12 newly acquired properties. In the LTC segment, flow-through funding for increased direct care provided to residents, annual inflationary increases, and higher preferred accommodation revenues from increased occupancy, partly offset by lower revenues from the disposition of one community in 2022, contributed to the increase in total adjusted revenue.
Total NOI decreased by 5.8% or $8.2 million, to $133.9 million, compared to the year ended December 31, 2021. The decrease is mainly due to higher LTC retroactive pandemic funding received in 2021, offset partly by higher NOI from the 12 retirement properties acquired during Q2 2022.
Same Property NOI decreased by 6.7% to $128.8 million, compared to the year ended December 31, 2021, including a 17.6% decrease to $70.3 million in the LTC segment, largely due to higher LTC retroactive pandemic funding received in 2021, offset by a 11.1% increase to $58.4 million in the Retirement segment.
OFFO per share decreased by 15.9% to $0.965 per share, compared to the year ended December 31, 2021. The decrease was primarily due to lower NOI, higher cash interest expenses and additional shares issued in March 2022 to finance the Company’s growth initiatives.
AFFO per share decreased by 13.1% to $0.943 per share, compared to the year ended December 31, 2021. The decrease was principally related to lower OFFO, partially offset by lower spend on maintenance capital.
AFFO payout ratio was 99.3% for the year ended December 31, 2022.
The Company maintained a strong financial position during Q4 2022:
Lowered debt to gross book value by 80 bps to 43.9% compared to Q4 2021;
Increased debt to adjusted EBITDA from 7.9 times to 8.9 times, compared to Q4 2021;
Increased liquidity to $287 million as of December 31, 2022, representing an increase of $61 million from December 31, 2021; and
Ended Q4 2022 with average cost of debt of 3.7%, a 30 bps increase compared to Q4 2021.
Financial and Operating Results
Three Months EndedYear Ended$000s except occupancy, per share and ratio dataDecember 31, 2022December 31, 2021December 31, 2022December 31, 2021Retirement - Average same property occupancy88.6%84.2%87.3%80.8%LTC - Average total occupancy89.9%88.9%88.8%85.2%LTC - Average total occupancy excl. 3 and 4 ward beds and isolation beds96.3%n/a95.5%n/aTotal Adjusted Revenue(1)193,216174,175736,841668,494Same property NOI(1)31,15032,596128,753137,957Total NOI(1)32,51733,446133,893142,141OFFO per share(1)0.2430.2720.9651.148AFFO per share(1)0.2370.2470.9431.085AFFO payout ratio(1)98.7%94.7%99.3%86.3%
(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.
Retirement - Heading into 2023, the Company intends to continue to capitalize on the growing demand for quality seniors’ living. Average Q1 2023 occupancy is expected to remain at a similar level as Q4 2022. For the full year ending December 31, 2023, Sienna expects average same property occupancy to exceed 90% and average occupancy in the acquisition portfolio to exceed 87%.
In addition, the Company expects continued unfunded pandemic expenses in its retirement operations to be to be approximately $0.4 million in Q1 2023.
Taking all factors into account, the operating margin in the Company’s retirement segment in Q1 2023 is expected to be similar to the full year margin of 35.7% in 2022. Sienna further expects the 2023 operating margin for the full year to improve by approximately 150 bps - 200 bps compared to 2022.
Long-term Care - Sienna expects continued unfunded pandemic expenses of between $2 million to $3 million in Q1 2023 within its long-term care segment, primarily as a result of additional labour costs, although some of these expenses may be covered by retroactive government funding in future periods.
Taking all factors into account, Sienna expects its 2023 NOI for the full year in the LTC segment to remain at a similar level compared to 2022.
Developments - In December 2022, as a result of significant inflationary and cost pressures, the Ontario government announced a time-limited supplemental increase to the construction funding subsidy for long-term care projects with a construction start by August 31, 2023. Based on the revised construction funding model, eligible projects will receive an additional construction subsidy of up to $35 per bed, per day for 25 years.
As a result, Sienna expects to have a total of 480 beds under construction by mid-2023, including projects in North Bay, Keswick as well as a campus of care development in Brantford, Ontario. In addition, over 1,000 beds are currently in the planning stages in the Greater Toronto Area, including in Scarborough and Mississauga.
Sienna will host a conference call on Friday, February 24, 2023 at 4:00 p.m. (ET). The toll-free dial-in number for participants is 1-800-715-9871, conference ID: 8818813. 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 February 24, 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 year ended December 31, 2022, and its most recent Annual Information Form for more information.
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