Q1 2025 Sienna Senior Living Inc Earnings Call
Speaker Change: Ladies and gentlemen, welcome to Sienna Senior Living Inc. Q4, 2024 Open Call. Today's call is tested by Nitin Jain, President and Chief Executive Officer, and David Hung, Chief Financial Officer, of Sienna Senior Living Inc.
Speaker Change: Please be aware that certain statements or information discussed today are forward-looking and actual results could differ materially.
Speaker Change: The company does not undertake to update any forward-looking statement or information, please refer to the forward-looking information and risk factor sections in the company's public filing.
Speaker Change: including its most recent MDA and A, MDNA and AIF for more information.
Speaker Change: on Cedar Plus and can be found on the company's website.
SiennaLiving.ca
Speaker Change: Today's call is being recorded, and a replay will be available.
Speaker Change: Instructions for accessing the call are posted on the company's website and the details are provided in the company's news release.
Speaker Change: The company has posted slides, which are companies that has remarked on the company's website under events and presentations. With that, I will now turn the call over to Mr. Jain. Please go ahead, Mr. Jain. Thank you. Good morning, everyone, and thank you for joining us today.
Speaker Change: We had a great start to 2025. We maintain a growth momentum which is reflected in our financial results.
Speaker Change: So far we are also in track to add nearly 600 million dollars of assets through acquisitions and developments by the third quarter, and we see significant potential for future growth throughout the balance of the year.
Speaker Change: Our Increasing Scale comes at a time and demand for Sienna Living is accelerating.
Speaker Change: And Supply remains highly constrained. This position sets extremely well for continued growth.
Speaker Change: With respect to Sienna's operating results, our key performance indicators continued to trend in a positive direction in the first quarter.
Speaker Change: It's just the same property NOI increased by 16.7% in the retirement segment and 2.2% in the
Speaker Change: On retirement, increasing occupancy and rental rate growth were the key drivers of the double-digit increase.
Speaker Change: Average Same Property Occupancy was up 260 basis points year-over-year, and it is each 92.5% in the first quarter, and we remain confident to reach a stabilized occupancy target of 95% by Q1 2026.
Speaker Change: A robust sales platform and focused marketing campaigns continued to generate strong interest in our residences.
Speaker Change: Our call center leads remains strong in a recent national open house at significant higher attendance and tours than in recent years.
Speaker Change: In addition, we remain focused on maintaining excellent relationships with healthcare and business partners in the local communities of our residences.
Speaker Change: On long-term care, our fully occupied homes with growing weightless added to the continued stability of this segment, which reinforces the strength of our operating platform.
Speaker Change: Moving to slide six, 2025 is shaping up to the year of considerable growth through acquisitions and developments. By the third quarter, our platform will exceed 100 properties and we will not end there.
Speaker Change: To date, we have closed $250 million of acquisitions in British Columbia, Alberta, and Ontario. In just yesterday, announced an $85 million acquisition of a Class A retirement residence in Ottawa with an anticipated closing date this summer.
Speaker Change: The residence is currently 93% occupied and we feel confident with the platform we will get it to stabilize occupancy of 95% within the next 12 months.
Speaker Change: With closing of a portfolio acquisition in Alberta at the beginning in April , we established platform in one of Canada's fastest-growing provinces. This acquisition of four properties has provided immediate scale and positions as well for continued growth in Alberta.
Speaker Change: Each acquisition is expected to be immediately a creative to Sienna's AFF over share and we remain very active in the acquisition market and see strong potential to create long-term value as we continue to scale our business.
Speaker Change: On the development side, we are ahead of schedule to complete Sienna's first to long-term care at redevelopment projects in North Bay and Branford.
Speaker Change: At a Brandford location, we are also nearing the completion of a new 147 retirement residence.
Speaker Change: Moving to our team members, investing in our team members and building a workforce that has fully aligned its fundamentals to growth and scaling our operations.
Speaker Change: We are particularly proud of our share ownership program which allows team members to participate in the growth and success of Sienna.
Speaker Change: Starting this year, we have expanded the program beyond this original one-time award.
Speaker Change: Under Sienna's new SOAR for service, key members will receive additional shares as they celebrate milestone work anniversaries working for the company.
Speaker Change: Programs like SOAR ensure a strong sense of ownership and share purpose among our team members and have delivered clear results.
Speaker Change: For two years in a row, we are able to reduce turnover by about 30%, which has led to a significant reduction in the use of agency staff and year over your agency cost down nearly 70%.
Speaker Change: With that, I'll turn it over to David for an update on financial results.
David Hung: Thank you, Nitin and good morning everyone. I will start on slide 9 for financial results. In my commentary in accordance with our MDNA disclosure, I will make reference to our operating results, excluding one-time items, in order to provide a clearer picture of Sienna's underlying performance. Thank you very much.
David Hung: In Q1 2025, total adjusted revenues increased by 12.1% year-over-year to $241.8 million. This increase was largely due to occupancy and rental rate growth as well as increased care revenue in the retirement segment.
David Hung: Adding to the increase where the significant contributions are long-term care platform, including higher flow-through funding for direct care and higher private accommodation revenues.
David Hung: Total adjustment of the same property NOI increased by 8.5% to $42.5 million in Q1 2025, including by 16.7% in our retirement segment and by 2.2% in the long-term care segment.
David Hung: In the retirement segment, adjusted NOI increased by $2.9 million in Q1 2025 compared to the prior year largely as a result of improved occupancy and rental rate growth.
David Hung: These improvements, in addition to generating higher care revenue and maintaining a strict focus on operating expenses, supported the year over year 210 basis point improvement of our same property operating margin.
David Hung: We expect the margin expansion to continue as we get closer to our 95% occupancy target and and achieve additional efficiencies to our scale.
David Hung: In addition, we are progressing well with respect to our asset optimization initiative, which includes five assets in the company's retirement portfolio that will benefit from a range of initiatives.
These initiatives target a better market fit and clue.
David Hung: Renovations, the change in sweet mix, additional services, or the alternative use of a property. Occupy in our optimization portfolio increased by 500 basis points, you're over here adding to the strength of our Q1 results in the retirement segment.
David Hung: In the long-term care segment, NOI increased by half a million dollars, and reflects the segment's stability, which is supported by fully occupied homes and growing weightless.
David Hung: During Q-1 2025, operating funds from operations increased by 27.5% to $24.7 million compared to last year, primarily due to higher NOI.
David Hung: OSFO per share increased by 8.3% to $0.287 in Q1 2025.
David Hung: Adjusted funds from operations increased by 27.1% to $22.9 million compared to the prior year. The increase was mainly due to higher OFFO and a decrease in maintenance capital expenditures offset by lower construction funding income.
David Hung: AFFO per share increased by 7.7% to $0.266 in Q1 2025.
David Hung: RQ-1 2025, 8th at the foe pale ratio, with 91%, a 390 basis point improvement compared to Q-1 2024.
David Hung: Excluding the impact of the February share offering, our pale racial was 86% in Q1 2025.
David Hung: Moving to slide 10, throughout the first quarter, we further strengthen our financial position and balance sheet. We ended the quarter with $145 million in liquidity, $1.1 billion of unencumbered assets with no major debt maturities until Q1, 2020-26.
David Hung: At the end of February , we successfully raised $144 million in equity, and we are on track to deploy our cash on-hand into accretive acquisitions and developments.
David Hung: Yesterday, we announced the acquisition of Hazel Dean Gardens in Ottawa.
David Hung: We will acquire this 172-suite retirement residence at a purchase price of $85.25 million and at an investment yield of 6.33% with additional upside-through synergies.
David Hung: Hazel Dean is our second acquisition in the Ottawa region this year and will be acquired at a significant discount to real placement cost.
David Hung: Our expansion in Ottawa reflects our confidence in this market where our existing portfolio has shown an impressive performance in recent quarters.
Nitin Jain: With that, I will turn the call back to Nitin's first closing remarks. Thank you, David. I'll start on slide 11. The Fundamentals and Canadian Senior Living remain exceptionally strong.
David Hung: And it is expected to remain below 2% for at least next 5 years.
David Hung: In addition, an aging infrastructure further adds to the significant supply constraint.
David Hung: These trends not only make our assets more valuable, but they also make Canadian Senior Living an increasingly attractive sector for long-term investments.
David Hung: Looking ahead, we expect same property NOI in our retirement segment to benefit from continued occupancy and rental rate increases.
David Hung: We remain on track to reach a stabilized occupancy target of 95% by Q1 or 2026.
David Hung: Based on a strong for-scorder results and outlook for the balance of the year, we have increased the guidance for Sienna's 2025 retirement NOI segment target to exceed now 10%.
David Hung: Sienna's long-term care portfolio is expected to benefit from the continued stability of this segment. The 2025 target for long-term care is expected to be in the low single digits in line with inflation.
David Hung: In addition, we expect Sienna's growth through acquisitions and development to continue. So far, we are on track to add nearly $600 million of assets by Q3, and we see significant potential for additional growth during the balance of the year.
David Hung: At a time of broader and economic uncertainty, the Canadian Senior Living sector continues to demonstrate stability, resilience and opportunity for growth.
David Hung: Couple with Sienna's increasing scale and strong balance sheets we have never been more confident about the opportunities ahead.
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David Hung: On behalf of our entire team and our board of directors, I want to thank our shareholders and all of you on this call for your continued support, and with that we'll open it up for your questions.
Speaker Change: Thank you. At this time, I would like to remind everyone if you do have a question, please press star and the number one on your telephone keypad. Your first question comes from a line of Lorne Kalmar with Desjardins. Please go ahead with your questions, sir.
Lauren Kalmar: Barning and congrats on another solid result here. Maybe just on the guidance side of things for their time at home. Was there perhaps an element of conservatism built in, or you know in the last couple of months, have you guys really seen a change that warranted the bump in the guidance?
Speaker Change: So, we want to make sure that our programs work before we start giving strengthening our guidance.
Lauren Kalmar: Our Q-1 results show that we are on track, so our same property NOI was on 17% and now that is giving us confidence to put a little bit more optimism into our numbers which is the 10% plus guidance.
Speaker Change: Okay, and then so you guys said 17% this quarter, is there any reason to believe you can't repeat that over the balance of the year? Are you expected to kind of trend out over the balance of the year?
Speaker Change: It's too early to say that just yet. So, you know, we don't want to give you guidance and not meet those. So, I think at this stage we'll stick to it will be 10% plus and you're right, 17 is 10% plus but so is 11. So, I think at this stage it's a bit early to commit to a number.
Speaker Change: We still, the budget is supposed to come out in the next two weeks and that's when we expect the funding announcement to come out as well. Obviously, you know, no one knows what we're going to decide, but there we are.
Speaker Change: The sector expects the funding should grow in line with inflation not only is needed for the existing homes but it is much needed to continue to grow long-term care as the wait list only grows to continue.
Okay, thank you very much. Thank you.
Speaker Change: Your next question comes from the line of Pammi Bir with RBC Capital Markets. Please go ahead with your question.
Pammy Burr: Thanks. Good morning. Just maybe Nitin just coming back to the comments he just made on changes in the platform. Can you maybe just expand on that? You know, you're certainly seeing momentum. But what are some of the key pieces that are driving? Perhaps the upside down look?
Pammy Burr: Sure, Pammi, one of the things, and that was a common question last year, we saw significant thickened up to an occupancy.
Pammy Burr: And our view is for every occupancy change. It's $2 million in revenue, nearly 75% goes to NOI, but we were not seeing that last year.
Pammy Burr: And we have done a few things. One is just looking at operating platforms and efficiencies we have done that or in the process of completing it. The second is CARE. Residents in our portfolio, which is more care focused.
Pammy Burr: So the good part is you don't see a lot of slow down with economic uncertainty but people do need more care and the way we were charging for that care, the way we were structured for it needs some work. I would say we are on the early stages of fixing that and we would continue to see that momentum going forward.
Speaker Change: Okay, that's helpful. And then just on the acquisition pipeline, it sounds like it's active still.
Speaker Change: You know, in terms of maybe what's under review beyond, well, the deal that you just announced, but can you quantify that in terms of what else is under review and this and what sort of potential do you see in terms of total acquisitions for the year.
Speaker Change: I would be a bit hesitant giving this pipeline because a lot of times there are people who are just getting the tires, their properties are for sale, but it's not really for sale. Having said so.
Speaker Change: The pipeline continues to be very robust. In Q1, we guided that we have a pipeline of 150 to 250, since then we have announced close to $250 million of acquisitions already.
Speaker Change: Okay, and then maybe just stepping back, you know, big picture here, you know, as you work towards driving a stronger evaluation, you know, is there any, any shift in your thinking between the long term mix?
Speaker Change: Pammi, so we're not really fast about a 50-50, I think what we are focused on is making sure we continue to be diversified.
Speaker Change: And doing the acquisitions we have done so far reflects that, you know, doing $250 million of acquisitions in all three provinces, it is possible because we're growing and all those three in both segments of the business, that's one.
Speaker Change: 2nd in the Western provinces, there are quite a few more campuses, which has the benefit of both Longton Kelcher and Retirement, and as we are seeing ourselves in Brandford, where we are building both, it is nearly impossible to get an 8.5% yield in our time at home, but we are getting that because it is combined with Longton Kelcher.
Speaker Change: And the third part is, I think there is still a big valuation gap in the private markets and public markets for long-term care. We bought a long-term care home in Ontario for around 6.75 cap rate and it was competitive, we were not the highest bid.
Speaker Change: And we bought four continuing care homes, called a long-compared light in Alberta, added on six and a half percent cap rate and it was compared and we were not the highest price.
Speaker Change: The funding will continue to grow with inflation and staffing has gone better significantly so I do think that business fundamentals has changed all for the better but somehow it has not reflected in the public markets yet but we remain optimistic and confident that that would happen.
Speaker Change: Okay, I will turn it back. Thank you. Thank you. Thank you. Next question is from the line of Jonathan Kelcher with Katie Cowan, Pete Blahed.
Jonathan Kelcher: Thanks. I'm just continuing on the acquisition and the pipeline. Which of your markets are you seeing the most opportunities? And I guess secondly, what is the seller profile look like?
Speaker Change: So I think all these markets, Ontario, BC, Alberta, we continue to be active, we see opportunities, all of those markets.
Speaker Change: which is unique, and I think that should stay for us for the next five years. The kind of of sellers, Jonathan, is really similar to what has been in the past.
Speaker Change: So it might be companies who are focusing on one part of the business versus another. So we saw that when you bought this pre-portfolio two years back, we saw that with another smaller, original senior housing where they were focused on retirement and wanted to exit from a long-term care side.
Speaker Change: The properties you bought in Alberta were developers where their goal is to build them and...
Speaker Change: Sell it at Stabilize, which works perfectly for us because I develop and dollars are going to be tied to Ontario. So it's really continues to be a mixture of all of those kind of sellers and we remain active in all those three provinces and expect to do so for the balance of the year and next year.
Hazel Dean: Okay, that's helpful. And Hazel Dean, that's like what's the occupancy on that? I'm assuming it's stabilized. It is, Jonathan, it's at 93%.
Speaker Change: Okay, and then just on the margins, 210 base-point improvement on the same property, that's guessing us.
Nitin Jain, CEO Alphabet and Google
Jonathan Kelcher: Our target Jonathan is to get the repositioning portfolio to be same or similar as our same property portfolio. So, we're currently at around 838% right now on same property. We would anticipate that the repositioning portfolio can get there.
Over, and what are you now on the reposition?
Currently at 26% in Q1.
Jonathan Kelcher: Okay, and I'm assuming that's a multi-year goal, not for 2026.
Jonathan Kelcher: Yeah, we would see it somewhere between the next 12 to 18 months. Some of these properties take time whether it be through renovation, changes in service offering.
Jonathan Kelcher: Or what not, it does take a little bit of time. That being said, we are seeing some very good momentum. Our margins, for example, this quarter or at 26% a year ago, they were at 22%. So we're seeing a good progress in that portfolio.
Speaker Change: Okay, so it should all allow T-clubs to grow a little bit faster, or faster than maybe a little bit, but faster than the stabilized.
We would anticipate that, yes.
Speaker Change: We saw that this quarter as well. I mean, that had much bigger growth than our stabilized portfolio, and that's why we separated them out of our same property and all.
Yeah, makes sense. Thanks, I'll turn it back.
Speaker Change: In your next question comes from a wine of Hamanshu Gupta with Scotia Bates. Please go ahead.
Himanshu Gupta: Thank you and good morning. So just from the auto acquisition, Hazel Dean is 93% at the occupancy. How do you expect, you know, occupancy amp up here? And is there any near term upside on margins as well?
Dr. Jain Wilkinson, Dr. Jain Wilkinson, Dr. Jain Wilkinson, Dr. Jain Wilkinson.
Himanshu Gupta: So, given with our call centre and our marketing of sales, we do expect our occupancy to be closer to 95.
Himanshu Gupta: We have multiple other homes in that area and those occupancies are higher. The Ottawa market has changed for the better because people have finally stopped building there after many, many years.
Speaker Change: And I am a new mansion, multiple homes near to this property and there are some synergies. So synergies are mostly on the coside or the revenue side as well.
Speaker Change: They're mostly on a cost side. You know, that's what, you know, when you think about procurement, food cost, medical supplies, labor, you know, those are all synergies. We can add operational efficiency and hobby stuff.
Speaker Change: For the homes, that's one. But there, you know, when you have multiple homes, and they're not next to each other, but they're far from each other, you can actually sell them. We see that in Kingston, where we have...
Speaker Change: Four retirement homes and for a lack of a better word, there are four different levels. For example, one is independent living and another one has memory care. So if someone is looking for memory care, that's the top of the place to recommend is our own home. So we do see some synergies on revenue as well.
Speaker Change: And then if I look at the acquisition price on a dollar per suite basis, I mean, Hazel Dean looks a bit higher than White Pine. I mean, is there a reason like, I mean, are there bigger units better than to file or who was causing that?
Speaker Change: Absolutely. And I think your answer is in your question. There are exactly those two things. The sweet sizes are bigger. And because of sweet sizes being bigger, it also has higher rent.
Speaker Change: It has a bigger mix of assisted living memory care. The common area is a bigger and obviously that gets into the run. So that's it is very reflective of the level of retirement home versus wild pint.
Speaker Change: Thank you. Thank you for that shifting years here on LTC NOI growth of 2% and Q1, obviously excluding on timers, said you say this could be the run rate for a full year.
Speaker Change: That's right, we anticipate for 2025 that LTC will grow in the low single digit range, so the 2.2% is fairly representative, but we could see through the rest of the year.
Okay. Again, in the low single-ticket range.
Fair enough, fair enough.
Speaker Change: What other, I mean, like agency staffing is already down like 70%. I mean, you've been a lot of progress there. What other expense for cost items you think there is, like, further scope to bring it down?
Speaker Change: But we did not see appropriate levels of margin expansion. So we are working in those. Care is one of them optimizing our staff to making sure that we are not over staffing and it is coming at the right shift.
Speaker Change: That would be a second. How do we do sales and marketing? You know, that's third. There's some standard opportunities for cost there. So it'll be a combination of all of that. And again, we feel comfortable with that 150 range. And so far, good results on the work that the team has done.
Speaker Change: Sure. Thank you, Nitin and David. I'll talk to you later. Thank you.
Thank you.
Speaker Change: For your next question, comes from the line of Giuliano Thornhill with National Bank. Please go ahead.
Giuliano Thornhill: Hey guys, good morning, just a few for me. I'm just wondering how much in remaining spend there is for your current products and the construction?
Speaker Change: Yeah, so our budget for the three projects were $300 million. To date, we spent about 58% of that. So around $175 million.
Speaker Change: And I know you guys mentioned that the Class A cap rates are LTC, they're kind of tight in that low six areas, what you mentioned earlier. How, what's the man like for the Class C units, and like how is that being underwritten?
Dr. Prasad Prasad Prasad Prasad Prasad Prasad
The A.U.
Speaker Change: I mean, we haven't really bought any class see-homes. So I think most of them...
Speaker Change: They would trade, you know, it's a combination of free cash for the next 10-15 years, the value of land and it could, it really varies like in our case.
Speaker Change: Majority for Seahomes, which are not developed now are in GTA. In some cases, with significant land value, we have a property in St George Street where the land value would be close to $34 million. So it really depends where those Seahomes are.
Speaker Change: And then with your cup of LTC projects being completed soon, what are the key inputs that you're looking for when greenlighting the next couple?
Speaker Change: So, we already started our project in Cedarville, you know, in Keswick, so that project is already underway.
We have probably, you know, another couple of projects ready to go.
Speaker Change: And in the budget we expect to see you, you know, let's see what comes out in the construction funding, one of those projects in the GTA.
Speaker Change: which has been a long time to get the appropriate construction funding. So we would be ready to start construction, but obviously we will do that if it's financially viable.
Speaker Change: Similar in the range of what you see in North Bay and in Frankfurt. So it's a bit of what we are ready with drawings and ready to go on ground but the financial viability still has to get proven out.
Okay, thanks. We'll turn it back.
Speaker Change: Thanks, guys. Maybe just two quick ones for me. I appreciate all the commentary on the retirement are looking at specifically margins, but...
Speaker Change: Maybe just one on that or sticking with that theme. Just trying to get a sense of the trajectory over the balance of the year. Was there anything non-recurring or kind of one-off, either this Q1 or last year that helped drive the very strong performance in Q1?
Speaker Change: Not really, I think from a balanced perspective, we ended the year at around 37.3%, so I would take the...
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and any couple of there.
Speaker Change: Renovation, repositioning of some of the Swedes. And what we've seen is that some of that has started taking traction at this point, so that has definitely contributed to the growth in occupancy in that portfolio.
Okay, thanks guys. Appreciate the color. I'll pass it back.
Dr. Jain Wilkinson, Sairam Srinivas, Lorne Kalmar, Pammi Bir, Himanshu Gupta, David Hung
There are no other questions at this time.
Speaker Change: I want to turn the call back over to you guys for the remarks, please. I just want to thank everyone for your time and for your questions and look forward to speaking to you in the next quarter.
Speaker Change: Ladies and gentlemen, this has concludes today's call. You may now disconnect.
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