Q2 2025 Sienna Senior Living Inc Earnings Call

Speaker 4: Ladies and gentlemen, welcome to Sienna Senior Living Inc.'s Q2 2025 conference call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer, and David Hung, Chief Financial Officer and Executive Vice President, Investor of Sienna Senior Living Inc. Please be aware that certain statements or information discussed in today's call are forward-looking statements, and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to the forward-looking information and risk factors section in the company's public filings, including its most recent MD&A and AIF, for more information. You will also find a more fulsome discussion of the company's results in its MD&A and financial statements for the period, which are posted on the Cedar Plus and can be found on the company's website, siennaliving.ca. Today's call is being recorded, and a replay will be available.

Ladies and gentlemen, welcome to Sienna Senior Living Inc, Q2 2025 conference call.

Today's call is hosted by Newton Jane president and chief executive officer and David hung Chief Financial Officer and Executive Vice President investor of Sienna Senior Living Inc.

Please be aware that certain statements or information discussed today are forward-looking statements. Actual results could differ materially. The company does not undertake to update any forward-looking statement or information.

Please refer to the forward-looking information and risk factors section in the company's public filings, including its most recent MD&A and AIF, for more information.

Speaker 4: Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides which accompany the host's remarks on the company website under Events and Presentations. With that, I will now turn the call to Mr. Jain. Please go ahead, Mr. Jain.

You will also find a more fulsome discussion of the company's results and its mdna and financial statements for the period, which are posted on the cedar plus and can be found on the company's website, Sienna living.cat, today's call is being recorded and a replay will be available.

Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release.

The company has posted slides that accompanied the host's remarks on the company website under Events and Presentations.

With that I'll now turn the call to Mr. Jane, please go ahead Mr. Jane.

David Hung: Thank you, and good morning, everyone. Thank you for joining us on our call today. During the second quarter, we had strong results. We maintained our growth momentum, which is reflected in our financial results, and the closing of a number of significant transactions. We completed $315 million of acquisitions during the quarter, and we remain on track to add close to $100 million by the end of this quarter, with further potential for acquisitions during the remainder of this year. In addition, we are preparing to open our long-term care community in North Bay in our campus of care in Brantford over the coming weeks. Together, these two developments are valued at over $220 million. Our increasing scale comes at a time when demand for seniors' housing is accelerating and supply remains highly constrained.

Thank you and good morning everyone.

Uh, and thank you for joining us on a call today. During the second quarter, we had strong results, we maintained our growth momentum, which is reflected in our financial results and the closing of a number of significant transactions.

We completed 315 million of Acquisitions due to the quarter and we remain on track to add it, close to 100 million dollars by the end of this quarter.

With further potential for Acquisitions. During the remainder of this year,

in addition, we are preparing to open our Long-Term Care community in North Bay, in our campus of care. And Brantford, over the coming weeks,

Together, these 2 developments are valued at over 220 million.

David Hung: These dynamics are not only making our assets more valuable, but they're also making Canadian senior living an increasingly attractive sector for long-term investments. From an operational perspective, our key performance indicators in both business segments continue to trend in a positive direction in this quarter. Same property NOI increased by 12.3% in the retirement segment and by 4.8% in the long-term care segment. Key drivers of the double-digit increase in the retirement segment were a year-over-year occupancy increase and rental rate growth. Average same property occupancy was up 150 basis points year over year and has reached 92.1% in the second quarter. Subsequent to the quarter, monthly occupancy increased to 93.1% in July, and we remain confident to reach our stabilized occupancy target of 95% by Q1 of next year. Our robust sales platform and focused marketing campaigns continue to generate strong interest in residences.

Our increasing scale comes at a time when demand was seen in housing is accelerating and Supply remains highly constrained. These Dynamics are not only making our assets, more valuable, but also making Canadian senior living and increasingly attractive sector for long-term Investments.

From an operational perspective, our key performance indicators in both business segments continue to trend in a positive direction in this quarter.

same property in noi increased by 12.3% in the retirement segment and by 4.8% in the long-term care segment,

Key drivers of the double-digit increase in the retirement segments were a year-over-year occupancy increase.

And rental rate growth.

Averaged, same-property occupancy was up 150 basis points year-over-year and has reached 92.1% in the second quarter.

Subsequent to the quarter, monthly occupancy increased to 93.1% in July. And we remain confident to reach our stabilizer occupancy, Target of 95% by q1 of next year.

David Hung: Our call center leads remain high, and tours have increased by over 30% year over year. In July, we hosted a two-day national open house at our residences, the first time we extended our open house over a two-day period, and we are encouraged by the results. We saw a 58% increase in attendance and a 66% increase in deposits compared to our previous open house last year. In addition, we maintain a robust focus on hospital outreach and excellent relationships with healthcare and business partners in the communities we operate in. All of these initiatives are expected to drive increasing lead generation and future movements. Beyond the strong same property performance, we are pleased to see the results of our repositioning efforts and our optimization portfolio.

A robust sales platform and a focus marketing campaigns continue to generate strong interest in residences.

Our call center leads remain high, and tours have increased by over 30% year-over-year.

In July, we hosted a 2-day national open house at our residences. The first time we extended our open house over a 2-day period.

And we are encouraged by the results.

We saw a 58% increase in attendance and 66%, increase in deposits compared to your previous open house last year.

In addition, we maintain a robust focus on hospitals, outreach, and excellent relationships with healthcare and business partners in the communities. We operate in.

Beyond the strong same-property performance, we are pleased to see the results of our repositioning efforts in our optimization portfolio.

David Hung: Second quarter NOI increased by approximately 32% year over year in this portfolio, with an average margin increase of approximately 400 bps compared to the same period last year. In long-term care, our fully occupied homes with growing waitlists continue to add to the strength of our operating platform. Further supporting the long-term care segment was an annual funding increase of 2.4% from the Government of Ontario. This increase comes into effect as of April 1, 2025, and we expect similar announcements for funding increases in line with inflation from governments in Alberta and British Columbia. In addition, our recently acquired portfolio in Alberta and the acquisition of the final 30% interest in Nicola Lodge in British Columbia have added to the increase in total NOI in the long-term care segment.

Second quarter noi increased by approximately 32% year-over-year in this portfolio with an average margin increase of approximately 400 basis point compared to the same period last year.

In long-term care are fully occupied homes with growing weight. Lists continue to add to the strength of our operating platform for the supporting. The long-term care segment was an annual funding increase of 2.4% from the government of Ontario.

This increase comes into effect as of April 1st 2025.

And we expect similar announcements regarding funding increases in line with inflation from governments in Alberta and British Columbia.

In addition, our recently acquired portfolio in Alberta and the acquisition of the final 30% interest in Nicola large in British. Columbia have added to the increase in total noi in the long term care segment.

David Hung: Moving to slide six, our strategy of maintaining a diversified portfolio of private-pay retirement residences and government-funded long-term care communities is reflected in our recent acquisitions. During the second quarter, we added six properties to our platform in Ontario and Alberta. On April 1, we finalized the portfolio acquisition of four continuing care homes in key markets in Alberta, and are excited about this expansion, adding 540 beds in a province where we expect to continue our growth as opportunities arise. We also closed the acquisition of two retirement residences in Ottawa, adding suites in a market that has seen a significant turnaround in the recent past. In addition, we are further strengthening the footprint in the Greater Toronto Area with an acquisition of 133 suite high-quality retirement residences and 192-bed long-term care homes. Both properties are located in Mississauga and are expected to close in this quarter.

Moving to slide 6, our strategy of maintaining a diversified portfolio of private paid retirement residences and government funded. Long-term care communities is reflected in our recent acquisitions,

During the second quarter, we added 6 properties to our platform in Ontario and Alberta.

On April 1st, we finalized the acquisition of four Continuing Care Homes in key markets in Alberta, and we are excited about this expansion. We are adding 540 beds in a province where we expect to continue our growth as opportunities arise.

We've also closed acquisition of 2 retirement residences in Ottawa.

Adding Suites in a market that has seen a significant turnaround in the recent past.

In addition, we are further strengthening the footprint in the greater Toronto area with an acquisition of 133. Sweet, high-quality retirement residents, and 192 bed, long-term care home. Both properties are located in Mr. Saga, and are expected to close in this quarter.

David Hung: Our highly engaged team and a structured approach to onboarding and integration allow us to grow at this accelerated pace. As we expand further, we will continue to enhance our transition processes to ensure a smooth and fast integration of the new properties, team members, and residents into Sienna's operating platform. This not only supports a positive experience for all involved, but will also further strengthen our operating results. Moving to development, we completed Sienna's first long-term care redevelopment project in North Bay, and we expect to welcome residents to their new home in the coming weeks. We couldn't be prouder of this significant milestone, which highlights our commitment to modernizing our long-term care portfolio in Ontario. We are also finalizing our $140 million campus of care in Brantford, Ontario. The campus comprises 160 redeveloped long-term care beds and 147 retirement suites.

Our highly engaged team and a structured approach to onboarding and integration allow us to grow at this accelerated pace.

As we expand further, we will we will continue to enhance our transition processes to ensure our smooth and fast integration of the new properties team members and residents into the Sienna's operating platform.

This not only supports a positive experience for all involved, but will also further strengthen our operating results.

Moving to development, we completed Sienna's first long-term care, Redevelopment project in North Bay and we expect to welcome residents to the new home in the coming weeks.

We couldn't be proud of the significant Milestone, which highlights our commitment to modernizing. A long-term care portfolio in Ontario.

David Hung: We are looking forward to welcoming our first residents at our retirement residence at the end of this month and expect to open our long-term care home by the end of the third quarter. Once fully operational, each of our redevelopment projects is expected to grow Sienna's AFFO per share by about 3%. At the end of July, the Ontario Government announced enhancements to its construction funding program for long-term care homes. The new program provides greater funding flexibility and addresses regional differences in construction costs, in particular with respect to higher building costs in the Greater Toronto Area. While we continue to evaluate the revised funding and its implications on our development program, we feel optimistic about the significant improvement given that over 80% of our development pipeline is located in the Greater Toronto Area.

We also finalizing our 140 million Campus of care in Brantford. Ontario, the campus comprises of 160 redeveloped, long-term, care beds, and 147 retirement, Suites

We're looking forward to welcoming our first residents at our time and residents at the end of this month, and expect, to open our long-term care home by the end of the third quarter.

Once fully operational each of our Redevelopment projects is expected to grow Sienna's AF for 4 per share by about 3%.

At the end of July, the Ontario government announced enhancements to construction funding program for long-term care homes.

The new program provides greater funding flexibility and addresses Regional differences in construction costs in particular, with respect to hard building cost in the GTA.

While we continue to evaluate the revised funding and its implications on our development program, we feel optimistic about the significant Improvement that over 80% of our development pipeline, is located in the greater Toronto area.

David Hung: Moving to slide eight, investing in our team members and building our workforce that is fully aligned is fundamental to grow and scale our operations. An important aspect of our growth story is the ownership culture we are building at Sienna, and we are particularly proud of our share ownership program. Since launching the program in 2022, more than 10,000 team members have become shareholders. This year, we made further enhancements by awarding additional shares to team members celebrating service milestones. Many of the impactful initiatives that have helped us build highly engaged teams are also highlighted in our 2025 impact report, which we released yesterday. The report highlights a meaningful difference our 14,500 team members make every single day in the lives of our residents, families, and the communities we operate in. With that, I'll turn it over to David Hung for an update on our financial results.

Moving to slide 8 investing in a team members and building a Workforce that is fully aligned, is fundamental to grow and scale our operations.

An important aspect of our growth story is the ownership culture we're building at Sienna. We are particularly proud of our share ownership program.

Since launching the program in 2022, more than 10,000 team members have become shareholders.

This year, we made further enhancements by awarding additional shares to team members celebrating service milestones.

Many of the impactful initiatives that have helped us build. Highly engaged. Teams are also highlighted in our 2025 impact report, which we released yesterday.

The report highlights a meaningful difference. Our 14 and a half thousand team members make every single day in the lives of our residents families and the communities we operate in

David Hung: Thank you, Nitin Jain, and good morning, everyone. I will start on slide 10 for financial results. In my commentary, in accordance with our MD&A disclosure, I will make reference to our operating results, excluding one-time items. In Q2 2025, revenue on a proportionate basis increased by 17.4% year over year to $253.6 million. This increase was largely due to occupancy and rental rate growth, as well as increased care revenue in the retirement segment. Adding to the increase were the contributions from our long-term care platform, including higher flow-through funding for direct care, higher private accommodation revenue, and additional revenue from acquisitions completed in 2025. Same property NOI increased by 8.2% to $45.1 million in Q2 2025, including by 12.3% in our retirement segment and by 4.8% in the long-term care segment.

With that, I'll turn it over to David for an update on our financial results.

Thank you, Nan and good morning everyone. I will start on slide 10 for financial results in my commentary in accordance with our MD and a disclosure. I will make reference to our operating results. Excluding 1-time items.

53.6 million. This increase was largely due to occupancy and rental rate growth, as well as increased care revenue in the retirement segment.

Adding to the increase where the contributions from our long-term care platform, including higher flow through funding for direct care, higher private, accommodation revenue and additional revenue from Acquisitions completed in 2025.

David Hung: In the retirement segment, same property NOI increased by $2.3 million in Q2 2025 compared to last year, largely as a result of improved occupancy and rate growth. These improvements, in addition to generating higher care revenue and maintaining a strict focus on operating expenses, supported the year-over-year 203 basis point improvement of our same property operating margin. We expect the margin expansion to continue as we get closer to our 95% occupancy target and achieve additional efficiencies through scale. In addition to strong same property growth, we are progressing well with respect to our asset optimization initiatives, which includes five assets in the company's retirement portfolio. These assets will benefit from a range of initiatives that target a better market fit, including renovations, the change in suite mix, additional services, or the alternative use of a property.

Same property, noi increased by 8.2% to 45.1 million in Q2, 202025 including by 12.3% in our retirement segment. And by 4.8% in the long term care segment

In the retirement segment. Same property, noi increased by 2.3 million in Q2 20225 compared to last year largely as a result of improved occupancy.

Growth.

These improvements in addition to generating higher care, revenue and maintaining a strict focus on operating expenses.

supported the year-over-year 2030 basis point improvement of our same property operating margin.

We expect the market expansion to continue as we get closer to our 95% occupancy target and achieve additional efficiencies through scale.

In addition to strong same-property growth, we are progressing well with respect to our asset optimization initiatives, which include five assets in the company's retirement portfolio.

David Hung: Occupancy in our optimization portfolio increased by 740 basis points year over year in Q2, adding to the strength of our results in the retirement segment. In the long-term care segment, same property NOI increased by $1.1 million. Fully occupied homes with growing waitlists and continued improvements in private occupancy supported the year-over-year growth. During Q2 2025, operating funds from operations increased by 24.3% to $29.3 million compared to last year, primarily due to higher same property NOI, as well as contributions from acquisitions that were completed in the quarter. Adjusted funds from operations increased by 21% to $24.1 million compared to last year. The increase was mainly due to a higher OFFO offset by an increase in maintenance capital expenditures and lower construction funding income. On a per-share basis, OFFO and AFFO per share decreased by 1.5% and by 4.0% respectively in Q2 2025.

These assets will benefit from a range of initiatives that Target a better Market fit, including Renovations the change in Sweet, Mix additional services or the alternative use of a property.

Occupancy in our optimization portfolio increased by 740 basis points year-over-year in Q2, adding to the strength of our results in the retirement segment.

In the long-term care segment, same property NOI increased by $1.1 million.

Fully occupied homes with growing weightless and continued improvements in private occupancy supported the year-over-year growth.

During Q2 2025, operating funds from operations increased by 24.3% to $29.3 million compared to last year, primarily due to higher same-property NOI, as well as contributions from acquisitions that were completed in the quarter.

Adjusted funds from operations, increased by 21%, to 24.1 million compared to last year. The increase was mainly due to a higher of ofo offset by an increase in maintenance Capital expenditures and lower construction funding income.

David Hung: Our Q2 2025 AFFO payout ratio was 89.5%, a 380 basis point increase compared to Q2 2024. The decrease in OFFO and AFFO per share and the increase in the company's payout ratio are the results of the temporary dilution in connection with our equity issuances in August 2024 and February 2025, which made the significant expansion of our asset base possible. In total, we raised $288 million of equity by issuing 18.7 million shares to fund our acquisitions and developments. With a substantial amount of the capital invested in recent months and further capital being deployed during the remainder of Q3, we expect to realize the full benefit in the quarters ahead. Moving to slide 11, throughout the second quarter, we maintained our strong financial position and balance sheet.

On a per share basis, ofo and afo per share, decreased by 1.5% and by 54.0% respectively in Q2 2025.

Our Q2 2025 AFO payout ratio was 89.5%, a 380-basis point increase compared to Q2 2024.

The decrease in OFO and ASFL per share, along with the increase in the company's payout ratio, are the results of the temporary dilution in connection with our equity issuances in August 2024 and February 2025, which made the significant expansion of our asset base possible. In total, we raised $288 million of equity by issuing 18.7 million shares to fund our acquisitions and developments.

With the substantial amount of capital invested in recent months and further capital being deployed during the remainder of Q3, we expect to realize the full benefit in the quarters ahead.

David Hung: We ended the quarter with $313 million in liquidity, $1.2 billion of unencumbered assets, and no major debt maturities until Q1 2026. Further adding to this strong financial position was the confirmation of the company's DBRS Morningstar triple B rating with stable trends. This confirmation was announced by DBRS Morningstar on August 1st and was based on Sienna's robust operating performance. With that, I will turn the call back to Nitin for his closing remarks.

Moving to slide 11, throughout the second quarter, we maintained our strong financial position and balance sheet. We ended the quarter with $313 million in liquidity, $1.2 billion of unencumbered assets, and no major debt maturities until Q1 2026.

Further adding to the strong financial position was the confirmation of the company's Morning Star dbrs. Triple B rating with stable trends.

This confirmation was announced by Morningstar DBRS on August 1st and was based on Sienna's robust operating performance.

Nitin Jain: Thank you, David. We are at the beginning of a major demographic shift. The leading edge of the baby boomer generation is turning 80 and entering a stage of life where retirement living becomes a real consideration. This powerful tailwind, combined with a strong balance sheet and a healthy pipeline of growth opportunities, puts us in a great position to take advantage of the positive momentum in Canadian senior living. With respect to our growth targets, we expect same property NOI in our retirement segment to benefit from continued occupancy and rental rate increases, and we remain confident to reach a stabilized occupancy target of 95% by Q1 of 2026. Based on our strong results during the first six months of 2025 and our outlook for the balance of the year, we maintain our guidance for Sienna's 2025 same property retirement NOI growth to exceed 10%.

With that. I will turn the call back to nitten for his closing remarks. Thank you, David.

We are the beginning of a major demographic shift, the Leading Edge of the baby boomer generation is turning, 80 and entering a stage of life where retirement living becomes a real consideration.

This powerful Tailwind combined, with a strong balance sheet, and a healthy pipeline of growth opportunities. Puts us in a great position to take advantage of the positive momentum in Canadian Senior Living.

With respect to a growth targets. We expect same property noi in our retirement segment to benefit from continued occupancy and rental rate increases and we remain confident to reach our stabilized occupancy, Target of 95% by q1 of 2026.

Nitin Jain: Sienna's long-term care portfolio is expected to benefit from the continued stability of this segment. The 2025 target for same property NOI growth, excluding one-time items, is expected to be in low single digits. In addition, we expect Sienna's growth through acquisitions and development to continue. So far, we are on track to add nearly $660 million of assets by Q3 of this year, and we see potential for additional growth during the balance of the year. In June of this year, we celebrated the 15th anniversary of Sienna being listed on the Toronto Stock Exchange. Our recent growth initiatives are built on the same diversified strategy that has driven our success over the past 15 years. Since our IPO, we added $2.3 billion of assets and grew from a long-term care operator in Ontario to one of the largest and most diversified senior living companies in Canada.

Sienna's long-term care portfolio is expected to benefit from the continued stability of the segment. The 2025 target for same property NOI growth, excluding one-time items, is expected to be in low single digits.

In addition, we expect Sienna's growth through acquisitions and development to continue.

So far, we are on track to add nearly 660 million dollars of assets by Q3 of this year, and we see potential for additional growth during the balance of the year.

In June of this year, we celebrate the 15th anniversary of Sienna being listed on the Toronto Stock Exchange.

A recent growth initiative is built on the same diversified strategy that has driven our success over the past 15 years.

Nitin Jain: During this time, Sienna has delivered a total shareholder return of over 400% and has significantly outperformed the TSX, which increased by approximately 140% over the same period. Last month, Sienna was named one of Canada's best companies in 2025 by Time Magazine, a ranking based on continuous growth, high employee satisfaction, and a purpose-driven culture. We are particularly proud of this recognition, which highlights our achievements and was made possible by our 14 and a half thousand team members who are also shareholders in our company. On behalf of our entire team and our board of directors, I want to thank you for your support, and we are now ready to take your questions.

Since our IPO, we added 2.3 billion dollars of assets and Grew From a long-term care, operator in Ontario, to 1 of the largest and most Diversified Senior Living companies in Canada.

During this time, Sienna has delivered a total shareholder return of over 400% and significantly outperformed the TSX, which increased by approximately 140% over the same period.

Last month Sienna was named 1 of Canada's best companies in 2025 by Time Magazine.

A ranking based on continuous growth, High employee satisfaction and a purpose-driven culture.

We are particularly proud of this recognition, which highlights our achievements and was made possible by our 14 and a half thousand team members who are also shareholders in our company on behalf of our entire team. And our board of directors, I want to thank you for your support and we are now ready to take your questions.

Speaker 4: Thank you. If you have a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, simply press star one again. One moment for your first question. Your first question comes from line of Lauren Calmire of Des Jardins. Your line is open.

Thank you.

If you have a question, please press star 1 on your telephone keypad, if you wish to remove yourself from the queue simply press star 1 again.

1 moment for your first question.

Your first question comes from the line of Lauren Kalmar of D. Your line is open.

Speaker 6: Thanks. Good morning. Maybe just focusing in on the developments to start off a little bit. You guys got the two that are going to be completed this quarter. You will have just one ongoing. Obviously, you have called out the fact that you are still evaluating the implications from the updated development team. But I was just wondering if you could give us a little bit of insight into how you are thinking about new initiations and how many projects you think you guys can get underway in maybe the next 12 to 18 months.

Thanks, good morning. Um, maybe just focusing in on the developments to start off a little bit. Um, you guys got the 2.

That are going to be completed. This quarter, you'll have just 1 ongoing obviously, you've called out the fact that you're still evaluating the implications from the updated development scheme.

Nitin Jain: Hi, Lauren. Good morning. On development, the new funding change in Greater Toronto Area, we are very optimistic about the funding is nearly increasing by close to 100%. Many of the projects which were not viable before could potentially be made viable. It's always, you always have to go through the details because the program was just recently launched. We have close to 1,000 beds in the pipeline in Greater Toronto Area markets. We do expect us to continue on with some projects. It's a bit too early to comment on which one will go first, but I would expect at least one project in the next 12 to 18 months, considering that some of the next projects will be bigger than 160 beds that we have done in the past.

But I was just wondering if you give us a little bit of insight into how you're thinking about new initiations and, and how many projects you think you guys can get underway in the maybe the next 12 to 18 months.

Elan, uh, good morning and development. Uh, the new funding change in GTA. We are very optimistic about the funding as newly increasing like close to 100%, uh, many of the projects which were not viable before could potentially be made. Um, viable, it's always, uh, you always have to go through the details because the program was just recently launched, we have close to thousand beds in pipeline, uh, in GTA markets. So we do expect us to continue on with uh, some projects. It's a bit too early to comment on which 1 will go first. Uh, but I would expect at least 1 Project in the next 2 12 or 18 months. Uh, considering that some of the next projects would be bigger than 160 beds that we've done in the past.

Speaker 6: Okay, that's very helpful. Then just a bit more of a technical one, I guess. On the construction funding subsidy for North Bay and Brantford, when do you guys expect that to come on? Would that come on sort of right when they're completed and you get the full benefit in Q4?

Okay. That's very helpful. Um and then just uh like a bit more of a technical 1 I guess on the construction funding subsidy for North Bay and Brandford. When do you guys expect that to come on with that? Come on, sort of right when they're completed and you get the full benefit in 4 q.

David Hung: Thanks for that question, Lauren. We would start getting the construction funding when the first resident moves in. So that would be in several weeks from now when we start moving residents to the new building. We've already completed the building in July, and we've gotten $4 million of development grant from them already. We're currently just undergoing final ministry inspection. So within the next few weeks, when the first resident moves in, that's when we would get the construction funding subsidies.

uh,

thanks for that question.

We would start getting the

The first resident moves in, um, so that would be in, you know, several weeks from now when we start moving residents to the new building, we've already completed the building in July and we've gotten 4 million dollars of uh, development Grant from them already. Uh, we're currently just undergoing, final Ministry, inspection. And So, within the next few weeks, when the first resident moves in, that's when we would get the construction funding sub.

Speaker 6: Okay. Just to confirm, that $4 million development grant, that doesn't hit FFO?

David Hung: No, it does not. It would go against the cost of construction.

Okay. And just to confirm, that million-dollar development grant doesn't hit FFO.

No, it does not. It would go against the cost of construction.

Speaker 6: Perfect. Okay, thank you so much. I'll turn it back.

Perfect. Okay, thank you so much. I'll turn it back.

Speaker 4: Your next question comes from the line of Jonathan Keltcher of TD Cowan. Your line is open.

Your next question comes from the line of Jonathan Kilcher of TDK and your line is open.

Speaker 6: Thanks. Good morning. Just sticking on the development front, for Brantford, for the retirement home, how should we think about the cadence of lease up for the property? Have you guys started leasing that yet?

Thanks, uh, good morning and just, um, sticking on, um, on the development front for, for brand, for, for the retirement home. Um, how should we think about the the Cadence of of lease up for the property? Have you guys have you guys started leasing that yet?

Nitin Jain: Hi, Jonathan. Good morning. We have started leasing up. We have deposits already, and residents are ready to move in when the homes open, which probably is the end of this month or first week of September. Usually, for a property that size, a regular lease up is around two and a half to three years. Our goal would be to do it faster. We will provide more detail on it as it opens up, and we will start to see more and more visibility. For some of the services, such as assisted living and memory care, they are more in time where people do not really put deposits. It is a need-driven service. The retirement home that we are building in Brantford has assisted living, has memory care. So we do expect that once it opens, it will get filled out pretty fast, at least those wings.

Our goal would be to do it faster. But again, we'll provide more detail on it as it opens up and we'll start to see more and more visibility and again for some of the services such as assisted living and Memory Care. There are both, there are more in time where you people don't really put deposits, it's a need-driven service. And um the retirement home that we're building in Brantford, uh has Assisted Living has memory care. So we do expect that. Once it opens it'll get filled out pretty fast. At least those wings.

Speaker 6: Okay. How many deposits would you have? Is it a lot, a little?

Okay, and, and how many deposits would you have?

Because there's a lot of little

Nitin Jain: I would say it is in line with what you would expect when a building opens.

Uh, I would say it's in line with what you would expect when a building opens.

Speaker 6: Okay, fair enough. On your same property NOI outlook for retirement, you guys kept it at 10% plus, but you did do 14%, give or take, in the first half. Should we maybe think about this as kind of 10% plus for the back half of the year?

Okay, fair enough. Um, on the, on your same property, noi outlook for retirement. Um, you guys kept it at 10% plus, but you you did do 14% give or take in in the first half. Should we maybe think about this as, as kind of 10% Plus, for, for the back half of the year?

Nitin Jain: Yeah, I would say that's not an assumption. That would make sense. We see margin growth. We see occupancy change. We saw a little bit of dip in occupancy in the second quarter, which was more driven by where we ended the first quarter. As you know, it's an average. When you start low, it takes a bit of time to build it up. The numbers we are seeing in July where occupancy is trending up, we do expect to deliver on the 10% plus target we have for this year.

Yeah, I would say that's not a you know, and an assumption like that would make sense. We see margin growth. We see occupancy change. We saw a little bit of dip in occupancy in the second quarter. Which is more driven by where we ended uh, the first quarter. Uh and as you know, it's it's an average of when you start low it takes a bit of time to build it up and the numbers we're seeing in July. We're occupancy is trending up. We do expect, uh, to deliver on the 10% plus, uh, Target. We

Half of this year.

Speaker 6: Okay. And then just lastly, on the 95% that you expect to hit in Q1, is there any reason to think that you cannot get to 96% or maybe even a little bit more as the year progresses next year? 95% is not just a magic stop number, is it?

Okay and then and then just lastly on the on the 95% um that you expected to hit q1 um is there is there any reason to think that you you can't get to 96 or maybe even a little bit more as the year progresses next year.

Nitin Jain: I agree with you 100%. I think there was a time when 95% was really the end mark for retirement. We have seen many of our homes delivering much above 95%. You always have in a portfolio a few properties in a market which is a bit oversupplied for a year or two. I would say the reality is the majority of the homes on an average of 95% would be much above 95%. You might have a few homes which are at 90% or in the high 80s, just depending on market conditions or if it is going through some optimization or renovation. Your question around that 95% is not really the high watermark. We agree with it completely. I think there is a lot more potential after 95%.

95 is not just a, a magic stop number, is it? I agree with you 100%. I think, uh, you know, there was a time in 95% was really the, the end mark for uh, retirement. We see many of our homes delivering much above 95% and you always have in a portfolio few properties when in a market, which is a bit oversupplied for a year or 2. I would say if there the, the reality is majority of the homes on an average of 95 would be much above 95. And you might have a few homes which are at 90% or, you know, in the high 80s just depending on market conditions or if it is going through some optimization or renovation. But your your question around that 95% is not really

the high water mark. We agree with it completely. I think there is a lot more potential after 95.

Speaker 6: What do you think the high watermark would be for a portfolio like yours?

Nitin Jain: Yeah, it is just very difficult to predict. I mean, we have homes which are running at 100% quarter after quarter for multiple quarters. So one could argue, can everything become like that? I think that would be very optimistic. But getting to 96%, 97% is not unreasonable. I just think we have to first get to 95% before we start talking about some of those other numbers.

What do you think the high water mark would be for a portfolio like yours?

Yeah. It's just very difficult to predict. I mean we have homes which are running at 100% um, order after quarter for multiple quarters so you know, 1 could argue, can everything become like that. I think that would be very optimistic but uh, you know, getting to 96. 97 is not unreasonable. I just think we have to first, get to 95.

Before we start talking about some of those other numbers.

Speaker 6: Okay, that's helpful. That's it for me. I'll turn it back. Thank you.

Nitin Jain: Thank you.

Okay, that's uh, that's helpful. That's it for me. I'll turn it back. Thank you.

Thank you.

Speaker 4: Again, if you have a question, please press star one on your telephone keypad. Your next question comes from the line of Himanshu Gupta of Scotiabank. Your line is open.

Again, if you have a question, please press star 1 on your telephone keypad. Your next question comes from the line of Human Gupta of Scotia Bank. Your line is open.

Speaker 7: Thank you and good morning. So, just sticking to retirement home occupancy, how was your occupancy performance in Q2, and does that make you on track to reach your 95% target?

Thank you and good morning.

So just, uh, sticking to the Diamond Home occupancy. Uh, how was your occupancy performance in Q2 and does that make you on track to reach your 95% of it?

Nitin Jain: Yeah, I mean, you know our occupancy target. Our occupancy for, we started the quarter in Q2 with a bit late. We had to do a bit of catch-up. We had significantly more move-outs in Q1 than we saw in the past. It takes a bit of time to catch that up. We are happy with our July results, where we are tracking around 93% or so. I would say we, and we don't see much change in that trend. We had very successful open house. Our leads are up. Our deposits are up. Our tours are up. Again, that's what gives us the confidence of getting to that 95% in Q1.

Speaker 7: Got it. Assuming a seasonal dip in February, March, you technically have to get to that 95% by December or January. It is like four or five months ahead of us and 200 basis points to cover. Are you able to say that?

You know, our our occupancy Target, uh, our occupancy for, uh, we started the quarter in Q2 with a bit late. And so we had to catch, we do a bit of catch up, we had significant more move outs in q1 than we saw in the past, so it uh, it takes a bit of time to catch that up. We are happy with our July results, uh, with where we are tracking around 93% or so. So I would say we uh and we don't see much change in the trend. We had very successful open house. Our leads are up. Our deposits are up. Uh tours are up. So again that's what gives us the confidence of getting to that 95% in q1.

Nitin Jain: Yeah, that is correct. There is seasonality. There is also a combination of you might have markets where there is a lot of, you know, as long-term care homes are opening up, you might have a dip when the new homes open up, but that, you know, it will get absorbed quickly. It might take a month or so. We are not seeing the level of seasonality we used to see in the past. The move-outs in Q1 were more driven by additional long-term care homes opening so that people on the waitlist go up, and it takes a month or so to backfill the retirement home. It is hard to say, Himanshu, at this time that would be done by December. I would say we would stick to the target of by Q1, we will get to 95%. Again, all things are trending towards that.

Sorry, and then, you know, assuming like a seasonal, dip in February March, I mean, so technically, you have to get to that 95% by December or January. So it's like 4 or 5 months ahead of us and 200 basis point to cover you to say that.

Yeah, that's correct.

Weight lists go up and it takes a month or so to backfill the retirement home. So it's it's hard to uh, say him and at this time that would we were done by December. I would say we would stick to the Target of my q1. Um, we'll get to 95% and again all. Uh, all things are trending towards that.

Speaker 7: Fair enough. Thank you for that. Turning attention to retirement home NOI margins, good to see some expansion in Q2 on a year-over-year basis. In the past, you guys have said 70% to 75% of revenue from incremental occupancy should go to NOI. Is that math still working? And that is how you see it going forward as well?

Fair enough. Uh, thank you for that.

Uh, turning attention to retirement homes. No margins. Uh, good to see some expansion in Q2, you know, on a year-over-year basis.

Uh, I mean, in the past you guys have said, like 70% to 75% of revenue from, you know, incremental occupancy should go to NOI. Is that match still working? And is that how you see it going forward as well?

David Hung: Yeah, that's right, Himanshu. We have said before that, between 75% to 80% of any occupancy increase would fall to the bottom line. We still continue to believe that, particularly now that we're above 92% occupancy, that would be more true than ever.

Percent of, um, you know, any occupancy increase would fall to the bottom line. We still continue to believe that, um, you know, particularly now that, you know, we're above 92, uh, percent occupancy, that would be more true than ever.

Speaker 7: Awesome. Okay, thank you. Maybe the last question is on North Bay. So that 3% AFFO accretion, would you say that most of it or the bulk of it is coming from that annual construction subsidy and not much of incremental? Fair to say that?

Awesome, okay, thank you. Uh, maybe the last question is on North Bay.

Uh, so that 3% effort for accretion, uh, would you say that most of it or the bulk of it is coming from that?

Annual construction, subsidy.

David Hung: Yeah, no, I mean, it is going to come from a combination of incremental NOI. Remember that North Bay, it is a bigger building than the older building that we have currently. We are also going to get more NOI from higher preferred revenues. But there will also be, of course, the lift from the construction funding subsidy as well, of which it would be $3.3 million on an annual basis. So it is really the combination of the two.

and not much of incremental Freedom, say that

Um yeah no I mean it's going to come from a combination of uh incremental noi. Uh remember that North Bay. It is a bigger building than the older building that we have. Uh, currently we're also going to um, you know, get more noi from higher preferred revenues but there will also be, of course, uh, you know, the lift from the construction funding subsidy as well of which it would be 3.3 million uh on an annual basis. So it's really the combination of the 2.

Speaker 7: Got it. Okay. Thank you guys, and I will turn it back. Thank you.

Got it. Okay, thank you guys and back. Thank you.

Speaker 4: With no further questions, that concludes our Q&A session. It also concludes today's conference call. You may now disconnect.

With no further questions that concludes our Q&A session. And it also concludes today's conference call you may now disconnect