SIA Sienna Senior Living Inc

Sienna Senior Living Inc. (“Sienna” or the “Company”) (TSX: SIA) today announced its financial results for the three and six months ended June 30, 2024. 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.sedarplus.ca.

Sienna continued its trend of year over year same property net operating income (“NOI”) growth in the Company’s long-term care and retirement segments, its sixth consecutive quarter of same property NOI growth in both business segments since the beginning of 2023. The Company’s strong performance in the long-term care (“LTC”) segment includes a significant government funding increase in Ontario to offset inflation in recent years, which came into effect in Q2 2024, as well as occupancy and rate increases in the Company’s retirement segment.

“Our second quarter performance demonstrates the strength and tremendous potential of our Company,” said Nitin Jain, President and Chief Executive Officer. "The accelerated growth momentum is a reflection of the numerous strategic initiatives we put in place to improve and expand our operating platforms, alongside a generally stabilizing macro-environment, and will ultimately allow us to grow and serve more seniors for generations to come."

Operating Highlights

• Same-property NOI increased by 18.5% to $46.1 million, compared to Q2 2023, including
  • a 9.5% year over year increase in the Retirement segment, and
  • a 26.6% year over year increase in the LTC segment
• Retirement same property occupancy increase – Average same property occupancy increased by 180 bps to 88.6% in Q2 2024 compared to Q2 2023, and by 50 basis points compared to Q1 2024; subsequent to quarter end, average monthly same property occupancy reached 89.0% in July 2024;
• Long-term-care government funding increase of approximately 6.6% to the level of care funding, including flow-through funding and Other Accommodations (“OA”) funding;
• One-time Workplace Safety and Insurance Board (“WSIB”) refund relating to prior years in the amount of $3.0 million pertaining to Sienna’s LTC segment and $0.4 million to the Retirement segment.

Publication of 2023-2024 Environmental, Social and Governance (“ESG”) Report

Today, Sienna released its 2023-2024 ESG Report, highlighting its most important achievements over the past year. The Company’s ESG initiatives and stories are deeply aligned with Sienna’s purpose of cultivating happiness and its core values, including Create Community, this year’s theme of the report.

Financial performance - Q2 2024

• Total Adjusted Revenue increased by 10.7% in Q2 2024 to $219.5 million, compared to Q2 2023. In the Retirement segment, the increase was mainly driven by annual rental rate increases, occupancy increases, and care and ancillary revenue. In the LTC segment, the increase was primarily due to increased flow-through funding for direct care, significant government funding increases offsetting inflation in recent years, higher private accommodation revenue and a one-time WSIB refund relating to prior years of $3.0 million.
• Total NOI increased by 18.3% to $46.0 million, compared to Q2 2023, resulting from a $1.6 million increase in the Retirement segment driven by an increase in same property NOI mainly due to annual rent rate increases, occupancy increase, and care and ancillary revenue. NOI in the LTC segment increased by $5.5 million largely due to a significant annual government funding increase to support cost increases in recent years and a one-time WSIB refund, offset by inflationary increases in expenses.
• Same Property NOI increased by 18.5% to $46.1 million, compared to Q2 2023, including a $20.1 million contribution from the Retirement segment, and a $26.0 million contribution from the LTC segment.
• OFFO per share increased by 21.4% in Q2 2024, or $0.063, to $0.357. The increase was primarily attributable to higher NOI.
• AFFO per share increased by 14.6% in Q2 2024 to $0.307. The increase was primarily related to the increase in OFFO, offset by a decrease in construction funding income and increase in maintenance capital expenditure.
• AFFO payout ratio was 76.2% in Q2 2024, compared to 87.3% in Q2 2023.

Financial performance in the six months ended June 30, 2024

• Total Adjusted Revenue increased by 15.3%, or $60.9 million, to $458.9 million, compared to the six months ended June 30, 2023. In the Retirement segment, the increase is mainly driven by annual rental rate increases, occupancy growth, and higher care and ancillary revenue. In the LTC segment, the increase is mainly driven by $23.7 million One-Time and Retroactive Funding related to prior years recognized in Q1 2024, annual inflationary funding increases, higher preferred accommodation revenue and a one-time WSIB refund relating to prior years.
• Total NOI increased by 45.6% to $109.5 million, compared to the six months ended June 30, 2023. Retirement segment total NOI increased $1.8 million primarily attributed to annual rental rate and occupancy increases, and higher care and ancillary revenue. LTC segment total NOI increased by $32.5 million mainly due to $23.7 million One-Time & Retroactive Funding relating to prior years in Q1 2024, annual inflationary funding increases and a one-time WSIB refund of $3.0 million, offset by inflationary increases in expenses.
• Same Property NOI increased by 46.2% to $110.0 million, compared to the six months ended June 30, 2023, including a 82.9% increase to $71.7 million in the LTC segment, and a 6.3% increase to $38.3 million in the Retirement segment.
• OFFO per share increased by 57.4%, or $0.314, to $0.861, compared to the six months ended June 30, 2023. The increase was primarily attributable to higher NOI, including $17.4 million of One-Time & Retroactive Funding of $23.7 million less $6.3 million of taxes relating to prior years in Q1 2024.
• AFFO per share increased by 52.9%, or $0.274, to $0.792, compared to the six months ended June 30, 2023. The increase was primarily related to the increase in OFFO, offset by higher maintenance capital expenditures, and a decrease in construction funding income.
• AFFO payout ratio was 59.1% for the six months ended June 30, 2024, compared to 90.3% for the same period prior year.

Financial position

The Company maintained a strong financial position during Q2 2024:

• Improved Interest Coverage Ratio to 3.7 for the three months ended June 30, 2024, compared to 3.5 for the three months ended June 30, 2023;
• Improved Debt Service Coverage Ratio to 2.1 for the three months ended June 30, 2024, compared to 1.9 for the three months ended June 30, 2023;
• Extended Weighted Average Term to Maturity of its debt to 5.5 years as at June 30, 2024, from 5.1 years as at June 30, 2023;
• Improved Debt to Adjusted EBITDA for the trailing 12 months to 6.8 as at June 30, 2024, from 8.0 as at June 30, 2023;
• Extended Unsecured Revolving Credit Facility for additional two-year period, expiring March 19, 2029; and
• Maintained high liquidity at $296.5 million as at June 30, 2024, compared to $275.6 million as at June 30, 2023.

Financial and Operating Results

	Three months ended June 30,				Six months ended June 30,
$000s except occupancy, per share and ratio data	2024		2023		2024		2023
Retirement - Average same property (1)	88.6	%	86.8	%	88.3	%	87.3	%
Retirement - Acquisition, Development and Others - Average occupancy (2)	29.4	%	-		22.4	%	-
Retirement - Average total occupancy	87.0	%	86.8	%	86.8	%	87.3	%
LTC - Average private occupancy	98.4	%	88.6	%	97.1	%	87.0	%
LTC - Average total occupancy (3)	98.5	%	97.8	%	98.0	%	97.2	%
Total Adjusted Revenue (4)(9)	219,487		198,343		458,871		397,954
Same property NOI (5)(9)	46,109		38,905		109,989		75,214
Total NOI (6)(9)	46,010		38,905		109,499		75,214
OFFO per share (7)(9)	0.357		0.294		0.861		0.547
AFFO per share (7)(9)	0.307		0.268		0.792		0.518
AFFO Payout ratio(8)(9)	76.2	%	87.3	%	59.1	%	90.3	%

1. Effective January 1, 2024, the results of Woods Park were reclassified from "acquisitions" to "same property".
2. Includes recently completed retirement residence in Niagara Falls, effective January 24, 2024, which is currently in the process of being leased.
3. Excludes the 3rd and 4th beds in multi-bed rooms in Ontario that will not be reopened.
4. Effective January 1, 2024, the Company began classifying all active funding that started during the pandemic as revenue ("pandemic funding"), instead of presenting them as net pandemic and incremental agency expenses. The corresponding expenses are presented as part of operating expenses.
5. Same property NOI for the three and six months ended June 30, 2024 includes a $3,406 WSIB refund related to prior years.Same property NOI for the six months ended June 30, 2024 includes a $27,010 government funding ("One-Time & Retroactive Funding") comprising one-time funding in Ontario of $13,419 ($10,064 relates to 2023 and $3,355 relates to 2024) and retroactive funding from British Columbia of $13,591. Excluding One-Time & Retroactive Funding of $23,655 related to prior years, same property NOI for the six months ended June 30, 2024 would be $86,334.
6. Total NOI for the three and six months ended June 30, 2024 includes a $3,406 WSIB refund related to prior years. Total NOI for the six months ended June 30, 2024 includes a $27,010 One-Time & Retroactive Funding. Excluding One-Time & Retroactive Funding of $23,655 related to prior years, total NOI for the six months ended June 30, 2024 would be $85,844.
7. OFFO and AFFO for the three and six months ended June 30, 2024 include a $2,500 WSIB refund related to prior years of $3,406 net of taxes of $906. OFFO and AFFO for the six months ended June 30, 2024 include a $17,365 One-Time & Retroactive Funding relating to prior years of $23,655 net of taxes of $6,290. Excluding the One-Time & Retroactive Funding relating to prior years, OFFO and AFFO would be $45,445 and $40,427, respectively. OFFO and AFFO per share would be 0.623 and 0.554, respectively.
8. AFFO payout ratio for the six months ended June 30, 2024 includes $17,365 consisting of One-Time & Retroactive Funding of $23,655 less $6,290 of taxes relating to prior years. Excluding the One-Time & Retroactive Funding relating to prior years, the AFFO payout ratio would be 84.5%
9. 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” in the MD&A.

Outlook

Long-term fundamentals in Canadian senior living continue to be very strong, driven by the rising needs of seniors, who make up the fastest-growing demographic in Canada, and limited new supply of senior living accommodations.

Looking ahead, we expect that the recent funding improvements to offset inflation in recent years will help stabilize our long-term care operating environment and also support our long-term care redevelopment initiatives in Ontario, and provide capital to continually make improvements to our homes in order to elevate our residents' experience, comfort and safety.

These positive factors, coupled with our continued initiatives to support occupancy growth in our retirement segment, give us reason for an optimistic outlook for 2024 and beyond.

In addition, easing inflation and expectations for further interest rate cuts add to our optimism. With ample sources of attractive financing options, we are well positioned to execute on our strategic initiatives and upcoming refinancing initiatives.

Retirement Operations – Average occupancy in the Company's same property portfolio was 88.6% in Q2 2024, a 180 bps increase year over year and 50 bps increase since Q1 2024. Our community outreach efforts, combined with a robust sales platform and an intensified focus on homes with below average occupancy levels, continued to support occupancy. Subsequent to the end of Q2, average same property occupancy reached 89.0% in July 2024 and lead indicators, including qualified leads and tours, continue to strengthen.

Going forward, we will continue to focus on expanding the Company's NOI with our concentrated marketing and sales initiatives, working towards our target for stabilized average occupancy of 95% in our same-property portfolio. We expect year over year same property NOI growth in our retirement portfolio in the high single-digit percentage range as a result of occupancy growth and rate increases.

Long-Term Care Operations – The Government of Ontario's 11.5% increase to Other Accommodations funding to offset inflation in recent years, which covers the costs of resident accommodation, comfort and safety, became effective as of April 2024 and has helped to support the increase in Sienna's LTC NOI. Further contributing to our strong year over year results were a one-time WSIB refund related to prior years and higher preferred accommodation revenues.

For the balance of 2024, we expect to benefit from the funding improvements announced earlier this year. The catch-up funding from the Ontario government is of particular importance, as it addresses the funding shortfalls as a result of inflationary pressures over the past four years. We also expect to benefit from a stable operating environment, as well as continued improvements with respect to staffing and cost management.

As a result, we expect our 2024 LTC NOI for the full year, excluding one-time and retroactive funding amounts of $23.7 million related to prior years which the Company recognized in Q1 2024, to grow in the low double-digit percentage range compared to 2023.

Developments – The Government of Ontario's commitment in its 2024 budget to significant new investments in the long-term care sector affirms our strategy to enhance and expand our long-term care platform and maintain a diversified portfolio of long-term care communities and retirement residences.

As a result of recent funding improvements, Sienna is moving forward with the redevelopment of its long-term care home in Keswick, Ontario, and expects to start construction in Q4 2024. Located on a campus comprising a 130-suite retirement residence and an older 60-bed Class B long-term care home, Sienna will redevelop the current long-term care home into a 160-bed home, redeveloping the current beds and adding 100 new beds. The Expected Development Yield for this project is approximately 8.5%.

As for Elgin Falls, construction costs for the 150 suite retirement residence in Niagara Falls, which was completed in Q4 2023 and is currently in lease-up, were in line with our estimates. To date, leasing progress is aligned with expectations, with 40% of the suites occupied and deposits for another 10% of the suites received from residents who will be moving in over the coming months.

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 of initiatives which may contribute to the Company’s NOI expansion, including:

• Occupancy growth in the Company’s retirement segment, including incremental NOI should we reach our target for stabilized average occupancy of 95.0% in our same-property portfolio, which would represent a 640 bps increase from our average occupancy of 88.6% in Q2 2024;
• Contributions from acquisitions and new developments, including incremental NOI from:
  1. The Company’s 50% joint venture interest in 12 retirement properties, acquired in 2022 for $189.8 million;
  2. The recently completed development of Elgin Falls Retirement Residence for $38.5 million with respect to the Company's 70% joint venture interest, which has an Expected Development Yield of approximately 7.5%; in addition, the Company has the ability to acquire the remaining 30% ownership interest, once the property is fully stabilized;
  3. The Company’s acquisition of its remaining interest in Nicola Lodge, expected to generate an unlevered yield of 6.75%; and
  4. The Company's development projects in North Bay, Brantford, and Keswick, once completed and operational.

These initiatives, individually and collectively, could have a significant positive impact on the value of Sienna’s business, enhancing its financial performance with growth in NOI and OFFO, and supporting the Company’s AFFO payout ratio.

Conference Call

Sienna will host a conference call on August 9, 2024 at 9:00 a.m. (ET). The toll-free dial-in number for participants is 1-800-715-9871, conference ID: 9543197. 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 August 9, 2025 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 and memory care under its Aspira retirement brand, long-term care, and specialized programs and services. Sienna's approximately 12,500 employees are passionate about cultivating happiness in daily life. For more information, please visit www.siennaliving.ca.

Risk Factors

Refer to the risk factors disclosed in the Company’s MD&A for the year ended December 31, 2023, and its most recent Annual Information Form for more information.

Forward-Looking Statements

Certain of the statements contained in this news release are forward-looking statements and are provided for the purpose of presenting information about management’s current expectations and plans relating to the future. Readers are cautioned that such statements may not be appropriate for other purposes. These statements generally use forward-looking words, such as “anticipate,” “continue,” “could,” “expect,” “may,” “will,” “estimate,” “believe,” “goals” or other similar words and are based on the Company’s expectations, estimates, forecasts and projections. These statements are subject to significant known and unknown risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied by such statements and, accordingly, should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved. The forward-looking statements in this news release are based on information currently available and what management currently believes are reasonable assumptions. The Company does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.

FOR FURTHER INFORMATION, PLEASE CONTACT:

David HungChief Financial Officer and Executive Vice President(905) 489-0258david.hung@siennaliving.ca

Nancy WebbSenior Vice President, Public Affairs and Marketing (905) 489-0788nancy.webb@siennaliving.ca