MARKHAM, Ontario, Feb. 24, 2022 (GLOBE NEWSWIRE) -- Sienna Senior Living Inc. (“Sienna” or the “Company”) (TSX: SIA) today announced its financial results for the three months and year ended December 31, 2021 and provided an update on its growth and expansion initiatives. The Consolidated Financial Statements and accompanying Management’s Discussion and Analysis (“MD&A”) are available on the Company’s website at www.siennaliving.ca and on SEDAR at www.sedar.com.
Sienna’s steadfast commitment to the safety and well-being of residents and team members during the pandemic as well as the continued focus on the future have resulted in a strengthening operating environment and put the Company in a position to accelerate its growth initiatives.
“Fundamentals in the Canadian seniors’ living sector have steadily improved in the second half of 2021 and supported Sienna’s significant occupancy recovery, strong fourth quarter operating results and return to growth and value add initiatives,” said Nitin Jain, President and Chief Executive Officer. “Over the past year, we have focused on engagement and recognition of our team members through a first of its kind share ownership program, have prioritized the well-being of our residents and team by making investments in our residences and operating platforms to improve their quality of life, and returned to strategically growing our business, including our recently announced portfolio acquisition and increased momentum in our development pipeline. These transformational initiatives, combined with our invaluable joint ventures with key stakeholders are all expected to be a source of future growth for Sienna. They will benefit our team members, shareholders, partners, and ultimately Canadian seniors for years to come.”
Operations Update
Sienna’s focus on operational excellence and its commitment to the health and safety of its residents and team members are reflected in Sienna’s operating and financial results.
- Strong Retirement Occupancy Gains – Average same property occupancy up 250 basis points (“bps”) to 84.6% in Q4 2021, from 82.1% in Q3 2021, as a result of marketing and sales initiatives and in-person tours during most of Q4 2021 at Sienna’s retirement residences.
Strong lead generation and a 140% increase in resident move-ins year-over-year in Q4 2021 resulted in average same property occupancy reaching the highest level in nearly two years of 85.3% in December 2021, followed by a 60 bps increase to 85.9% in January 2022.
- Accelerating LTC Admissions – Average occupancy based on licensed beds was 88.9% in Q4 2021, or 94.1% excluding beds unavailable due to capacity limitations or isolation requirements.
- Improving Net Operating Income1 (“NOI”) – Same property NOI increased by $4.4 million in Q4 2021, or 15.7%, to $32.4 million, compared to Q4 2020, mainly due to the improved operating environment, including
- $2.4 million increase in LTC same property NOI to $18.5 million; and
- $2.0 million increase in Retirement same property NOI to $13.9 million.
For the full year, same property NOI increased by 11.3%, or $13.9 million, to $137.5 million compared to the year ended December 31, 2020.
- Declining Pandemic Expenses – Pandemic expenses continued to decline as a result of the continued moderation of pandemic costs and the timing of government assistance, including
- $7.6 million year-over-year decline of net pandemic expenses in Q4 2021 compared to Q4 2020;
- Excluding retroactive pandemic funding of $2.6 million received during the quarter, net pandemic expenses for Q4 2021 were $2.8 million, representing a decrease of $0.1 million compared to Q3 2021.
- COVID-19/Omicron Update – As of February 21, 2022, 12 of Sienna’s 82 owned or managed residences are in outbreak with active cases of COVID-19 at 9 LTC and 3 Retirement residences. Of these residences, 11 residences have five or less active COVID-19 cases among its residents, including 3 residences with no active COVID-19 resident cases.
Supported by the added protection of third and fourth doses, the majority of residents’ and team members’ symptoms with respect to the Omicron variant have been mild or moderate. Sienna continues to have stringent precautions in place to manage the impact of COVID-19 at its residences.
- Vaccinations – Approximately 86% of Sienna’s residents and approximately 67% of Sienna’s team members have received their booster dose of a COVID-19 vaccine, according to the most recent data available. In addition, 39% of eligible residents at Sienna’s LTC residences have received a fourth dose of the vaccine. Sienna’s vaccination task force is supporting the efforts to get third and fourth doses of the vaccine to team members and residents as quickly and efficiently as possible.
Transformational Growth and Entry into New Market
- $308 million Joint Venture Acquisition – On February 3, 2022, the Company entered into an agreement to acquire a 50% ownership interest in 11 private-pay retirement residences in Ontario and Saskatchewan (the “Acquisition”), subject to regulatory approvals and customary closing conditions, and is expected to close the transaction in late Q2 2022:
- High-quality, contemporary portfolio consisting of 1,048 suites, with an average age of six years, expected to be finalized in late Q2 2022; Sienna’s share of the portfolio is $154 million;
- Formation of new strategic joint venture with Sabra Health Care REIT, Inc. (“Sabra”), one of North America’s leading owners of seniors housing properties;
- Portfolio provides Sienna with immediate scale and a platform for further expansion within Saskatchewan, along with an enhanced presence in Ontario; and
- Accretive to Operating Funds From Operations (“OFFO”) and Adjusted Funds From Operations (“AFFO”) per common share on a leverage neutral basis.
- Accelerating $600+ million Long-Term Care Redevelopment – The Government of Ontario approved three additional long-term care (“LTC”) redevelopment projects in December 2021, including
- First-of-its-kind campus of care, combining Sienna’s Altamont Care Community and Rockcliffe Care Community in Toronto onto one site, comprising 448 LTC beds and 30 palliative care beds in partnership with Scarborough Health Network;
- Redevelopment of Sienna’s Midland Gardens Care Community in Toronto to provide 320 new LTC beds, as well as the 53 seniors’ apartments; and
- Redevelopment of Sienna’s Streetsville Care Community in Mississauga to create a contemporary, safe and comfortable 256-bed campus of care.
Sienna’s near-term redevelopment plans of its LTC portfolio in Ontario also include previously announced projects in Keswick and Brantford with an expected construction start during the first half of 2022, and the redevelopment of a LTC community in North Bay, which is under construction.
This brings a total of six government-approved LTC redevelopment projects to date, comprising over 1,500 beds or approximately two thirds of Sienna’s Class C beds. Planning for the balance of Sienna’s Class C portfolio is well underway.
- Development of Retirement Residence in Niagara Falls – Construction at Sienna’s joint venture development of a 150-suite retirement residence with an expected development yield of 7.5% is well underway.
Strong Financial Position and Liquidity Support Sienna’s Growth Plans
Throughout 2021, the Company maintained a strong financial position, supported by the issuance of $125 million in unsecured debentures in June 2021, and DBRS’ confirmation of Sienna’s issuer rating and senior unsecured debentures ratings of “BBB” with stable trends in October 2021.
Sienna ended 2021 with:
- Debt to gross book value of 44.7%, a 350 bps decrease compared to 48.2% in Q4 2020;
- Significant liquidity of $226 million as at December 31, 2021.
Sienna’s strong financial position supports the Company’s development plans, Acquisition and related financing, including a $150 million acquisition term loan at 145 bps per annum over the floating BA rate for a 12-month term from the closing of the acquisition, expected to be fully refinanced by the Company post-closing of the transaction.
Fourth Quarter Operating and Financial Performance
- Revenue has increased to $174.2 million in Q4 2021, compared to $168.8 million in Q4 2020;
- Operating expenses, net of government assistance were $140.7 million in Q4 2021, compared to $140.2 million in Q4 2020;
- NOI of $33.4 million in Q4 2021 increased by 16.7% (or $4.8 million) compared to Q4 2020, mainly due to occupancy growth in Retirement, annual inflationary funding increases in the LTC segment, timing of government assistance to support pandemic expenses and moderation of pandemic costs, partially offset by higher costs of staffing, utilities and insurance premiums;
- Net income of $4.7 million increased by $13.4 million year-over-year, due to the increase in NOI, lower amortization on intangible assets, lower administrative expenses, lower net finance charges, partially offset by higher income tax expense and transaction costs;
- Average occupancy in Sienna’s Long-Term Care (“LTC”) portfolio was 88.9%, based on total number of licensed beds, up 270 bps from 86.2% in Q3 2021;
- Average same property occupancy in Sienna’s Retirement portfolio was 84.6%, up 250 bps from 82.1% in Q3 2021;
- OFFO per share increased by $0.061 year-over-year to $0.272 per share;
- AFFO per share increased by $0.051 year-over-year to $0.247 per share; and
- AFFO payout ratio was 94.7% for Q4 2021.
Financial Position
The Company maintained a strong financial position during Q4 2021:
- Maintained high liquidity of $225.5 million, representing an increase of $8.5 million from $217 million as at December 31, 2020, and expanded its unencumbered asset pool to approximately $1.1 billion as at December 31, 2021, representing an increase of $261 million from $840 million as at December 31, 2020;
- Decreased debt to gross book value by 350 basis points to 44.7% as at December 31, 2021, from 48.2% at December 31, 2020; and
- Debt service coverage ratio, improved to 1.8 times for the three months ended December 31, 2021, from 1.5 times for the three months ended December 31, 2020.
Financial and Operating Results
The following table represents key performance indicators for the periods ended December 31:
| Three Months Ended | Year Ended | |||||||||||
| $000s except occupancy, per share and ratio data | 2021 | 2020 | 2021 | 2020 | ||||||||
| Retirement - Average same property occupancy(1) | 84.6 | % | 81.9 | % | 81.3 | % | 83.1 | % | ||||
| LTC - Average total occupancy(2) | 88.9 | % | 86.0 | % | 85.2 | % | 91.4 | % | ||||
| LTC - Average private occupancy | 82.2 | % | 83.5 | % | 80.7 | % | 89.8 | % | ||||
| Revenue | $ | 174,175 | $ | 168,834 | $ | 668,494 | $ | 664,233 | ||||
| Operating expenses, net of government assistance | $ | 140,729 | $ | 140,181 | $ | 526,353 | $ | 538,223 | ||||
| Same property NOI(3) | $ | 32,426 | $ | 28,015 | $ | 137,458 | $ | 123,531 | ||||
| Total NOI(3)(9) | $ | 33,446 | $ | 28,653 | $ | 142,141 | $ | 126,010 | ||||
| EBITDA(4)(9) | $ | 25,825 | $ | 18,439 | $ | 110,841 | $ | 91,959 | ||||
| Net income (loss) | $ | 4,654 | $ | (8,729 | ) | $ | 20,648 | $ | (24,487 | ) | ||
| OFFO(5)(9) | $ | 18,258 | $ | 14,156 | $ | 76,992 | $ | 68,897 | ||||
| AFFO(6)(9) | $ | 16,555 | $ | 13,174 | $ | 72,757 | $ | 69,568 | ||||
| Total assets(7) | $ | 1,609,189 | $ | 1,678,129 | $ | 1,609,189 | $ | 1,678,129 | ||||
| Net income (loss) per share | $ | 0.070 | $ | (0.130 | ) | $ | 0.310 | $ | (0.370 | ) | ||
| OFFO per share(5)(9) | $ | 0.272 | $ | 0.211 | $ | 1.148 | $ | 1.028 | ||||
| AFFO per share(6)(9) | $ | 0.247 | $ | 0.196 | $ | 1.085 | 1.038 | |||||
| Dividends per share | $ | 0.234 | $ | 0.234 | $ | 0.936 | $ | 0.936 | ||||
| Payout ratio(8) | 94.7 | % | 119.4 | % | 86.3 | % | 90.2 | % | ||||
Notes:
- Retirement same property occupancy excludes the financial results of the 57-suite expansion at Island Park Retirement Residence, which opened in July 2019 and is in the lease-up period, and one retirement residence classified as an asset held for sale, both of which are included in retirement total average occupancy.
- Long-term care residences received occupancy protection funding for vacancies caused by temporary closure of admissions due to an outbreak, including COVID-19, and for capacity limitations and isolation requirements until January 31, 2022.
- NOI for the three months and year ended December 31, 2021 includes net pandemic expenses (recovery) of $21 and $(7,219), respectively (2020 - $7,035 and $21,977, respectively) (as discussed in the “Our Operations Update” section of this MD&A).
- EBITDA for the three months and year ended December 31, 2021 increased by $7,386 to $25,825 and $18,882 to $110,841, respectively, over the comparative periods primarily due to an increase in NOI and lower administrative expenses.
- Net income (loss) and OFFO for the three months and year ended December 31, 2021 includes an after-tax net pandemic expense (recovery) of $113 and $(3,639), respectively (2020 - $5,664 and $20,727, respectively) and mark-to-market (recovery) expense on share-based compensation of $(78) and $(159), respectively (2020 - $713 and $(2,477), respectively). OFFO per share for the three months and year ended December 31, 2021 excluding after-tax net pandemic expense (recovery) and mark-to-market adjustments on share-based compensation was $0.273 and $1.092, respectively (2020 - $0.306 and $1.300, respectively).
- AFFO for the three months and year ended December 31, 2021 includes net pandemic capital expenditures (recoveries) of $295 and $(10), respectively (2020 - $57 and $501, respectively), after-tax net pandemic expenses (recoveries) of $113 and $(3,639), respectively (2020 - $5,664 and $20,727, respectively) and mark-to-market (recovery) expense on share-based compensation of $(78) and $(159), respectively (2020 - $713 and $(2,477), respectively). AFFO per share for the three months and year ended December 31, 2021 excluding net pandemic capital expenditures (recoveries) and after-tax net pandemic expense (recoveries) and mark-to-market adjustments on share-based compensation was $0.252 and $1.029, respectively (2020 - $0.292 and $1.318, respectively).
- Payout ratio for the three months and year ended December 31, 2021, excluding after-tax net pandemic impact and mark-to-market adjustments on share-based compensation, would be 92.8% and 91.0% respectively (2020 - 80.0% and 71.0%, respectively).
- Debt to enterprise value decreased to 49.5% as at December 31, 2021 from 52.1% as at December 31, 2020. The decrease is mainly due to the $82,340 decrease in total debt.
- This is a non-IFRS measure. Refer to the Non-IFRS Measures section below and the “Non-IFRS Performance Measures” section of the Management’s Discussion and Analysis (the “MD&A”) as at December 31, 2021.
Financial and Operating Results, excluding net pandemic expenses
The following table represents key performance indicators excluding net pandemic expenses (recoveries) for the periods ended December 31:
| Three Months Ended | Year Ended | |||||||||||
| $000s except occupancy, per share and ratio data | 2021 | 2020 | 2021 | 2020 | ||||||||
| Operating expenses, excluding net pandemic expenses (recoveries)(1) | $ | 140,708 | $ | 133,146 | $ | 533,572 | $ | 516,246 | ||||
| Same property NOI, excluding net pandemic expenses (recoveries)(1) | $ | 32,619 | $ | 34,889 | $ | 131,468 | $ | 144,148 | ||||
| Total NOI, excluding net pandemic expenses (recoveries)(1) | $ | 33,467 | $ | 35,688 | $ | 134,922 | $ | 147,987 | ||||
| EBITDA, excluding net pandemic expenses (recoveries)(2) | $ | 25,979 | $ | 26,152 | $ | 105,885 | $ | 120,186 | ||||
| Net income (loss), excluding net pandemic expenses (recoveries)(3) | $ | 4,767 | $ | (3,065 | ) | $ | 17,009 | $ | (3,760 | ) | ||
| OFFO, excluding net pandemic expenses (recoveries) (3)(5) | $ | 18,371 | $ | 19,820 | $ | 73,353 | $ | 89,624 | ||||
| AFFO, excluding net pandemic expenses (recoveries) (4)(5) | $ | 16,964 | $ | 18,895 | $ | 69,108 | $ | 90,796 | ||||
| OFFO per share, excluding net pandemic expenses (recoveries)(3)(5)(6) | $ | 0.274 | $ | 0.296 | $ | 1.094 | $ | 1.337 | ||||
| AFFO per share, excluding net pandemic expenses (recoveries) and net pandemic capital expenditures (recoveries)(4)(5)(7) | $ | 0.253 | $ | 0.281 | $ | 1.031 | $ | 1.355 | ||||
| Payout ratio, excluding net pandemic expenses (recoveries) and net pandemic capital expenditures (recoveries)(8) | 92.5 | % | 83.3 | % | 90.8 | % | 69.1 | % | ||||
Notes:
- Operating expenses, same property NOI and total NOI for the three months and year ended December 31, 2021 exclude net pandemic expenses (recoveries) of $21 and $(7,219), respectively (2020 - $7,035 and $21,977 respectively).
- EBITDA, debt to adjusted EBITDA, interest coverage ratio and debt coverage ratio exclude net pandemic expenses for the three months and year ended December 31, 2021 of $154 and $(4,956), respectively, (2020 - $7,713 and $28,227, respectively).
- Net income (loss) and OFFO for the three months and year ended December 31, 2021 exclude after-tax net pandemic expenses (recoveries) of $113 and $(3,639), respectively (2020 - $5,664 and $20,727, respectively).
- AFFO for the three months and year ended December 31, 2021 excludes net pandemic capital expenditures (recoveries) of $295 and $(10), respectively (2020 - $57 and $501, respectively) and after-tax net pandemic expenses (recoveries) of $113 and $(3,639), respectively (2020 - $5,664 and $20,727, respectively).
- OFFO and AFFO for the three months and year ended December 31, 2021 include an after-tax mark-to-market (recovery) expense on share-based compensation of $(78) and $(159), respectively (2020 - $713 and $(2,477), respectively).
- OFFO per share for the three months and year ended December 31, 2021 excluding after-tax net pandemic expenses (recoveries) and mark-to-market adjustments on share-based compensation was $0.273 and $1.092, respectively (2020 - $0.306 and $1.300, respectively).
- AFFO per share for the three months and year ended December 31, 2021 excluding net pandemic capital expenditures (recoveries) and after-tax net pandemic expenses (recoveries) and net mark-to-market adjustments on share-based compensation was $0.252 and $1.029, respectively (2020 - $0.292 and $1.318, respectively).
- Payout ratio for the three months and year ended December 31, 2021, excluding after-tax net pandemic impact and mark-to-market adjustments on share-based compensation, would be 92.8% and 91.0%, respectively (2020 - 80.0% and 71.0%, respectively).
Fourth Quarter 2021 Summary
Average same property occupancy in Retirement was 84.6% in Q4 2021, an increase of 250 bps from 82.1% in Q3 2021. Rent collections remained high and consistent with pre-pandemic levels.
The following table provides an update on the monthly average same property occupancy and rent collections in Sienna’s Retirement portfolio during and subsequent to the end of Q4 2021:
| Oct 2021 | Nov 2021 | Dec 2021 | Jan 2022 | |||||
| Retirement same property occupancy (average) | 84.0 | % | 84.4 | % | 85.3 | % | 85.9 | % |
| Retirement rent collection (%) | 99.2 | % | 99.0 | % | 98.7 | % | 98.9 | % |
Average occupancy in LTC, based on total number of licensed beds was 88.9% in Q4 2021, and ended the quarter at 87.3%, or 94.1% if the unavailable 3rd and 4th beds in multi-bed rooms and isolation beds were excluded, while LTC continued to be fully funded for vacancies. The Government of Ontario extended the occupancy protection funding until January 31, 2022, at which time occupancy targets of 97% for long-stay beds and 90% for interim short-stay beds, excluding beds unavailable as a result of capacity limitations and isolation requirements, will be reinstated, including the existing occupancy funding protection during outbreaks. We expect that the vast majority of our LTC communities will reach the average annual occupancy target required for full funding for 2022.
NOI increased by 16.7% in Q4 2021, or $4.8 million, to $33.4 million, compared to Q4 2020, mainly due to occupancy growth in the Retirement segment, annual inflationary funding increases in the LTC segment, timing of retroactive pandemic funding of $2.6 million received in Q4 2021 related to pandemic expenses incurred in excess of available funding during the year ended December 31, 2020 of $1.7 million and Q1 2021 of $0.9 million, and moderation of pandemic costs, partially offset by higher staffing costs, utilities and insurance premiums.
LTC same property NOI increased by $2.4 million to $18.5 million, compared to Q4 2020, primarily due to annual inflationary funding increases, timing of retroactive pandemic funding of $2.6 million received in Q4 2021 related to pandemic expenses incurred in excess of available funding during the year ended December 31, 2020 and March 31, 2021, and decrease in pandemic expenses, partially offset by lower preferred accommodation revenues from lower occupancy in private and semi-private rooms, higher utilities costs and insurance premiums and increased repairs and maintenance expenses.
Retirement same property NOI for Q4 2021 increased by $2.0 million to $13.9 million, compared to Q4 2020, primarily due to occupancy growth and annual rental rate increases in line with market conditions, partially offset by higher agency staffing costs, utilities costs and insurance premiums.
Revenue increased by 3.2% in Q4 2021, or $5.3 million, to $174.2 million, compared to Q4 2020. In the Retirement segment, revenues increased by $1.3 million or 3.6% compared to Q4 2020 driven by occupancy growth and annual rental rate increases in line with market conditions. LTC’s revenues for Q4 2021 increased by $4.0 million compared to Q4 2020, primarily due to increased funding for direct care hours and annual inflationary funding increases, partially offset by lower preferred accommodation revenues from lower occupancy in private and semi-private rooms.
Operating Expenses, net of government assistance increased by 0.4% in Q4 2021, or $0.5 million, to $140.7 million, compared to Q4 2020. Retirement’s operating expenses decreased by $0.5 million to $24.3 million, primarily due to decrease in pandemic expenses, partially offset by higher agency staffing costs, utilities costs and insurance premiums. LTC’s operating expenses increased by $1.0 million to $116.4 million, mainly due to flow-through expenses related to increase in direct care hours and other funding, annual inflationary labour cost increases, higher utilities costs, and increased repairs and maintenance expenses, partially offset by decrease in net pandemic expenses.
Net income was $4.7 million for Q4 2021, representing an increase of $13.4 million compared to Q4 2020. The increase was primarily due to the increase in NOI, lower amortization on intangible assets, lower administrative expenses, lower net finance charges, partially offset by higher income tax expense and transaction costs.
OFFO increased by 29.0% in Q4 2021, or $4.1 million, to $18.3 million compared to Q4 2020. OFFO per share increased by 28.9% in Q4 2021, or $0.061, to $0.272. The increase was primarily due to higher NOI, lower administrative expenses, lower interest expense on long-term debt, partially offset by higher current income tax expense.
AFFO increased by 25.7% in Q4 2021, or $3.4 million, to $16.6 million compared to Q4 2020. AFFO per share increased 26.0% in Q4 2021, or $0.051, to $0.247. The increase was primarily related to the increase in OFFO noted above, partially offset by higher maintenance and pandemic related capital expenditures.
2021 Year End Results
NOI increased by 12.8%, or $16.1 million, to $142.1 million compared to the prior year, driven by $17.2 million of retroactive pandemic funding received in 2021 related to pandemic expenses incurred in excess of available funding during the year ended December 31, 2020, moderation of net pandemic expenses, annual inflationary funding increases in the LTC segment and annual rental rate increases in the Retirement segment, partially offset by lower average occupancy in the Retirement segment, lower LTC preferred accommodation revenues from lower occupancy in private and semi-private rooms, annual inflationary labour cost increases, increases in agency staffing costs, higher utilities costs, higher insurance premiums and increased repairs and maintenance due to deferrals from prior year.
LTC same property NOI increased by 26.1%, or $17.7 million to $85.4 million, compared to the prior year, primarily due to the $17.2 million retroactive pandemic funding received in 2021, decrease in pandemic expenses and annual inflationary funding increases, partially offset by lower preferred accommodation revenues, annual inflationary labour cost increases, higher utilities costs, higher insurance premiums and increased repairs and maintenance due to deferrals from prior year.
Retirement same property NOI decreased by 6.7%, or $3.7 million to $52.1 million, compared to the prior year, primarily due to lower average occupancy, higher agency staffing costs, utilities costs and insurance premiums, partially offset by annual rental rate increases.
Revenue increased by 0.6%, or $4.3 million, to $668.5 million compared to the prior year. In the Retirement segment, the decrease of $1.9 million compared to the prior year was due to lower average occupancy, partially offset by annual rental rate increases in line with market conditions. LTC’s revenues increased by $6.1 million compared to the prior year primarily due to annual inflationary funding increases and increased funding related to direct care hours, partially offset by lower preferred accommodation revenues.
Operating expenses, net of government assistance decreased by 2.2%, or $11.9 million, to $526.4 million compared to the prior year. Retirement’s operating expenses increased by $2.3 million to $94.5 million, mainly due to higher agency staffing costs, utilities costs and insurance premiums. LTC’s operating expenses decreased by $14.1 million to $431.8 million, mainly due to a decrease in pandemic expenses and retroactive funding of $17.2 million received in 2021 related to pandemic expenses incurred in excess of available funding during 2020, partially offset by annual inflationary labour cost increases, increase in flow-through expenses related to direct care hours funding, higher utilities costs, higher insurance premiums and increased repairs and maintenance due to deferrals from prior year.
OFFO increased by 11.8%, or $8.1 million, to $77.0 million compared to the prior year. OFFO per share increased by 11.7%, or $0.120, to $1.148. The increase was primarily due to an increase in NOI, driven by lower net pandemic expenses, lower interest expense on long-term debt and lower administrative expenses, partially offset by higher current income taxes and increase in net settlement on interest rate swaps.
AFFO increased by 4.6%, or $3.2 million, to $72.8 million compared to the prior year. AFFO per share increased by 4.5%, or $0.047, to 1.085. The increase was primarily related to increase in OFFO noted above, partially offset by higher maintenance capital expenditures and one-time capital improvements at our LTC communities, decrease in construction funding and timing of government assistance for pandemic capital expenditures.
Outlook
Continued strong demand for the services and care offered by Canadian seniors’ living operators supports an optimistic outlook for the sector and the Company in 2022 and beyond. Over the next 20 years, the 75+ population is expected to grow by nearly 4% annually and outpace Canada’s overall population growth by five times.
For 2022, Sienna forecasts gradual occupancy improvements in the Company’s retirement portfolio, based on the assumption that residences will be open for in-person tours, and supported by pent-up demand and the Company’s continued investment in sales, marketing and rebranding initiatives. Sienna maintains its forecast for occupancy levels to reach approximately 87% to 89% in its in-place Retirement portfolio by the end of 2022.
The Company also expects continued occupancy growth with respect to the Acquisition portfolio. Overall occupancy for the 11 properties to be acquired in late Q2 2022 has been trending upward since mid-2021.
In Sienna’s LTC portfolio, admissions of new residents accelerated for most of the fourth quarter. Starting in February 2022, occupancy targets required for full funding, including the occupancy funding protection during outbreaks, have been reinstated, excluding beds unavailable as a result of capacity limitations and isolation requirements. Given the long waiting list for long-term care beds in Ontario and British Columbia, we anticipate to meet the required occupancy targets at the vast majority of our care communities for full funding in 2022 with limited impact on NOI.
After adjusting for retroactive pandemic funding of $17.2 million received during 2021 and normalizing for the two property dispositions expected to be completed in Q1 2022 comprising of approximately $4 million of NOI in 2021, we expect year-over-year NOI growth in 2022 to be supported by continuing occupancy growth, rental rate increases and added scale from acquisitions. These factors are expected to contribute to revenue growth, while we anticipate cost pressures experienced in the past two years to continue due to labour shortages, increased insurance premiums and higher utility rates, with our operating margins gradually improving over the coming years.
With respect to incremental pandemic-related expenses, Sienna anticipates continued improvements as the pandemic subsides, while related government funding is expected to decline gradually.
Going forward, Sienna will continue to leverage the growth potential at its Retirement and LTC platforms in existing and new markets. Sienna’s strategic partnership with its joint venture partner Sabra is also expected to become an additional avenue of future growth, and will generate enhanced returns through a management fee income stream. In addition, the development and redevelopment of Sienna’s LTC portfolio in Ontario continues to gain momentum.
Fundamentals in the Canadian seniors’ living sector have steadily improved in 2021 as demand for the services and care offered by seniors’ living operators continue to build. Sienna intends to capitalize on the improving fundamentals, achieve operating efficiencies through scale, continue to grow the business through development and acquisitions, and drive performance for years to come.
Non-IFRS Performance Measures
Management uses financial measures based on International Financial Reporting Standards (“IFRS”) and non-IFRS measures to assess Sienna’s performance. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore, should not be constructed as alternatives to net income or cash flow from operating activities calculated in accordance with IFRS. Refer to the Non-IFRS Performance Measures section of the MD&A for the year ended December 31, 2021, available on www.sedar.com, for an explanation of the composition of the non-IFRS measures used in this press release and their usefulness for readers in assessing Sienna’s performance. Such explanation is incorporated by reference herein.
Reconciliations of Non-IFRS Measures
The following tables reconcile the non-IFRS measures to the most comparable IFRS measures for the three months ended and year ended December 31, 2021 and the comparable periods in 2020. The Company’s method of calculating these measures may differ from other issuers’ methods and accordingly, these measures may not be comparable to measures presented by other publicly traded entities.
Earning Before Interest, Taxes, Depreciation and Amortization “EBITDA”
“EBITDA” is defined as net income excluding interest, taxes, depreciation and amortization. EBITDA is relevant in understanding the Company’s ability to service its debt, finance capital expenditures and pay dividends to shareholders. The IFRS measure most directly comparable to EBITDA is “net income”.
The following table reconciles Sienna’s net income to EBITDA, a non-IFRS measure, for the periods ended December 31:
| Three Months Ended | Year Ended | ||||||
| Thousands of Canadian dollars | 2021 | 2020 | 2021 | 2020 | |||
| Net income (loss) | 4,654 | (8,729 | ) | 20,648 | (24,487 | ) | |
| Depreciation and amortization | 11,923 | 19,401 | 53,069 | 77,659 | |||
| Net finance charges | 6,886 | 11,302 | 27,380 | 47,065 | |||
| Provision for (recovery of) income taxes | 1,579 | (3,727 | ) | 7,385 | (9,950 | ) | |
| Transaction costs | 783 | 192 | 2,359 | 1,672 | |||
| EBITDA | 25,825 | 18,439 | 110,841 | 91,959 | |||
Net Operating Income
“NOI” is defined as property revenue and government assistance related to the pandemic net of property operating expenses. The Company believes that NOI is a useful additional measure of operating performance as it provides a measure of core operations that is unaffected by depreciation, amortization, administrative expenses, net finance charges and income taxes. The IFRS measure most directly comparable to NOI is “net income”.
The following table reconciles Sienna’s net income to NOI, a non-IFRS measure, for the periods ended December.
| Three Months Ended | Year Ended | ||||||
| Thousands of Canadian dollars | 2021 | 2020 | 2021 | 2020 | |||
| Net income (loss) | 4,654 | (8,729 | ) | 20,648 | (24,487 | ) | |
| Add: | |||||||
| Depreciation and amortization | 11,923 | 19,401 | 53,069 | 77,659 | |||
| Administrative expenses | 7,599 | 9,878 | 31,270 | 33,486 | |||
| Net finance charges | 6,886 | 11,302 | 27,380 | 47,065 | |||
| Provision for (recovery of) Income taxes | 1,579 | (3,727 | ) | 7,385 | (9,950 | ) | |
| Transactions costs | 783 | 192 | 2,359 | 1,672 | |||
| Share of net loss in joint venture | 22 | 336 | 30 | 565 | |||
| Net operating income (NOI) | 33,446 | 28,653 | 142,141 | 126,010 | |||
Funds from Operations (“FFO”) and Operating Funds from Operations (“OFFO”)
“FFO” is defined as NOI less certain adjustments including administrative expenses, finance charges and current income taxes. FFO is a recognized earnings measure that is widely used by public real estate entities, particularly by those entities that own and/or operate income-producing properties. The use of FFO, combined with the required IFRS presentations, has been included for the purpose of improving the understanding of the Company’s operating results. The IFRS measure most directly comparable to FFO is “net income”.
“OFFO” is FFO adjusted for non-recurring items, which includes restructuring costs, and presents finance charges on a cash interest basis. Management of the Company is of the view that OFFO is a relevant measure of the operating performance of the Company.
The following table reconciles Sienna’s net income to FFO and OFFO, which are non-IFRS measures, for the periods ended December. The reconciliation from FFO to AFFO is provided as supplementary information.
| Three Months Ended | Year Ended | ||||||||||||
| Thousands of Canadian dollars | 2021 | 2020 | Change | 2021 | 2020 | Change | |||||||
| Net income (loss) | 4,654 | (8,729 | ) | 13,383 | 20,648 | (24,487 | ) | 45,135 | |||||
| Deferred income tax expense (recovery) | 1,967 | (717 | ) | 2,684 | 5,065 | (4,290 | ) | 9,355 | |||||
| Depreciation and amortization | 11,038 | 17,800 | (6,762 | ) | 49,511 | 73,245 | (23,734 | ) | |||||
| Transaction costs | 783 | 192 | 591 | 2,359 | 1,672 | 687 | |||||||
| Net settlement payment on interest rate swap contracts | 685 | 355 | 330 | 2,773 | 1,438 | 1,335 | |||||||
| Fair value (gain) loss on interest rate swap contracts | (1,629 | ) | (602 | ) | (1,027 | ) | (6,776 | ) | 8,206 | (14,982 | ) | ||
| Funds from operations (FFO) | 17,498 | 8,299 | 9,199 | 73,580 | 55,784 | 17,796 | |||||||
| Depreciation and amortization - corporate | 885 | 1,601 | (716 | ) | 3,558 | 4,414 | (856 | ) | |||||
| Amortization of financing charges and fair value adjustments on acquired debt | 560 | 930 | (370 | ) | 2,510 | 2,562 | (52 | ) | |||||
| Amortization of loss on bond forward contract | — | 306 | (306 | ) | — | 964 | (964 | ) | |||||
| Net settlement payment on interest rate swap contracts | (685 | ) | (355 | ) | (330 | ) | (2,773 | ) | (1,438 | ) | (1,335 | ) | |
| Tax shield due to the settlement of the bond-lock hedge | — | (81 | ) | 81 | — | (258 | ) | 258 | |||||
| Restructuring costs | — | 1,385 | (1,385 | ) | — | 4,798 | (4,798 | ) | |||||
| Redemption premium paid | — | 2,071 | (2,071 | ) | 117 | 2,071 | (1,954 | ) | |||||
| Operating funds from operations (OFFO) | 18,258 | 14,156 | 4,102 | 76,992 | 68,897 | 8,095 | |||||||
| Construction funding | 2,365 | 2,736 | (371 | ) | 9,780 | 10,889 | (1,109 | ) | |||||
| Maintenance capital expenditure | (3,773 | ) | (3,661 | ) | (112 | ) | (14,025 | ) | (9,717 | ) | (4,308 | ) | |
| Net pandemic capital expenditure (recovery) | (295 | ) | (57 | ) | (238 | ) | 10 | (501 | ) | 511 | |||
| Adjusted funds from operations (AFFO) | 16,555 | 13,174 | 3,381 | 72,757 | 69,568 | 3,189 | |||||||
Adjusted Funds From Operations (“AFFO”)
“FFO” is defined as OFFO plus the principal portion of construction funding received, less actual maintenance and net pandemic capital expenditures. Management of the Company believes AFFO is a cash flow measure, which is relevant in understanding the Company’s ability to earn cash and pay dividends to shareholders. The IFRS measure most directly comparable to AFFO is “cash flow from operating activities.”
The following table reconciles Sienna’s cash flow from operating activities to AFFO, which a non-IFRS measures, for the periods ended December.
| Three Months Ended | Year Ended | ||||||||||||
| Thousands of Canadian dollars | 2021 | 2020 | Change | 2021 | 2020 | Change | |||||||
| Cash provided by operating activities | 31,924 | 25,440 | 6,484 | 98,517 | 69,237 | 29,280 | |||||||
| Construction funding principal | 2,365 | 2,736 | (371 | ) | 9,780 | 10,889 | (1,109 | ) | |||||
| Transaction costs | 783 | 192 | 591 | 2,359 | 1,672 | 687 | |||||||
| Tax shield due to settlement of the bond-lock hedge | — | (81 | ) | 81 | — | (258 | ) | 258 | |||||
| Maintenance capital expenditures | (3,773 | ) | (3,661 | ) | (112 | ) | (14,025 | ) | (9,717 | ) | (4,308 | ) | |
| Net pandemic capital expenditures | (295 | ) | (57 | ) | (238 | ) | 10 | (501 | ) | 511 | |||
| Net change in working capital, interest and taxes | (14,606 | ) | (14,961 | ) | 355 | (24,435 | ) | (8,760 | ) | (15,675 | ) | ||
| Restricted share units recovery | 157 | 110 | 47 | 434 | 137 | 297 | |||||||
| Restructuring costs | — | 1,385 | (1,385 | ) | — | 4,798 | (4,798 | ) | |||||
| Redemption premium | — | 2,071 | (2,071 | ) | 117 | 2,071 | (1,954 | ) | |||||
| Adjusted funds from operations (AFFO) | 16,555 | 13,174 | 3,381 | 72,757 | 69,568 | 3,189 | |||||||
Conference Call
The conference call will be on Friday, February 25, 2022 at 10:00 a.m. (ET). The toll-free dial-in number for participants is 1-844-543-5234, conference ID: 5879544. A webcast of the call will be accessible via Sienna’s website at: www.siennaliving.ca/investors/events-presentations. The webcast of the call will be available for replay until February 25, 2023 and archived on Sienna’s website.
About Sienna Senior Living
Sienna Senior Living Inc. (TSX:SIA) offers a full range of seniors’ living options, including independent living, assisted living, long-term care, and specialized programs and services. Sienna’s approximately 12,000 employees are passionate about helping residents live fully every day. For more information, please visit www.siennaliving.ca.
Risk Factors
Refer to the risk factors disclosed in the Company’s MD&A for the three months and year ended December 31, 2021, 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 include, without limitation, statements with respect to the successful closing of the Acquisition and dispositions, and the timing and financing thereof; the impact of COVID-19 and measures taken to mitigate the impact including the effectiveness of the vaccine, availability of government funding, the availability of various government programs, and financial assistance. 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:
Karen Hon
Chief Financial Officer and Senior Vice President
(905) 489-0254
karen.hon@siennaliving.ca
Nancy Webb
Senior Vice President, Public Affairs and Marketing
(905) 489-0788
nancy.webb@siennaliving.ca
1 This is a non-IFRS measure. Refer to the Non-IFRS Measures section below and in the ‘Non-IFRS performance measures’ section of the Management’s Discussion and Analysis (the “MD&A”) as at December 31, 2021.
