MARKHAM, Ontario, Nov. 11, 2020 (GLOBE NEWSWIRE) -- Sienna Senior Living Inc. (“Sienna” or the “Company”) (TSX: SIA) today provided an update on its operations and announced its financial results for the three and nine months ended September 30, 2020. The Unaudited Condensed Interim 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.
“Eight months into the pandemic, we are continuing with our tireless efforts to fight COVID-19 and to minimize the impact of new outbreaks,” said Nitin Jain, President and Chief Executive Officer of Sienna. “While managing through a difficult environment, our initiatives have helped us adjust and strengthen our operations, made us more knowledgeable and better prepared in our response to the second wave, while maintaining our strong financial position. As we look beyond the pandemic, overall sector fundamentals remain strong. An aging population, long waiting lists for long-term care and a slowdown in future supply of retirement residences are all expected to support our sector’s outlook.”
Operations Update
Sienna has leveraged the knowledge and skills of Canada’s foremost health and long-term care experts and has invested in its frontline teams and processes to enhance the way it cares for its residents and to limit the spread of COVID-19.
- COVID-19 Cases – As of November 11, 2020, 14 residences of Sienna’s 83 owned or managed residences are in outbreak with active cases COVID-19, including 5 retirement and 9 long-term care residences.
- Strengthened Resident Quality Platform
- Appointed Dr. Andrea Moser as Chief Medical Officer to lead and implement all aspects of medical services, build up Sienna’s virtual care capacity, and enhance our resident quality platform; and
- Established Quality Committee to enhance oversight of key clinical quality and resident safety measures, including resident care, resident and team member satisfaction and safety;
- Joining the Seniors Quality Leap Initiative to benchmark quality indicators against international standards and to participate in the sharing of best practices to improve clinical quality and quality of life for seniors.
- Increased Staffing – From March to October, Sienna added approximately 1,400 full-time and 1,100 part-time team members increasing net new hires by 800 and growing its total pool of full-time team members by 20% to over two thirds of Sienna’s workforce.
- Launched Centralized Call Centre – New call centre strengthens communications with residents and their families and support marketing efforts in retirement (“Retirement”) operations.
- Improved Occupancy in Retirement Portfolio – Occupancy in Sienna’s Retirement portfolio increased to 83.4% at the end of Q3 2020, a 180 basis point increase from 81.6% at the end of Q2 2020, as a result of intensified marketing and sales initiatives.
- Pursuit of Long-Term Care Campus Redevelopment – Sienna is actively pursuing the development of a new 320-bed long-term care campus to provide integrated care in partnership with Scarborough Health Network.
Third Quarter Operating and Financial Performance
The Company’s financial performance has been significantly impacted by extraordinary expenses incurred to manage the pandemic in excess of government funding received. With the strength in overall fundamentals in the seniors living sector and the encouraging recent developments with respect to a potentially effective COVID-19 vaccine, coupled with Sienna’s solid balance sheet and liquidity, we are confident we will see significant improvements in the Company’s operational and financial performance once the pandemic subsides.
- Revenue decreased by 0.7% to $166.9 million in Q3 2020, compared to Q3 2019;
- Operating expenses, net were $137.9 million in Q3 2020, an increase of 7.9% compared to Q3 2019;
- Total same property NOI decreased by 28.3% (or $11.4 million) to $29.0 million in Q3 2020, compared to Q3 2019, mainly due to net pandemic expenses of $7.2 million;
- Net income decreased by $10.2 million year-over-year to a net loss of $6.5 million;
- Average occupancy in Sienna’s Long-Term Care (“LTC”) portfolio was 87.4%;
- Average same property occupancy in Sienna’s Retirement portfolio was 81.4%;
- Operating Funds from Operations (“OFFO”) per share decreased by 44.2% year-over-year to $0.203 per share; excluding net pandemic expenses, OFFO per share decreased by 14.8% year-over-year to $0.310 per share;
- Adjusted Funds from Operations (“AFFO”) per share decreased by 42.4% year-over-year to $0.212 per share; excluding net pandemic expenses, AFFO per share decreased by 14.9% year-over-year to $0.313 per share;
- Payout ratio was 110.4% for the three months ended September 30, 2020; excluding net pandemic expenses, payout ratio was 74.8%.
Solid Financial Position
The Company maintained a strong financial position and debt rating during Q3 2020:
- Confirmed the Company’s issuer rating of “BBB” with a “Stable” trend from DBRS, highlighting the Company’s high-quality balanced portfolio and sophisticated operating platform;
- Liquidity increased to $210.3 million as at September 30, 2020, from $144.0 million as at December 31, 2019, comprised of cash and cash equivalents and available credit facilities; subsequent to Q3 2020, the Company repaid $30.0 million of its credit facilities; and
- Weighted average cost of debt lowered by 40 basis points to 3.3% as at September 30, 2020, from 3.7% compared to September 30, 2019.
On October 2, 2020, Sienna successfully completed $275 million of debt financings which were used for general corporate purposes and to repay existing indebtedness, including the redemption of all of the outstanding 3.474% Series B Senior Secured Debentures due February 3, 2021. These financings significantly reduced near-term debt maturities, improved Sienna’s long-term debt ladder and resulted in further liquidity improvements, including:
- Fair value of unencumbered asset pool increased to $840 million from $540 million as at September 30, 2020; and
- Extending the Company’s weighted average term to maturity to 4.9 years on a pro forma basis from 4.0 years as at September 30, 2020.
Financial and Operating Results
The following table represents key performance indicators for the periods ended September 30:
| $000s except occupancy, per share and ratio data | Three months ended September 30, 2020 | Three months ended September 30, 2019 | Nine months ended September 30, 2020 | Nine months ended September 30, 2019 | ||||||||
| Retirement – Average same property occupancy(1)(2) | 81.4 | % | 86.9 | % | 83.2 | % | 88.6 | % | ||||
| Retirement – As at same property occupancy(1)(2) | 83.4 | % | 86.3 | % | 83.4 | % | 86.3 | % | ||||
| LTC – Average total occupancy(3) | 87.4 | % | 98.2 | % | 92.6 | % | 98.3 | % | ||||
| LTC – Average private occupancy | 86.3 | % | 98.0 | % | 91.7 | % | 98.1 | % | ||||
| Revenue | $ | 166,850 | $ | 167,947 | $ | 495,399 | $ | 497,573 | ||||
| Operating expenses, net | $ | 137,895 | $ | 127,785 | $ | 398,042 | $ | 378,570 | ||||
| NOI(4) | $ | 28,955 | $ | 40,162 | $ | 97,357 | $ | 119,003 | ||||
| Net (loss) income | $ | (6,484 | ) | $ | 3,763 | $ | (15,758 | ) | $ | 6,435 | ||
| Operating Funds from Operations (OFFO)(5) | $ | 13,624 | $ | 24,208 | $ | 54,741 | $ | 69,132 | ||||
| Adjusted Funds from Operations (AFFO)(5) | $ | 14,187 | $ | 24,492 | $ | 56,394 | $ | 72,303 | ||||
| Net (loss) income per share | $ | (0.097 | ) | $ | 0.057 | $ | (0.235 | ) | $ | 0.097 | ||
| OFFO per share(5)(6) | $ | 0.203 | $ | 0.364 | $ | 0.817 | 1.042 | |||||
| AFFO per share(5)(6) | $ | 0.212 | $ | 0.368 | $ | 0.842 | 1.089 | |||||
| Dividends declared per share | $ | 0.234 | $ | 0.233 | $ | 0.702 | $ | 0.692 | ||||
| Payout Ratio | 110.4 | % | 63.3 | % | 83.4 | % | 63.5 | % | ||||
Notes:
(1) Retirement same property occupancy excludes the results from the expansion at Island Park Retirement Residence, which opened in July 2019 and is in lease-up. Retirement total average occupancy is 80.7% for Q3 2020 (2019 - 85.8%) and 82.3% for the nine months ended September 30, 2020 (2019 - 88.2%).
(2) The quarter-over-quarter and year-over-year declines in Retirement occupancy are primarily related to a decline in new residents moving in as a result of access restrictions and the general impact from the COVID-19 pandemic.
(3) Long-term care residences are receiving occupancy protection funding for vacancies caused by temporary closure of admissions due to an outbreak, including COVID-19, and for capacity limitations of two beds per room as residents cannot be placed in rooms with three or four beds.
(4) NOI for the three and nine months ended September 30, 2020 includes net pandemic expenses of $7,177 and $14,942, respectively.
(5) OFFO and AFFO for the three and nine months ended September 30, 2020 includes an after-tax mark-to-market expense (recovery) on share based compensation of $647 and ($3,189), respectively (2019 - after-tax (recovery) expense of ($155) and $1,065, respectively).
(6) OFFO and AFFO per share for the three months ended September 30, 2020 excluding the after-tax mark-to-market adjustments on share-based compensation would have increased by $0.010 to $0.213 and $0.222, respectively (2019 - increased by $0.002 to $0.362 and $0.366, respectively). OFFO and AFFO per share for the nine months ended September 30, 2020 excluding the after-tax mark-to-market adjustments on share-based compensation would have decreased by $0.048 to $0.769 and $0.794, respectively (2019 - increased by $0.016 to $1.058 and $1.105, respectively).
Financial and Operating Results, excluding net pandemic expenses
The following table represents key performance indicators excluding net pandemic expenses for the periods ended September 30:
| $000s except occupancy, per share and ratio data | Three months ended September 30, 2020 | Three months ended September 30, 2019 | Nine months ended September 30, 2020 | Nine months ended September 30, 2019 | ||||||||
| Operating expenses, excluding net pandemic expenses (1) | $ | 130,718 | $ | 127,785 | $ | 383,100 | $ | 378,570 | ||||
| NOI, excluding net pandemic expenses (1) | $ | 36,132 | $ | 40,162 | $ | 112,299 | $ | 119,003 | ||||
| Net income (loss), excluding net pandemic expenses (2) | $ | 666 | $ | 3,763 | $ | (695 | ) | $ | 6,435 | |||
| Operating Funds from Operations (OFFO), excluding net pandemic expenses (2)(4) | $ | 20,774 | $ | 24,208 | $ | 69,804 | $ | 69,132 | ||||
| Adjusted Funds from Operations (AFFO), excluding net pandemic expenses and pandemic capital expenditures (3)(4) | $ | 20,926 | $ | 24,492 | $ | 71,901 | $ | 72,303 | ||||
| Net income (loss) per share, excluding net pandemic expenses (2) | $ | 0.010 | $ | 0.057 | $ | (0.010 | ) | $ | 0.097 | |||
| OFFO per share, excluding net pandemic expenses (2)(4)(5) | $ | 0.310 | $ | 0.364 | $ | 1.042 | 1.042 | |||||
| AFFO per share, excluding net pandemic expenses and pandemic capital expenditures (3)(4)(5) | $ | 0.313 | $ | 0.368 | $ | 1.073 | 1.089 | |||||
| Payout Ratio, excluding net pandemic expenses (6) | 74.8 | % | 63.3 | % | 65.4 | % | 63.6 | % | ||||
Notes:
(1) Operating expenses, same property NOI and total NOI for the three and nine months ended September 30, 2020 exclude net pandemic expenses of $7,177 and $14,942, respectively.
(2) Net income (loss) and OFFO for the three and nine months ended September 30, 2020 exclude net pandemic expenses (after tax) of $7,150 and $15,063, respectively.
(3) AFFO for the three months ended September 30, 2020 excludes net pandemic expenses (after tax) of $7,150 and pandemic capital recovery of $411. AFFO for the nine months ended September 30, 2020 excludes net pandemic expenses (after tax) of $15,063 and pandemic capital expenditures of $444.
(4) OFFO and AFFO for the three and nine months ended September 30, 2020 include an after-tax mark-to-market expense (recovery) on share-based compensation of $647 and ($3,189), respectively (2019 - after-tax (recovery) expense of ($155) and $1,065, respectively).
(5) OFFO and AFFO per share, excluding net pandemic expenses and pandemic capital expenditures for the three months ended September 30, 2020 and further excluding the after-tax mark-to-market adjustments on share-based compensation would have increased by $0.117 to $0.320 and by $0.111 to $0.323, respectively (2019 - increased by $0.002 to $0.362 and $0.366, respectively). OFFO and AFFO per share, excluding net pandemic expenses and pandemic capital expenditures for the nine months ended September 30, 2020 further excluding the after-tax mark-to-market adjustments on share-based compensation would have increased by $0.177 to $0.994 and by $0.183 to $1.025, respectively (2019 - increased by $0.016 to $1.058 and $1.105, respectively).
(6) Payout ratio, excluding net pandemic expenses for the three and nine months ended September 30, 2020 and further excluding mark-to-market adjustments on share-based compensation (after tax) would be 72.6% and 68.5%, respectively.
2020 Third Quarter Summary
Average occupancy in LTC was 87.4% in Q3 2020, a decrease from 98.2% in Q3 2019. Long-term care residences are fully funded for vacancies caused by temporary closure of admissions due to an outbreak, including COVID-19, and for capacity limitations of two beds per room as residents cannot be placed in rooms with three or four beds. The Governments of Ontario and British Columbia have announced that the occupancy protection funding will be in place for long-term care residences until December 31, 2020. This funding protection does not compensate for the loss of preferred accommodation premiums from private and semi-private room vacancies.
Average same property occupancy in Retirement was 81.4% in Q3 2020, a decrease from 86.9% in Q3 2019, primarily related to a decline in new residents moving in due to the impact of the COVID-19 pandemic, including access restrictions.
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 Q3 2020:
| 2020 | ||||||||
| July | Aug | Sep | Oct | |||||
| Retirement same property occupancy (average) | 81.2 | % | 81.1 | % | 81.7 | % | 82.7 | % |
| Retirement rent collection (%) | 99.8 | % | 99.6 | % | 99.4 | % | 99.5 | % |
Improvements in the average monthly occupancy rates in September and October were the result of a successful marketing and sales campaign ahead of the second wave. As at October 31, 2020, Retirement same property occupancy was 81.9%, reflecting the impact of the second wave of COVID-19, including reinstated access restrictions.
NOI decreased by 27.9% (or $11.2 million) to $28.9 million in Q3 2020, compared to Q3 2019, mainly due to net pandemic expenses of $7.2 million. Excluding net pandemic expenses, NOI decreased by 10.0% (or $4.0 million) to $36.1 million mainly due to softness in Retirement occupancy, lower LTC preferred accommodation revenue from vacancies in private and semi-private accommodations during the COVID-19 pandemic, annual inflationary increases in labour costs and higher property expenses, partially offset by annual rental rate increases in Retirement.
The following table summarizes the government assistance and pandemic expenses recognized for the three and nine months ended September 30, 2020:
| Three months ended | Nine months ended | |||||||
| September 30, 2020 | September 30, 2020 | |||||||
| Retirement | LTC | Administrative | Total | Retirement | LTC | Administrative | Total | |
| Total government assistance | 2,594 | 24,905 | — | 27,499 | 4,735 | 48,492 | — | 53,227 |
| Total pandemic expenses | 3,382 | 31,294 | 2,560 | 37,236 | 6,909 | 61,260 | 5,572 | 73,741 |
| Total net pandemic expenses | 788 | 6,389 | 2,560 | 9,737 | 2,174 | 12,768 | 5,572 | 20,514 |
Included in total government assistance and total pandemic expenses in the table above is government-funded flow-through pandemic pay for frontline team members. In the Retirement segment, a total of $1,856 and $3,285, respectively, and in the Long-Term Care segment, a total of $11,776 and $22,716, respectively, of flow-through temporary pandemic pay was recognized for the three and nine months ended September 30, 2020.
LTC same property NOI decreased by 35.9% (or $8.4 million) to $14.9 million in Q3 2020, compared to Q3 2019, mainly due to net pandemic expenses of $6.4 million. Excluding net pandemic expenses, LTC same property NOI for Q3 2020 decreased by 8.5% or $2.0 million to $21.3 million, compared to Q3 2019, primarily due to lower preferred accommodation revenue from vacancies in private and semi-private accommodations during the COVID-19 pandemic, annual inflationary increases in labour costs, and higher property expenses.
Retirement same property NOI decreased by 17.7% (or $3.0 million) to $13.9 million in Q3 2020, compared to Q3 2019, including net pandemic expenses of $0.8 million recognized in Q3 2020. Excluding net pandemic expenses, Retirement same property NOI for Q3 decreased by 13.1% (or $2.2 million) to $14.7 million, compared to Q3 2019, primarily attributable to lower occupancy, annual inflationary increases in labour costs and higher property expenses, partially offset by annual rental rate increases in line with market conditions.
Revenue decreased by 0.7% (or $1.1 million) to $166.9 million in Q3 2020, compared to Q3 2019. In the Retirement segment, the decrease of $0.9 million was mainly a result of occupancy softness, partially offset by annual rental rate increases. LTC’s revenues decreased by $0.2 million. However, $1.6 million of government funding, which would have typically been included in LTC revenues, has been recorded against eligible operating expenses related to the pandemic.
Operating expenses, net increased by 7.9% (or $10.1 million) to $137.9 million in Q3 2020, compared to Q3 2019. The increase was mainly a result of net pandemic expenses of $7.2 million, annual inflationary increases in labour costs and higher property expenses.
The Company generated a net loss of $6.5 million in Q3 2020, representing a decrease of $10.3 million compared to Q3 2019. The decrease was primarily related to net pandemic expenses, non-recurring restructuring costs, softer Retirement occupancy and mark-to-market adjustments on share-based compensation, partially offset by annual rental rate increases in Retirement, lower interest expense and lower income taxes.
OFFO decreased by 43.7% (or $10.6 million) to $13.6 million in Q3 2020, compared to Q3 2019. The decrease was primarily due to net pandemic expenses of $9.7 million, softer Retirement occupancy, an increase in share-based compensation from mark-to-market adjustments of $1.1 million, annual inflationary increases in labour costs and higher property expenses, partially offset by annual rental rate increases in Retirement, lower interest expense and lower current income taxes of $4.1 million.
AFFO decreased by 42.1% (or $10.3 million) to $14.2 million in Q3 2020, compared to Q3 2019. The decrease was primarily related to the decrease in OFFO noted above and timing of funding for pandemic related capital expenditures.
2020 Nine Months Summary
NOI decreased by 18.2% (or $21.6 million) to $97.4 million over the comparable prior year period, mainly due to net pandemic expenses of $14.9 million. Excluding net pandemic expenses, NOI decreased by 5.6% (or $6.7 million) to $112.3 million mainly due to lower Retirement occupancy.
LTC same property NOI decreased by 22.0% (or $14.7 million) year-over-year, primarily attributable to net pandemic expenses of $12.8 million. Excluding net pandemic expenses, LTC same property NOI for the nine months ended September 30, 2020 decreased by 2.9% (or $1.9 million) to $64.9 million, over the comparable prior year period, mainly due to lower preferred accommodation revenue from vacancies in private and semi-private accommodations during the COVID-19 pandemic, annual inflationary increases in labour costs and higher property expenses.
Retirement same property NOI decreased 14.0% (or $7.3 million) year-over-year, including net pandemic expenses of $2.2 million recognized for the nine months ended September 30, 2020. Excluding net pandemic expenses, Retirement same property NOI for the nine months ended September 30, 2020 decreased by 9.9% (or $5.1 million) to $47.0 million, over the comparable prior year period, primarily attributable to lower occupancy, annual inflationary increases in labour costs and higher property expenses, partially offset by annual rental rate increases in line with market conditions.
Revenue decreased by 0.4% (or $2.2 million) to $495.4 million over the comparable prior year period. In the Retirement segment, the decrease of $2.4 million was due to lower Retirement occupancy, partially offset by annual rental rate increases in line with market conditions. LTC’s revenues increased by $0.2 million due to annual inflationary increases, partially offset by $6.7 million of government funding, which would have typically been included in LTC revenues, has been recorded against eligible operating expenses related to the pandemic and lower LTC preferred accommodation revenue from vacancies in private and semi-private accommodations during the COVID-19 pandemic.
Operating expenses, net increased by 5.1% (or $19.5 million) to $398.0 million over the comparable prior year period. The increase was mainly a result of net pandemic expenses of $14.9 million, annual inflationary increases in labour costs and higher property expenses.
The Company generated a net loss of $15.8 million, representing a decrease of $22.2 million over the comparable prior year period. The decrease was primarily related to net pandemic expenses and non-recurring restructuring costs, partially offset by lower income taxes and mark-to-market adjustments on share-based compensation.
OFFO decreased by 20.8% (or $14.4 million) to $54.7 million over the comparable prior year period. The decrease was primarily attributable to net pandemic expenses of $20.5 million, softer Retirement occupancy and annual inflationary increases in labour costs and higher property expenses, partially offset by annual rental rate increases in Retirement, a decrease in share-based compensation from mark-to-market adjustments of $5.8 million, lower interest expense and lower current income taxes of $8.0 million.
AFFO decreased by 22.0% (or $15.9 million) to $56.4 million over the comparable prior year period, mainly due to the increase in OFFO noted above, timing of maintenance capital expenditures and pandemic related capital expenditures in excess of government assistance.
Conference Call
The conference call will be on Thursday November 12, 2020 at 9:30 a.m. (ET). The toll-free dial-in number for participants is 1-844-543-5234, conference ID: 5877615. 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 November 12, 2021 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 13,000 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 on “General Business Risks” and “COVID-19 and Other Outbreaks” disclosed in the Company’s MD&A for the three and nine months ended September 30, 2020, and other risk factors disclosed in its most recent annual MD&A and 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 business strategy and financial condition, and in particular in respect of the impact of COVID-19 and measures taken to mitigate the impact, supply-chain integrity and availability of PPE, the availability of various government programs, government funding 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) 415-7623
nancy.webb@siennaliving.ca