Sienna Senior Living Inc. (SIA) Earnings Call Transcript & Summary

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Annual and Special Meeting of Shareholders of Sienna Senior Living. [Operator Instructions] I would now like to turn the meeting over to Dino Chiesa. Please go ahead.

Thank you, and good morning, ladies and gentlemen, and welcome to the Annual and Special Meeting of Shareholders of Sienna Senior Living. My name is Dino Chiesa. I'm the Chair of the Board of Directors of Sienna and I'll act as Chair of today's meeting. Now before I proceed and on behalf of the entire Board of Directors, I'd like to commend all of our team members on their remarkable efforts over the past year. Our company has approximately 12,000 people, who have shown extraordinary dedication and compassion and carried for our residents. I also want to thank Sienna's management team whose steadfast leadership and commitment to the safety and well-being of our residents and team put our company in a position to accelerate investments in strategic growth initiatives. The efforts of the leadership team are sincerely appreciated. I would also like to thank our shareholders, who are able to join us virtually for today's meeting. Now before we begin, please be aware that certain information to be presented or discussed today may be forward-looking. If you logged into the webcast, I refer you to the cautionary note on the presentation slide. The cautionary note applies to our presentation and discussion this morning. For everyone else, I pause here while the note is read.

Certain information in this presentation may contain forward-looking information. Actual results may differ materially from conclusions, forecasts or projections in the forward-looking information, and certain material factors or assumptions were applied in drawing conclusions or making forecasts or projections as reflected in the forward-looking information. Additional information about the material factors, assumptions and risks that could cause actual results to differ materially from the conclusions, forecasts or projections in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are as disclosed in the company's disclosure documents filed on SEDAR from time to time, including, but not limited to, the company's most recent annual information form.

Thank you. I will begin by introducing the people that would traditionally be joining me at the head table with us today. First is Nitin Jain, a member of the Board of Directors and President and Chief Executive Officer; David Hung, Chief Financial Officer and Executive Vice President; and Adam Walsh, Senior Vice President, General Counsel and Secretary. In addition to Nitin and myself, we are also pleased to have other members of our Board of Directors in attendance today. All of whom are nominees for reelection to the Board at today's meeting. They are Paul Boniferro, Shelly Jamieson, Brian Johnston, Paula Jourdain Coleman and Stephen Sender. The format for today's meeting will be divided into 2 parts. First, I'll deal with the formal aspects of the meeting, following which there will be a presentation by Nitin and David. At the end of that presentation, we'll take questions from shareholders and duly appointed proxy holders. [Operator Instructions] I'll now begin with the formal part of the meeting. The first item is the appointment of secretary and scrutineer. I now call the meeting to order with the permission of the meeting, Adam Walsh, the company's Secretary will act as secretary of the meeting and Jennifer [ Hua ] of Broadridge will act as scrutineer for today's meeting. The secretary has advised me that we have received the affidavit of mailing from Broadridge confirming that the notice calling the meeting and related materials were provided to shareholders of record on the record date for the meeting. With the consent of the meeting, I will dispense with the reading of the notice, calling the meeting. The secretary has advised me that a quorum is present for the meeting based on the shareholders we know to be in attendance, including by proxy, and documented in the preliminary report of the scrutineer. A final report will be prepared and filed as part of the record of the meeting. On this basis, I declare the meeting to be properly constituted for the transaction of the business. On behalf of the Board, I thank those shareholders who have joined us today. Voting results for resolution to be voted on today will be formally announced by press release following the meeting. Based on reporting by the scrutineer, the designated proxy holder for the meeting is holding proxies demonstrating voting in an abundance of favorability for all matters to be voted on. Accordingly, we will try to move through the formal part of the meeting items quickly. To make the best use of our time, we will have designated shareholders that will move, and second each of the meeting matters. The first item of business is the presentation of the consolidated financial statements of Sienna for the period ended December 31, 2021, and the related auditor's report. A copy of the financial statements is provided to those shareholders, who requested them and the statements are available electronically on the company's website and SEDAR. Shareholders are not being asked to take any action regarding the statements. But if any shareholder has questions related to the financial statements, they may be sent to Sienna's Investor Relations team at [email protected]. That was [email protected]. We will now proceed with the election of directors. The management circular sets out information for the 7 nominees for election to the Board. Since I'm advised that no nominations other than those submitted by management were received by the company prior to the advanced noted deadline in the company's articles. The nominees continue to be only the following 7. The 7 director nominees are: Paul Boniferro, Nitin Jain, Shelly Jamieson, Brian Johnston, Paula Jourdain Coleman, Stephen Sender and myself, Dino Chiesa. All corporations listed on the Toronto Stock Exchange are required to elect directors individually. Consistent with this requirement, shareholders have been provided with the opportunity to vote or withhold their vote for each nominee on an individual basis. In addition and consistent with Sienna's commitment to its governance practice -- practices, the Board has adopted a majority voting policy. Under that policy, a director is required to tender his or her resignation if he or she is elected with more votes withheld that are cast in favor of his or her election. Based on the proxy received for the election of directors, none of the nominees after tender their resignation understand Sienna's majority voting policy. In light of this, I propose that we proceed with the motion to elect the nominees. May I have a motion for the election of directors.

My name is Olga Giovanniello. I'm the Chief Human Resources Officer and Executive Vice President and a shareholder of the company. Mr. Chair, I move for the election of the 7 nominees as directors.

My name is Nancy Webb. I'm the Senior Vice President of Public Affairs and Marketing and a shareholder of the company. Mr. Chair, I second the motion.

Thank you. We will now vote for the election of directors. Any shareholder or duly appointed proxy holder who has not yet voted or wishes to change their vote with respect to the election of directors may do so now by clicking on the vote here button on the web portal and following the instructions. Thank you. The proxies received for the voting of Directors show an abundance of favorability for the election of each nominee. Accordingly, the motion is carried. I declare Paul Boniferro, Nitin Jain, Shelly Jamieson, Brian Johnston, Paula Jourdain Coleman, Stephen Sender and myself, Dino Chiesa, duly elected as Directors of Sienna Senior Living Inc. to hold office until the next Annual Meeting of Shareholders or until successors are duly elected or appointed. We will now proceed with the appointment of auditors and the authorization of the Board to fix the remuneration. The directors on the recommendation of the Audit Committee proposed that Deloitte LLP be reappointed as the auditors of Sienna and the directors be authorized to fix their remuneration. May I have a motion for such appointment and authorization.

I so move.

I second the motion.

Any shareholder or duly appointed proxy holder who has not yet voted or who wishes to change their vote for -- with respect to the appointment of the auditor may do so now by clicking on the vote here button on the web portal and follow the instructions. The proxies received shown an abundance of favorability for the resolution. Accordingly, the motion is carried. I declare that Deloitte LLP are reappointed as the auditor of Sienna and that the directors are authorized to fix the remuneration. The next item of business to consider and is thought advisable to approve an ordinary resolution of the shareholders to approve the resolution approving the proposed Sienna ownership and reward program, here and after referred to as the SOAR plan. The full text of the resolution is set forth in the management circular for the meeting. I would now ask for a motion to be made to approve the ordinary resolution to approve the resolution approving the proposed SOAR plan as set out in the management circular.

I so move.

I second the motion.

Any shareholder or duly appointed proxy holder who has not yet voted or who wishes to change their vote with respect to the resolution approving the proposed SOAR plan, may do so now by clicking on the vote here button on the web portal and following the instructions. The ordinary resolution is required to be passed by the affirmative vote of a majority of the votes cast at the meeting. The proxies received shown an abundance of favorability for the resolution. Accordingly, the motion is carried. I declare that the ordinary resolution to approve the resolution approving the proposed SOARplan is settled and management circular is passed by the affirmative vote of a majority of the votes cast. The next item of business is to consider and is thought advisable to approve an ordinary resolution for the shareholders to approve the resolution reconfirming the third amended and restated shareholder rights plan agreement dated as of May 22, 2019 between the company and Computershare Trust Company of Canada as rights agent. The full extent of the resolution is set forth in the management information circular for this meeting. I would now ask for a motion to be made to approve the ordinary resolution to approve the resolution reconfirming the third amended and restated shareholder rights plan agreement as set out in the management circular.

I so move.

I second the motion.

Any shareholder or duly appointed proxy holder who has not yet voted or who wishes to change their vote with respect to the resolution to approve the resolution reconfirming the third amended and restated shareholder rights plan agreement as set out in the management circular may do so now by clicking on the vote here button on the web portal and following the instructions. The ordinary resolution is required to be passed by the affirmative vote of a majority of the votes cast at the meeting. The proxies received shown an abundance of favorability for the resolution. Accordingly, the motion is carried. I declare that the ordinary resolution to approve the resolution reconfirming the third amended and restated shareholder rights plan agreement as set out in the management circular is passed by the affirmative vote of a majority of the votes cast. The next item of business is to hold a nonbinding advisory vote on the company's approach to executive compensation. The full extent of the advisory resolution is set forth in the management circular. Since the vote is advisory, it will not be binding on the Board, but the compensation, governance and nominating committee of the company will take into account the results of the vote when considering future executive compensation arrangements. I would now ask for a motion to be made to approve the resolution to hold a nonbinding advisory vote on the approach to executive compensation as set out in the management circular.

I so move.

I second the motion.

Any shareholder or duly appointed proxy holder who have not yet voted or who wishes to change their vote with respect to the resolution to hold a nonbinding advisory vote on the approach to executive compensation may do so now by clicking on the vote here button on the web portal and following the instructions. The resolution is required to be passed by the affirmative vote of a majority of the votes cast at the meeting. The proxies received shown an abundance of favorability for the resolution. Accordingly, the motion is carried. I declare that the nonbinding advisory resolution on the approach to executive compensation as set out in the management circular is passed by the affirmative vote of a majority of the votes cast. Now that everyone has a chance -- and now that everyone has had the opportunity to vote, I now declare the polls closed. Ladies and gentlemen, we have now completed the formal part of the meeting. If there's no further business, I will ask for a motion to terminate the meeting.

I so move.

I second the motion.

I declare the motion carried and the Annual and Special Meeting of Shareholders of Sienna Senior Living terminated. On behalf of management and the Board, I'd like to thank you all for attending today. That concludes our formal part of the meeting. Before I call upon Nitin and David to make a presentation, I would like to once again acknowledge and express my gratitude and that of the entire Board to each and every one of our team members who are working tirelessly to provide care, comfort and compassion to the seniors living in our residences. We are humbled by your commitment and thankful for your ongoing efforts. With that, I'll now ask Nitin and team to provide their remarks. Thank you.

Thank you, Dino. Good morning, everyone, and thank you for attending our annual meeting. In 2021, improving fundamentals and the return to a more stable operating environment, allowed us to focus on making impactful changes to our operating platforms and to grow our company at a time and Canadian senior living sector at the cusp of exponential growth. We expect to see the full impact of the competing sector demographics in the coming years with the oldest baby boomer [ 2075 ] next year. The 75-plus population is estimated to grow by nearly 4% annually over the next 20 years and outpace Canada's overall population growth by 5x. In addition, the strong residential housing market in Canada further supports the optimistic outlook. For many seniors, the significant increase in the value of their homes over the past decades a driver for choosing a retirement residence as the preferred housing auction sooner because of this increase in value. At the same time, rising construction costs, coupled with the uncertainty caused by the pandemic, have led to a significant decline in new construction activity in the retirement sector. Deploying supply and strong demographic tailwinds, we expect demand for existing retirement residences to increase substantially in the coming years. Amid these strengthening fundamentals, we were able to execute on our growth strategy by entering an agreement to acquire a 50% ownership interest in 12 retirement residences in Ontario and Saskatchewan with a joint venture partner, Sabra Health Care REIT. In addition, we agreed to acquire a campus of care in Barrie, Ontario. Growing our diversified portfolio and expanding our retirement portfolio outside of Ontario and British Columbia have been part of our growth strategy for some time. Our portfolio acquisition will give us immediate scale in the Saskatchewan market, one of the fastest-growing markets in Canada. Saskatchewan Real GDP is expected to grow substantially as a result of the upswing in the energy sector and the rebound in agriculture. In addition, the provinces job market is exceptionally robust, and the housing market remains strong. With respect to the retirement sector, Saskatchewan has one of the highest capture rates in Canada. The capture rate, which indicates how many residents live in senior residences compared to the overall 75-plus population. This has rapidly grown from 6.3% in 2009 to a high of 9.4% in 2020. In addition, average rental rates have consistently increased by approximately 3.3% annually from 2009 to 2021, despite considerable new supply coming to market over the past decade. Our joint venture acquisition with Sabra provides an entry into the Saskatchewan market with imagine scale. We'll be operating over 500 suites in 4 markets, including over 300 suites in Saskatoon, the largest market in the province. The assets we are acquiring in Saskatchewan are located in Saskatoon, Regina, Yorkton and Moscow. There are contemporary retirement residences built to high-quality standards and offer extensive amenities like movie theaters, fitness centers and spas. The remaining acquisition properties are located in Ontario, our largest market. Through these acquisitions, we'll capitalize on the growing demand for quality senior living in key markets in Ontario and achieve efficiencies by operating these residences in markets where we already have an established presence. Our acquisition include retirement residences in some of the fastest-growing retirement markets in Canada. And with the close proximity to the Greater Toronto area and along the Niagara-London, including in Barrie, Bolton, Port Hope, Whitby, Uxbridge, Tillsonburg, Simcoe. Through these acquisitions, we'll expand our portfolio of own and manage retirement suites within a 1-hour drive of Toronto by approximately 60%. Once the joint venture transaction is completed, we'll act as a manager of the 12 properties, which will deepen an already well-established relationship with Sabra. Adding to our growing asset base will be 150-suite retirement residents currently under construction in a call with Niagara Falls with Reichmann Senior Housing which is expected to be completed by the end of 2023 and a campus of care in Barrie, which we have been managing for nearly a decade. With respect to geographic diversification, British Columbia remains our second largest market after Ontario. We operate 16 residences in BC, including 4 managed and 4 owned retirement residences as well as 8 long-term care communities, 6 of which are wholly owned and 2 are partially owned. Approximately 60% of Sienna's long-term care beds in British Columbia are private pay beds, an option that is available in BC. Construction activity in BC retirement sector remains very low and average occupancy rates remained the highest in any province in Canada. In the long-term care sector, demand for best continue to surpass supply in both Ontario and BC. In Ontario, the number of long-term care beds for 1,000 Ontarians, a 75-plus is expected to decline over the next several years despite the government's commitment to add 30,000 new beds by 2030. Similarly, there is strong demand for long-term care beds in British Columbia. Long-term care beds have increased by only 2%, while the 75% population in BC increased by 20% over the past 5 years. Our long-term care development program is an important aspect of growth in value creation. Our plans for the redevelopment of our Class C long-term care portfolio have gained notable traction in 2021. In November, we stated -- we started construction at our care community in North Bay, the first of a total of 14 long-term care redevelopment projects. These redevelopments will not only replace older beds, but it will also add urgency needed additional beds. Today, we have received approval for 13 of the 14 total projects comprising of 2,500 beds, including nearly 800 new beds. These approvals bring certainty to our redevelopment program. And once completed, the redevelopment to elevate the quality of life of our residents and provide a great workplace for our team. In the coming months, construction starts are scheduled at our communities in Keswick and Brantford and going forward, we expect to start 2 or 3 projects each new year. Overall, we plan to invest over $600 million to redevelop our older long-term care homes in Ontario. These developments will ensure that residents in our communities can experience the best quality of life and will help reduce long wait list for long-term care beds. In the coming years, we intend to capitalize on the improving sector fundamentals, achieve operating efficiencies through scale and continue to grow our business through development and acquisitions. Now moving to elevating the quality of life of residents, which is at the core of what Sienna stands for. To ensure that we will provide the highest quality of care and services, we decided to make considerable platform changes to both the retirement and long-term care operations. With respect to our retirement operations, we identified opportunities to add and enhanced service offerings to differentiate our platform in an increasingly competitive marketplace. As a result, we made a decision to rebrand our retirement operations under the new Aspira name. Since the announcement of the Aspira platform in August of 2021, we have been focused on the development of resident-centric model of choice, which includes an improved culinary experience, feature sophisticated signature programming and offers expanded wellness programs. At the end of this month, we'll be launching a dedicated new website for Aspira and starting in May, our signature programs will be rolled out at our residences. The development of our new long-term care platform is also well underway. Similar to the enhancements we're making in retirement, our aim is to increase the quality of life of residents by elevating their experience with respect to dining, recreation and community-focused interactions in addition to improving their move-in experience. Many aspects of the platform design are based on the input we have received from our residents and their families. With a team of approximately 12,000, our employees are our most important asset, creating a positive experience and supporting personal and professional growth, our key objectives as we grow our company and a team in the months and years ahead. However, staffing in senior living and the wider health care sector remains challenging. As part of our strategic objectives, we aim to become the employer of choice in Canadian seniors living by offering a compelling team member experience and by nurturing a purpose-driven culture. We believe that this will help us attract and retain a highly engaged workforce and build a talent pipeline for our growing company. Our initiatives include numerous programs for current and prospective team members to support their credit growth and to bridge the existing labor gap in our sector. Programs include government-sponsored education programs, expanded placements of international educated nurses and increasing recruitment of college and university students. One of our key initiatives is the Sienna ownership and Rewards program SOAR. [indiscernible] initial investment to recognize and thank our team through the grant of our company's shares. This program will provide shares through every eligible full-time and part-time team member and is a first of its kind in Canadian senior living. With today's shareholder approval, Sienna employees will be able to share in the success of our company as owners. With that, I'll turn it over to David Hung, while new in his role as Sienna's CFO, David has been with the company for nearly 7 years and has been instrumental in providing strategic direction and leading growth and value-add initiatives, most recently as Chief Investment Officer and Executive Vice President of Corporate Services.

Thank you, Nitin, and good morning, everyone. With the gradual improvement of the operating environment, occupancy in our retirement portfolio reached its highest level in nearly 2 years at the end of 2021 and resident admissions at our long-term care community continues to increase. At the same time, pandemic-related expenses started to moderate. These positive developments were reflected in Sienna's 2021 financial results and strong financial position. Throughout 2021, our balance sheet continues to improve. We lowered our debt to gross book value by 350 basis points to 44.7% at the end of 2021, mainly as a result of reducing the drawdown on our credit facilities. And our interest coverage ratio increased to 3.7x in 2021 compared to 3.1x in 2020. In addition, we have limited debt maturities over the next 2 years. This has put us in a strong position to accelerate investments in strategic growth initiatives. To execute our strategic objectives, we have being active on numerous financing initiatives to raise capital and further strengthen our balance sheet in recent months. Supporting these initiatives is Sienna's DBRS issuer rating and senior unsecured debentures rating of BBB with stable trends, which was confirmed by DBRS last October. These ratings underscore the resiliency and the strength of our company. More recently, in February of 2022, we secured a $150 million acquisition term loan at 145 basis points over the floating BA rate for a 12-month term to support the financing of our acquisitions. In addition, we have sold 2 noncore properties in Q1 2022 as part of our capital recycling initiatives, including a retirement residence in British Columbia and a long-term care community in Ontario. The net proceeds from these sales will be reinvested in our acquisition properties. At the end of March 2022, Sienna completed its first equity offering in 4 years. Approximately 5.8 million shares were issued at a price of $15 per share for a total of $86.3 million, including the full exercise of the over-allotment option of 750,000 shares. The successful completion of the offering was a clear indication of the strong investor interest and confidence placed in our company and our sector. I will now turn it back to Nitin for his closing remarks.

Thank you, David. In 2021, the sector fundamentals started to strengthen and demand for quarterly senior living increased significantly with more baby boomers heading into retirement. At the same time, new supply has been slowing. These strengthening fundamentals have not been lost from major global investors, who have been deploying capital into the Canadian senior living space. We are very pleased that we were able to execute on our growth strategy despite the strong investor demand for quality senior living assets. Over the past 12 months, we also continued to execute on our capital strategy through debt and equity financings and capital recycling. And we put into motion, transformational changes to our operating platform. In the coming months, we'll be rolling out a new platform, integrate our acquisition properties and welcome new team members. We'll also continue our development momentum, which includes construction start at 2 additional long-term care redevelopment projects this year. In everything we do, we'll continue to draw on the insights gained from our resident families and our team to build a stronger future for all. Each initiative is grounded in the belief that it is a privilege to care for and serve Canada's seniors, ensuring they live with our most comfort, dignity and respect. We are now happy to answer any questions that were submitted.

Thank you, Nitin. [Operator Instructions] As a reminder, only shareholders or duly appointed proxy holders in attendance at the meeting will be able to ask questions. We'll pause now to see if there are any incoming questions. There appears to be no questions.

Thank you. I want to express my gratitude for our team members who have made a remarkable difference in prioritizing the health and wellbeing of residents and their colleagues. I also want to sincerely thank our residents and their families whose confidence, appreciation and support has been invaluable and has a tremendous impact on our team's ability to provide the highest level of care and services. I also want to acknowledge the many stakeholders who have supported us, and I want to sincerely thank our investors and business partners for your trust and ongoing support of our company. Your confidence and continued capital investments are crucial for the long-term vitality of the senior living sector and the success of Sienna. In closing, I want to thank our Board of Directors for their guidance and unwavering commitment to our company and to Sienna's team for the incredible difference they're making in our residence lives each and every day. Thank you for joining us today.

Ladies and gentlemen, that concludes today's meeting. Thank you all for joining, and you may now disconnect.