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

Thanks, Ivy. Morning, everyone, and I appreciate you joining us today—we've generated substantial momentum here at Sienna. We just reported our 15th consecutive quarter of same-property growth, added CAD 1.2 billion in assets via acquisitions and development since the beginning of last year, and we foresee a lengthy growth runway continuing ahead. Demand for seniors housing and care continues to climb rapidly, and we're strongly positioned to satisfy that demand. Sienna is expanding throughout the full range of senior living options. Within our retirement segment, we're growing beyond senior apartments into assisted living and memory care. We're also answering demand by expanding our services and care offerings. Within long-term care, our redevelopment initiative is being accelerated, and at the same time we're pursuing growth via acquisitions. Throughout this expansion phase, we've remained disciplined in how we manage the balance sheet. Debt has been held at a conservative level, and we've maintained substantial liquidity, which puts us in the strongest possible position to act on opportunities as they arise. OFFO per share for the third quarter was CAD 0.36, a figure that reflects the dilutive effect of the ATM shares prior to our deploying the proceeds later in the quarter. That dilution came to approximately CAD 0.02. Same property NOI increased 11.6% in the retirement segment and 6.2% in long-term care. If we leave out retroactive funding, both segments grew by double digits. The retirement segment's strong performance came mainly from higher occupancy and rates, along with increased care revenue. Same-property occupancy on average was up 20 basis points from a year earlier, hitting 94.9% in the third quarter, and it continued climbing to 95.2% in October. That occupancy gain, combined with greater scale and operational efficiencies, drove a 200 basis point margin improvement across our same-property portfolio. Strong interest in our residences keeps coming from our sales platform, targeted marketing efforts, and community outreach, as well as from enhancements to the resident experience; we have increased support for our local sales team, which has lifted tour activity and made sales cycles shorter. Beyond that, our open houses continue to produce solid outcomes—drawing in prospective residents and creating fresh leads. Today and tomorrow, members of our team are running an open house across the portfolio at our retirement residences. Another big contributor to the strong results in our retirement operations was growth in care revenue. That growth stems from our Aspira Wellness program, through more efficient processes, improved staffing models, and consistent care offerings. We launched the enhanced wellness program last year, and within our same property portfolio it has fueled an almost 30% increase in care revenue compared with a year earlier. Going forward, we anticipate that our wellness program will remain a major engine of revenue growth. Regarding Sienna's long-term care operations, results were strengthened by increased government funding and greater revenue from private accommodations. The Alberta government announced a 7.2% funding increase during the quarter. This demonstrates the government's firm commitment to stabilizing the long-term care sector and its continued focus on adding capacity. Additionally, our results reflect the benefits of long-term care redevelopments we have completed in Ontario. Sienna's long-term care operations contribute meaningful value to our business and provide stability, as they are largely protected from market fluctuations or economic uncertainty. Moving to slide six. During 2026, we have closed or have under contract seven acquisitions, amounting to roughly CAD 430 million of assets, and our pipeline is still robust. Our latest acquisitions, two retirement residences located in Ottawa and Brighton, Ontario, valued together at CAD 245 million, illustrate well the quality and scale of transactions we have managed to secure; these deals show we can complete large transactions even amid market volatility, thanks to a strong balance sheet and substantial liquidity. Alongside growth through acquisitions, we keep investing in our existing residences by way of renovations. That lets us meet seniors' growing needs and shifting preferences by adding more care and service offerings. Meanwhile, rebuilding our more dated long-term care properties swaps out aging facilities for residences that do a better job of supporting care for residents, their comfort, and quality of life. The joint venture Sienna entered into not long ago with Fiera Infrastructure will accelerate that effort. The first two developments under consideration for the joint venture total over 700 beds, with construction anticipated to get underway in early 2027. Past those developments, we now own land for virtually all of the Class C development we have left, which is located mostly in the Greater Toronto Area. Our continued investment in team members is reflected in the findings of our most recent yearly engagement survey. Sienna maintained its strong engagement score of 8.0 and hit record participation of 90%. When you have 15,500 team members, engagement and a solid team culture matter enormously. Those efforts have driven better retention and turnover at a record low of under 15%. As a result, Sienna relies less on outside agency staff than ever before. Agency staffing expenses are now just roughly half a percentage point of Sienna's overall labor cost. Strong engagement among team members, reduced turnover, and lower agency spending are closely tied to resident satisfaction, and that too has risen substantially over recent years. Our measurement of resident satisfaction through the Net Promoter Score approach started in 2023. Net Promoter Scores in our long-term care and retirement segments have each risen above 50, versus 14 and 25, respectively, back in 2023. A score above 50 is viewed as excellent and shows residents are strongly willing to recommend Sienna and Aspira. These numbers demonstrate how committed our team members are to Sienna's purpose of cultivating happiness in daily life. With that, I'll hand things over to David for an update on our financial results.

Thank you, Nitin, and good morning to all of you. My remarks on financial results begin on slide 10. For Q3 2026, proportionate revenue grew 12.4% compared with a year earlier, reaching CAD 295.7 million; that gain came mainly from higher rental rates, acquisitions, occupancy gains, and greater care revenue within the retirement segment. Further adding to the rise were contributions from our long-term care platform, including acquisitions and developments finished during the past year, additional flow-through funding for direct care, and greater private accommodation revenues. Same property NOI rose 8.7% to CAD 57.8 million in Q3 2026, with an 11.6% increase in our retirement segment and 6.2% in long-term care. Within retirement, same property NOI was up CAD 2.8 million in Q3 2026 versus last year, chiefly because of better occupancy, rate growth, and higher care revenues. Together with our disciplined attention to operating expenses, the operating margin improved 200 basis points year-over-year. In long-term care, same property NOI grew by CAD 1.8 million. Government funding increases, among them a 7.2% rise in Alberta, greater revenue from private occupancy, and contributions from Sienna's completed redevelopments drove that very strong year-over-year growth. Our Q3 results in long-term care include retroactive items. If those retroactive items were excluded, same property NOI would have risen 11.5%. In Q3 2026, operating funds from operations rose 21.2% to CAD 39.8 million versus last year, mainly on higher NOI, partly offset by greater income tax and interest expense. Adjusted funds from operations grew 25.7% to CAD 36.1 million versus last year. That gain stemmed chiefly from higher OFFO and construction funding income received from the Government of Ontario for redevelopments we finished last year. On a per share basis, OFFO rose 1.4% in Q3 2026, driven largely by higher OFFO and offset by the temporary dilutive effect of the ATM program. Sienna's Q3 2026 AFFO per share rose 5.2%, and the AFFO payout ratio fell to 72% from 75.9% in Q3 2025. These improvements reflect Sienna's strong operating results, contributions from our completed redevelopments, and accretive acquisitions, offset by the ATM program's impact. Cash raised through the ATM program was later deployed to fund an acquisition announced in Q3. Our recent acquisitions are newly built, high-quality retirement residences in Ontario. During Q3, we agreed to acquire Stonemont on the Park, a 305-suite retirement residence in Ottawa that is nearly fully occupied. We closed that transaction at the end of October for roughly CAD 171 million, financing it with cash on hand; in October we also entered into a CAD 74 million transaction to acquire Brighton Retirement & Active Living. That is a 165-suite retirement residence in Brighton, Ontario, including 41 seniors apartments, and we expect to finalize the transaction in Q4. With a solid balance sheet and substantial liquidity, we're now well positioned to buy high-quality assets at scale, like Stonemont and Brighton. We closed Q3 with roughly CAD 595 million in liquidity and close to CAD 1.6 billion of unencumbered assets. Net debt to adjusted gross book value came in at 34.5%, down 6.3 percentage points from a year earlier, and our weighted average cost of debt stayed low at 3.9% at quarter end, the same as Q3 2025. Year-over-year, we also pushed Sienna's debt service coverage ratio higher, to 2.8x from 2.4x in Q3 2025. About CAD 160 million of Sienna's debt matures over the coming 12 months. With access to a wide range of capital and Sienna's strong BBB credit rating with stable trends, we're confident we can refinance maturing debt on attractive terms. On Sienna's equity, we raised CAD 4.9 million of shares in Q3 under the existing CAD 150 million at-the-market equity distribution program. That ATM program gives us flexibility to raise capital when market conditions are right, and we intentionally kept share issuance limited in the third quarter. Yesterday our board of directors approved renewal of the ATM program, letting us issue a further CAD 150 million of shares as we keep executing our growth strategy; we'll stay disciplined about raising and allocating capital, always focused on keeping the balance sheet strong; with that, I'll hand the call back to Nitin for his closing remarks.

Thanks, David. As 2026 draws to a close, our confidence in the growth outlook and the opportunities in front of us remains strong. We still expect NOI growth in the retirement segment to surpass 10% year-over-year in 2026; that double-digit target comes from occupancy gains, rent increases, and higher care revenue. On margins, we raised our guidance by 50 basis points and now expect same-property margin in the retirement segment to rise 150 to 200 basis points year-over-year. In long-term care, we lifted our 2026 same-property NOI growth target and now anticipate high single-digit percentage growth. That mirrors the segment's strong operating results and the favorable effect of recent government funding announcements. Past 2026, the runway for growth looks very long to us. Senior housing and care demand should climb over the next two decades. Meanwhile, supply will stay constrained longer than expected, with 2026 construction starts coming in under 1% of current inventory. This is a remarkable moment in the Canadian senior living space, and as a diversified owner and operator, we are especially well-positioned to seize the opportunities ahead. We cover the full spectrum of senior living, from senior apartments through long-term care. That gives us plenty of ways to scale our platform. In retirement, we will keep growing via targeted acquisitions in existing and new Canadian markets, including a push into Quebec. We will also upgrade care and service offerings at our existing residences and put money into strategic renovations to address seniors' growing care needs and shifting preferences. For long-term care, we will speed up redevelopment of our older Class C homes and also expect to keep growing through acquisitions. That sets us up well to serve more and more Canadian seniors in the years to come, further strengthening our platform and building long-term value for Sienna's shareholders; on behalf of Sienna's leadership team and our board of directors, I want to thank our shareholders and everyone on this call for your continued support. With that, we will open it up for your questions.

Thanks, and good morning. About retirement home occupancy — I mean, same-property occupancy has risen quite a bit from June through September. So what drove that, and what are you seeing when it comes to tour activity or lead generation?

Good morning, Himanshu. Tour activity remains solid, in our view. As you said, open houses are happening today and tomorrow throughout our whole Sienna platform, so nationwide. Leads are still holding up well, tours are still holding up well, and deposits are still holding up well. We are trending in October, or rather we ended October at 95.2% occupancy. The question that always arises is what level stabilizes things? I think that's still tough to answer. I'd say it could fall anywhere between 95% and 96%. Trends are pointing more toward 96%; we have a number of homes, close to 20%, which represent close to 50% of our retirement portfolio, and those are now near 100% occupancy. So we will keep seeing occupancy march upward. I think 96% is achievable.

Understood. That's good to hear. Just focusing on occupancy, the other component, growth and optimization, portfolio occupancy remains in that low 80% range. I realize there are some renovations involved and work still to be done. Do you have a timeline or a target for getting that occupancy up into the 90s, or perhaps the mid-90s?

Yes, Himanshu, occupancy in the optimization portfolio sits at roughly 83%. That's the portfolio where we see considerable opportunity for major renovations and/or adjustments to the service mix. Those projects are actively underway, so we'd expect occupancy in those portfolios to stabilize somewhere in the next 12 to 18 months, once the renovations are complete.

So every year, Himanshu, we reset the growth and optimization portfolio, which means you might notice that occupancy within it could stay about the same, and after those properties reach the optimized stage, or once the renovation work is finished, they'll shift into same property.

All right, thanks. This is the final question. Regarding the Stonemont acquisition, the property is fully occupied and newly built, and it sounds like it has high-end amenities too. Do you intend to raise rents more than you would across some of your other portfolio? What assumptions are you making about increasing rents or rent growth at this property?

Yes, so what we see is that Stonemont is a property less than two years old, and typically during lease-up we sometimes see higher incentives and sometimes lower rent, and in this case we're seeing both. As residents turn over, we do see a chance to raise rates while offering lower incentives. I believe that opportunity is there, and those opportunities really do exist once the property is full, which it is now.

And perhaps a single brief follow-up question. When I consider the pricing, above CAD 500,000 for each suite, does that reasonably reflect what replacement cost stands at presently for assets of this kind?

Regarding that specific asset, since half of those properties are in fact senior apartments, it is newly constructed, and it offers extensive amenity space. In my view the replacement value figure can sometimes be somewhat misleading, because you can build many more studios with less amenity space for less money. Here, we anticipate this will come in 10%-15% under replacement cost based on today's construction figures.

Understood. That's fair. Many thanks, and I'll hand it back. Thank you.

Thank you. Good morning. Turning to margins, you had a fairly solid year-over-year improvement even though occupancy rose only 20 basis points. I'm curious what you believe can be achieved near term as occupancy levels off within the same property portfolio. And what were the main shifts, I suppose, in your original margin assumptions when you issued your outlook compared with where things stand now?

Appreciate the question, Lorne. To start, I'd note we've raised our margin outlook to 150 to 200 basis points for 2026. That represents, roughly speaking, our near-term view on margin growth. The lift relative to what we expected actually stems from our care revenues. Those care revenues have been rising more quickly than we anticipated. Over the last several years they've grown 25%-30%, and in 2026 we've seen that trend persist. So care revenues have helped drive the stronger margin growth in our retirement segment; that would differ from our initial outlook.

But tell me if I've got this wrong — is it usually the case that care revenues carry a thinner margin than the other parts of the business?

Yeah, Lorne, I'd have been surprised if you hadn't come back with that follow-up; so you're right, generally they do sit at a lower margin; but something we've noticed is that when we first brought care to market — I mean, our care is several times what it was five years ago. And during the first few years, we actually lost money on that care revenue, after which we reached break-even, and today we're earning margin. So something we're seeing right now is that the investment we made last year in optimizing care revenues, in having consistency across our offering, in having the right labor model; we're seeing that margin on care keep rising, though it will remain below what we'll find on our accommodation side. But our mix is improving, since that number keeps climbing.

All right. Could you maybe give us a rough sense of what care revenues would account for as a share of retirement NOI?

I'd say probably, if you look at it as a percentage of revenues, there are two pieces. One is care that's included within assisted living, and then there's what we'd refer to, say, as a la carte care. That a la carte care would come to roughly somewhere in the 7%-8% range of total revenues, if that helps give you a picture.

Great. That definitely helps. So perhaps just one final question. Net debt to EBITDA has indeed fallen fairly meaningfully. I believe you're now below six. What would you consider an ideal target for the company? I'm just curious how you weigh that against continuing to issue shares through the ATM.

Yes. We've addressed this during earlier quarters, and our position hasn't changed. Over the medium term, our goal for debt to EBITDA would sit at roughly 7.5x — 8x. It came in lower this quarter, and that pleases us a great deal. One reason the debt to EBITDA declined is that we brought in capital by issuing through our ATM. After the quarter closed, we used those proceeds to acquire Stonemont. You should anticipate that ratio rising slightly in Q4. But over the medium term, we'd expect it to land somewhere within the 7.5x — 8x range.

Should we expect you to remain this active with the ATM? I'm sort of trying to wrap my head around it, because you're so far below and issuing shares under the ATM, and I'm just trying to reconcile that.

Well, we've been pretty clear on this. We will only issue shares under the ATM program if, first, market conditions are right, and second, if we see a near-term opportunity to deploy that capital at the right pace. Ideally, we would have liked to close both Stonemont and Brighton in Q3, so there wouldn't have been any timing difference. But as we all know, you can't time those acquisitions perfectly, since multiple parties are involved. Our goal is not to issue stock under the ATM and then just sit on it; that was never the intent. Whenever we're in the market raising money through the ATM program, we have specific deals in sight and a specific purpose for it. Going forward, for example, if we don't find any acquisition opportunities, which won't be the case, to David Hung's point, we'll happily work on the other side of the balance sheet and make sure that we don't expect to be at 6x debt to EBITDA. So that number will change to ensure we're finding the right balance of not over-equitizing our shareholders.

All right. Thanks a lot. I'll hand it back over.

Thanks, Operator. Morning, everyone. Taking a look at those flu season figures, I'm aware October got off to an early start around this year. Are you noticing any effect from that on the residences, and any thoughts on that regarding how it might affect occupancy moving forward?

Well, typically, we observed that last year; the effect showed up for us in early Q1; it's too soon to say whether an effect will appear or not. I mean, we do correlate. Often, we field questions about the housing market and whether that would affect retirement occupancy. No correlation is showing up for us there. That may be due to the level of care we provide, or it could be that supply is still incredibly low while demand keeps rising. I think predicting what Q1 will bring is difficult. Up to now, the figures we're seeing for leads, for tours, and deposits, in that order, keep running high.

So perhaps connecting this back to what we discussed regarding care revenue. Looking at the past year, as flu season arrived and we tracked it, were there moments when you saw care revenue rise as the season progressed?

That strikes me as very difficult to forecast. Typically, residents undergo assessment two times per year. So your point could be valid, but tracking that figure, I believe, would be extremely challenging.

That's a fair point. I suppose I'm mostly shifting over to acquisitions. I know you guys mentioned there's a huge amount of opportunity out there, but clearly with rates rising over the last couple of weeks, how have the spreads shifted from your perspective? Has that had any effect on the acquisition market for you, or are competitors even starting to see that pricing take hold?

Yeah, commenting on what our competitors or peers are up to is difficult for us. I mean, from our side, if we can't make money in the short to medium term, we have zero interest in putting money into any property, no matter how attractive it appears from the outside. So, we'll stick with the same process. And you're right, I mean, it has to reflect current market conditions. That's the reason we have the balance sheet we do, which is liquid. We have plenty of opportunity to grow without issuing stock, if we choose to do so. So, we're in a good place, and we'll stay very disciplined about the kinds of properties we'd invest in.

Thanks, Nitin. My final question, perhaps, concerns how Class C redevelopment will be paced. That's obviously a massive opportunity for you folks. Do you have any greater clarity yet on when that pipeline might start coming through?

Two projects were finished by us last year. One is currently under development and will be completed next year, after which we're beginning two projects. The figure two is somewhat misleading, since these involve 700 beds. They're closer to four projects, and we expect to begin them in Q1. Meanwhile, during this year, we expect to secure land for each and every C home we have. Again, after you purchase land, you then move into schematic designs plus the approval process and so on. So, a continuous cadence of new long-term care development being launched is what we should see. That's the reason we wanted the right partner, because doing all of that on our balance sheet isn't something we want.

Nice work on that, Nitin. Thanks. I'll hand it back over.

Thanks.

Thank you. Good morning. I just want to return to the leverage question. On a pro forma basis, with the two acquisitions set to close in Q4, what will your debt to EBITDA be, roughly?

Yes. If we include all the acquisitions, Brighton and Ballycliffe among them, both of which should close over the next couple of months, we would come in at about six and a half times.

All right. So that means you're keeping some capacity for acquisitions there, correct?

You could say that fairly.

All right. Regarding your margins, I suppose much of the expansion this year came simply from better optimization of the care. As you look toward 2027, I guess growth won't be quite the 100 to 1 50 you set out as initial guidance this year, but do you still expect decent margin expansion next year?

Well, we haven't provided any 2027 numbers yet, but we expect our long-term care to grow through inflation. I think the figures we see in retirement, we don't believe those are reasonable in the medium term. Sorry, unreasonable in the medium term; so, there's a high chance our margin will keep expanding beyond where we stand at the moment.

Alright. So last thing, regarding Stonemont and the seniors apartments, what separates seniors apartments from traditional retirement suites from a tenant's standpoint?

Typically, they'd have, say, most of them come with a kitchen — a full kitchen, that is. The suites tend to be larger as well, and that's reflected in the cost figure. Say you build a retirement home — normally under 10% of your suites are two-bedroom. With a senior apartment, that figure could be twice as high, since residents generally move in at a younger age, often have a spouse at that point, and want more room. From an amenity standpoint, though, residents usually still want big amenities. That's really the main distinction. If not, there'd be no reason to choose a senior apartment — you could simply live in a regular apartment. So amenity usage remains a central focus. And when residents do move, we see the full continuum of care draw them in. At one of our strategic renovation properties in Campbellford, we added assisted living, and the first few residents to move there were our existing residents going from independent living into assisted living. So beyond the amenities being different in a senior apartment, it also builds a substantial funnel for residents to move into independent living and afterward assisted living or memory care as needed.