Sienna Senior Living Inc. Provides Operations Update and Reports 2020 Third Quarter Financial Results

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 UpdateSienna 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 PlatformAppointed 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; andEstablished 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 PerformanceThe 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 PositionThe 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; andWeighted 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; andExtending 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 ResultsThe following table represents key performance indicators for the periods ended September 30: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 expensesThe following table represents key performance indicators excluding net pandemic expenses for the periods ended September 30: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 SummaryAverage 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: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:
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