Sienna Senior Living Inc.

Ladies and gentlemen, welcome to Ciena Senior Living Inc's Q4 2020 conference call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer, and Karen Hahn, Chief Financial Officer of Ciena Senior Living Inc. Please be aware that certain statements or information discussed today are forward-looking and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to the forward-looking information and risk factors section in the company's public filing, including its most recent MD&A and AIF for more information. You will also find a more full-through discussion of the company's results and its MD&A and financial statements for the period, which are posted on CDAR and can be found on the company's website, dandaliving.ca. Today's call is being recorded and a replay will be available. Instructors for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides which accompany the host's remarks on the company's website under events and presentations. With that, I will now turn the call to Mr. Jain. Please go ahead, Mr. Jain.

Thank you, Michelle, and good morning, everyone. Thank you for joining us in our Q4 call today. First, I would like to express my deepest gratitude to our team members. Their demonstration of resilience, compassion, and commitment over the past year has been inspirational and truly humbling. They're making a remarkable difference by prioritizing the health and well-being of our residents and their colleagues, while often making significant sacrifices in their own lives. With the arrival of COVID-19 vaccines, we ended 2020 with both promise and urgency in the ongoing fight against the pandemic. We have new protection and renewed hope as many of our residents and team members are now vaccinated. Since mid-December, Ciena's vaccination task force has been rolling out vaccinations across our long-term care and resident residences, retirement residences in Ontario and British Columbia. Over the past two months, approximately 92% of Ciena's long-term care residents and 60% of Ciena's long-term care team members have received their first dose of the vaccine. While the rollout of the vaccine and long-term care has been a government priority, approximately 46% of our residents and 28% of team members in our retirement residences have also received their first dose of the vaccine. In addition, the administration of the second dose is also well underway at many of our residences. The arrival of the vaccine has been a turning point and is expected to be the most impactful defense in the fight against COVID-19. With a high vaccination rate at our residences, we are encouraged that the number of residences in outbreak and the severity of outbreaks has started to decrease significantly over the past few weeks. As of yesterday, we had 12 residences with active cases of COVID-19, including nine residences in long-term care and three residences in retirement. At this point, we have no active COVID-19 cases across any of our residences in B.C., and only six residences in Ontario have active resident cases. This marks a significant improvement and represents a 96% decline since the beginning of 2021. Moving to our continued focus on quality of care and safety, we continue to expect to have stringent precautions in place to reduce the impact of COVID-19 at our residences. Coupled with the high level of community spread, the transmission rate of the virus in older BNC buildings has posed significant challenges, and vigilant IPAC measures and protocols will remain in place for the foreseeable future. Our incident management team meets on a regular basis, reviews announcements and changes to provincial directives, and provides guidance and oversight for implementing changes to applicable policies and procedures. With the guidance of Dr. Moser, our chief medical officer, and Dr. McGeer, Ciena's chief infection prevention and control advisor, we made enhancements to our IPAC measures and developed a standardized COVID-19 management guide based on public health guidelines. This guide provides further advice on IPAC measures to our team members and helps standardize the clinical management of COVID-19 in our residences. Moving to slide six, As a result of the pandemic, we enhanced our staffing strategy both through our internal talent acquisition teams and the use of external agencies who provide short-term, ready-to-deploy team members. From March to December of 2020, we added approximately 1,200 team members to our workforce, and we increased our full-time workforce by 16% to about two-thirds of our total employees. Learning from the first wave continues to be a key focus of team member training and weekly training webinars, which are held at all of our properties, along with webinars to address site-specific needs. We have also placed additional emphasis on wellness programs, including mental health and well-being. We also made improvements to the way we communicate with residents and team members. We strengthened Ciena's Family Caregiver Engagement Program to better engage with the residents' families and caregivers and to provide them with additional support. Every resident now holds a virtual town hall with all families at least once a month and sends out a newsletter every second week. In Q4, we have hosted close to 170 virtual town halls and issued more than 300 newsletters. We also launched a wellness series currently focused on stress management and dealing with loss. We engaged our in-house medical experts, Dr. Moser and Dr. McGeer, to provide information and answer questions about the COVID-19 vaccines to our team members, residents, and their families. We made further enhancements to a centralized call center. This includes longer hour of operations and enhancements to its marketing and sales function to support our retirement operations. And we continued to leverage Crew, our team member mobile app, which has been invaluable in connecting with thousands of team members in different locations quickly and efficiently. Over the fall and winter months, we continued with intensified marketing and sales activities and process improvements across our retirement platform to increase efficiency and productivity. Our continued investments in our digital presence have been driving traffic to our website and in social media sites to support lead generation. Online leads have increased by approximately 80% in Q4 of 2020 compared to the prior year and remain well above their prior levels in the first week of 2021. Initiatives also include professional referral programs and a sales incentive program. In addition, we continue the use of virtual tours at our residences. Moving to occupancy, given the ongoing pandemic, occupancy declined in our retirement portfolio by 3.7% in the fourth quarter to 79.7% at the end of 2020. With average occupancy of 81.3% in Q4, year-over-year occupancy declined by 6.1% since the end of 2019. After several months of occupancy gains in the late summer and early fall of 2020, Renewed access restrictions led to the occupancy decline in the final months of 2020. Average monthly occupancy further declined to 78.6% in January of this year, down 120 basis points from December, and we expect continued occupancy pressure until mid-2021. Based on our assumption that restrictions on our retirement residences will ease over the coming quarters, we forecast occupancy improvements during the second half of the year. supported by anticipated pent-up demand and our continued investments in our sales and marketing initiatives. In our long-term care portfolio, average occupancy declined to 84.8% in the fourth quarter from 98.2% in the same period last year due to access restrictions and capacity limitations. Occupancy will continue to be impacted by the pandemic with gradual improvements expected during the second half of the year. Excluding the impact of net pandemic expenses, we expect the financial performance of Ciena's long-term care portfolio in 2021 to be similar to 2020. Long-term care residences are fully funded for vacancies if new residents cannot be admitted due to an outbreak. In addition, we continue to receive full funding for capacity limitations to a number of two residents per room in multi-bedrooms in Class B and C homes until February 28, 2021. This occupancy protection, however, does not compensate us for the loss of premiums we receive for preferred accommodations for private and semi-private rooms if they're vacant. Moving to slide nine, our operating performance has been significantly impacted by the extraordinary expenses incurred to manage the pandemic. Q4 OFFO per share was 21.1 cents, a decrease of 12.9 cents compared to the prior year, Excluding that pandemic expenses, OFFO per share would have decreased by 4.4 cents compared to the prior year. Q4 AFFO per share was 19.6 cents, a decrease of 11.7 cents compared to the prior year. Excluding that pandemic expenses, AFFO per share would have decreased by 3.2 cents compared to the prior year. CNS AFFO payout ratio increased to 119% in the fourth quarter. Excluding the net pandemic expenses, the payout ratio would have been 83%. For the full year, AFFO per share was $1.04 compared to $1.40 in the prior year, and the payout ratio was 90% compared to 66% in 2019. While we expect a continued increased level of expenses in the foreseeable future, high vaccination rates, coupled with the many actions we have taken to strengthen our operations, provide new protection to our residents and team members, and increase optimism across our sector and our company. With that, I'll turn it over to Karen, who will provide an update on our operating and financial performance.

Thank you, Nitin, and good morning, everyone. As Nitin mentioned, Ciena has taken extensive precautions to manage the impact of COVID-19, which is reflected in our results and key metrics. We have made investments in additional staffing, PPE, and property infrastructure, entered into management agreements with hospitals, and added senior healthcare expertise to navigate the effects of COVID-19. All of this affected our operating and financial results. I will start with our Q4 financial results on slide 11. Revenue decreased by 1.9% year over year to $168.8 million in Q4 2020 compared to Q4 2019. Our same property net operating income of $28.5 million in Q4 2020 decreased by $9.5 million over the prior year, mainly related to net unfunded pandemic expenses of $7.7 million. Retirement same property NOI decreased by $4.3 million to $12.2 million, which included net unfunded pandemic expenses of $1.8 million recognized during the quarter, excluding net pandemic expenses Retirement same property NOI decreased by 2.5 million to 14 million, mainly due to lower occupancy levels and inflationary increases in labor costs, partially offset by annual rental rate increases in line with market conditions. Long-term care same property NOI decreased by 5.2 million to 16.3 million year-over-year due to net unfunded pandemic expenses of 5.2 million. Excluding that pandemic expenses, Long-term care same property NOI was slapped to prior year with decreases in preferred accommodation revenues in our Ontario portfolio offset by timing of expenses. Moving to slide 12 on our full year financial results, same property NOI decreased by 31.5 million compared to 2019. Same property NOI in retirement decreased by 16.9 million or 11.6 million. and long-term care scheme property NOI decreased by $22.5 million or $19.9 million over the prior year. Rent collection levels in the retirement portfolio remained high at approximately 99% throughout the pandemic. We encourage an increased level of expenses to support the cost of fighting the pandemic and minimizing the impact of outbreaks. There are various programs and financial assistance provided by the government to support pandemic-related expenses. It is important to note that there may be timing differences between the time of incurring these pandemic expenses and the funding of such expenses. During the quarter, we recorded net unfunded pandemic expenses of $7.7 million related to managing COVID-19, a decrease of 20.8% compared to the third quarter's 9.7 million. The decrease compared to last quarter was mainly related to lower pandemic staffing costs as a result of our effective recruitment and retention initiatives, leading to a reduction in external agency costs. We also incurred lower hospital management fees compared to the last quarter. This was partially offset by increased PPE costs in response to the second wave. For the full year, net pandemic expenses were $28.2 million. We are very grateful for the continued government support that helps us cover some of the extraordinary pandemic expenses. With the exception of funding related to accommodation, all government funding is flow-through funding, which means it has to be spent entirely on resident care. Any amounts that are not spent directly on resident care or pandemic expenses have to be returned to the government. At the beginning of January, the Government of Ontario announced additional funding for long-term care of $398 million for costs related to enhanced testing requirements and continued infection prevention and containment efforts, increasing total funding to the long-term care sector to over $1.3 billion. This funding included an allocation of $6.9 million to date to Ciena for expenses that were incurred in 2020. Had the impact of this additional funding been recognized in 2020, same property NOI in our long-term care portfolio would have been $23.2 million in Q4 2020. To date, the Ontario government has approximately allocated $747 million, excluding amounts for occupancy protection funding. Of this amount, approximately $47 million has been allocated to Ciena to date. The government of British Columbia has allocated approximately $197 million in funding for costs in connection with additional screening and staffing, infection prevention and control measures, and social visitation, of which $3 million has been allocated to Ciena. All of this funding is crucial to help offset some of the significant costs driven by the pandemic. moving to our debt financing efforts. On October 2nd, we successfully completed $275 million of debt financing, which significantly reduced near-term debt maturity and improved our long-term debt ladder. These financings, which reflect the confidence placed in our company, included $175 million in unsecured ventures carrying a coupon rate of 3.45% and maturing in February 2026. and 100 million credit facility carrying a floating bankers acceptance rate plus 225 basis points. The proceeds from the financings were mainly due to early redeem or series B security ventures, which would have been due in February 2021. With these successful financing, the weighted average terms of maturity of our debt has been extended to 4.7 years at the end of the year. Looking at our debt metrics for the full year 2020 on slide 16, excluding the impact of net pandemic expenses, our interest coverage ratio was 3.9 times in 2020 in line with the prior year. And excluding the impact of net pandemic expenses, debt to adjusted EBITDA increased to 7.5 times in 2020 from 6.7 times in the prior year. And our debt to gross book value increased by 220 basis points to 48.2% year over year, mainly due to an 87 million drawdown on our credit facilities, of which 40 million have been invested in short-term investments to provide us with continued financial flexibility. Subsequent to the end of the year, we repaid 63 million of our credit facilities, therefore decreasing our debt to gross book value by 150 basis points to 46.7%. We decreased our weighted average cost of debt by 40 basis points to 3.2% year-over-year, primarily due to increasing our mix of floating rate debt. In terms of our balance sheet, Hiena maintains a strong financial position and investment-grade credit rating, and ended the year with $217 million in liquidity and an unencumbered asset pool of over $840 million. Our debt is well distributed between unsecured debentures, conventional mortgages, CMHC insured mortgages, and credit facilities. As mentioned, we expect an increased level of expense for some time, which will continue to affect some of Ciena's key performance indicators, in particular with respect to the company's operating performance. Given the many factors influencing your results, We remain committed to providing periodic business updates on the impact of the pandemic and on our business operations and financial results. I will now turn the call back to Nitin for his closing remarks.