Sienna Senior Living Inc.

Ladies and gentlemen, welcome to Ciena Senior Living Inc's Q3 2021 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 filings, including its most recent MD&A and AIF, for more information. You will also find a more fulsome discussion of the company's results in its MD&A and financial statements for the period, which are posted on CDAR and can be found on the company's website, sienaliving.ca. Today's call is being recorded, and the replay will be available. Instructions 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 website under Events and Presentations. With that, I will now turn the call to Mr. Jane. Please go ahead, Mr. Jane.

Thank you, Lateef, and good morning, everyone, and thank you for joining us on our Q3 call today. Our strong third quarter operating results and occupancy growth reflect the general optimism for Ciena's path forward. Occupancy is up significantly in both her long-term care and retirement portfolios. Our development projects have gained further momentum, and the rollout of our new retirement platform, Aspera, is progressing well. We are also in the preliminary stages of developing a new long-term care platform. As part of a new service model, we want to improve our residents' dining experience, activities, and recreation programs. We also want to find ways to create a better community experience for residents, whether it is a vintage car club or a visit from a local school. We believe that creating more connections with the wider community will give our residents something to look forward to in their day, no matter how big or small. The design of our new long-term care platform is based on best practices and the input from our residents and their families. Our ultimate goal is to significantly enhance the quality of life of our residents by providing holistic and integrated care at our communities. The completion of the platform development is expected in the second quarter of 2022. The launch of the new long-term care platform follows SPHERA, our new retirement platform. Espira will make the retirement brand within the Siena business lines more distinctive. Our aim is to target prospective residents to consider Espira Retirement Living as a better option to living at home. An alternative that provides a personalized experience, offers more choices, with an increased emphasis on being a vital part of the local community. During the third quarter, we concentrated on the development of our resident-centric model, which emphasizes personalization and expanded choices, and included team member training on the new resident experience model and marketing initiatives. We're also in the final stage of developing the brand design and identity for a dedicated Espira website. The website's features include a centralized lead management system, chat options, webinar series, and transparent pricing. all of which will support brand awareness, lead generation, and occupancy growth. In addition, we are continuing the development of the platform's brand awareness strategy, which includes both online and offline marketing initiatives specific to the local communities, as well as widespread communications campaign. We're also developing new programming, which will support the brand's promise of a refined culinary program and enhanced residence programming. We are currently piloting various concepts at select retirement residences. Moving to slide seven, throughout the summer and fall, our operating environment continues to improve. We saw the positive impact of high vaccination levels with a limited number of COVID-19 cases at our residences. In addition, our strong infection prevention and control practices, our extensive education programs, incentives to get vaccinated, and a new mandatory vaccine policy were all very helpful. To date, many of our residents have received their booster shots. As of last week, over 70% of our long-term care residents and over 40% of the residents in our retirement communities have received their third dose of the vaccine. As a result of a more stable operating environment in current months, pandemic-related expenses continue to decrease, and we are encouraged by the improvements in occupancy in our retirement and long-term care portfolios. Our retirement portfolio benefited from in-person tours and continued strong lead generation, which resulted in a 44% year-over-year increase in resident move-ins for the quarter. Average same-property occupancy improved by 280 basis points during the quarter, increasing from 79.3% in Q2 2021 to 82.1% in Q3 2021. In the long-term care communities, admissions of new residents accelerated and resulted in a 460 basis point increase in occupancy during Q3, ending the quarter with an occupancy rate of 87.8%. or 92.4% if we exclude the unavailable third and fourth beds in multi-bedrooms. Given the long-term care waiting list of 40,000 seniors in Ontario, we expect these strong occupancy gains to continue. The Government of Ontario announced the extension of the Occupancy Protection Funding until January 31, 2022, and we expect to achieve the average annual occupancy target of 97%, which is required for full funding in 2022. Moving to the focus in building a team for the future. During the third quarter, we continued with a proactive staffing strategy to lessen our reliance on agency staff and to position Sienna well for the increase in direct hours of care in our Ontario long-term care portfolio. A proactive approach helped us fill positions resulting from attrition from our company-wide mandatory vaccination policy, which came into effect on October 12th. It also supported extensive new talent acquisition and helped us bring back approximately 330 former teammates since April of this year who previously were restricted to work at single location as a result of the single site directive. In addition, during the third quarter, we supported the placement of approximately 350 students in our residences through our collaboration with colleges and universities. We are thankful that the Government of Ontario extended its wage enhancement of $3 per hour for personal support workers until March 31, 2022. Ciena's culture of fairness and equal opportunity is also reflected in our fair compensation and gender pay equity models. Over 95% of our frontline team members earn more than the minimum wage, and approximately 80% earn at least 50% more than minimum wage. In addition, male and female frontline team members in similar positions receive comparable compensation. Moving to the next slide, our team members are our most important asset, which inspired us to launch SOAR, the first employee ownership and rewards program of its kind in Canadian seniors' living. We are initially investing approximately $3 million to provide our employees with the opportunity to become shareholders. This will be done through one-time grants of common shares of approximately $500 for full-time employees and $300 for part-time employees. We're also introducing an employer matching program for employees who wish to further invest in the company. We launched this program to recognize the compassion, effort, and dedication that team members bring to our residents and communities every single day. Moving to slide 12, we continue to make good progress with respect to our development projects. Our $50 million joint venture development of a retirement residence in Niagara Falls is progressing well. In early November, we secured construction financing for this project. And last week, we started construction at our new Northern Heights Care Community in North Bay. We're monitoring current cost escalations, which will impact our original cost estimate of $55 million. Our near-term redevelopment programs in Ontario also include the replacement of the current 60 long-term care beds with 160 new beds in a campus of care in Keswick, and the redevelopment of our current 120-bed long-term care community in Bradford to 160 new long-term care beds with modern design, with the addition of 147 suite retirement residents to create an integrated campus of care. We expect construction at these two locations to start during the first half of 2022. We are also currently in the process of selling two assets. The sale include our 138 suite retirement residence located in Burnaby, British Columbia in a 236 bed long-term care community located in the greater Toronto area for a combined selling price of approximately 53 million. We intend to invest the net proceeds to further grow our business to our development program. These dispositions are part of the fulsome review of our assets to add value through capital recycling. With that, I'll turn it over to Karen for an update on our financial results.

Thank you, Nitin, and good morning, everyone. I will start on slide 14. The operating environment continued to improve in the third quarter, and we saw the positive impact of high vaccination levels, in particular with respect to the decrease in pandemic-related expenses. We are also encouraged by the improvements in occupancy in both our retirement and long-term care portfolios and the continued pandemic funding support that we are receiving from our government. These positive developments are reflected in our Q3 and year-to-date financial results. Revenues increased by 2.1% year-over-year to over $170 million this quarter. Net operating income increased by 15.4% to $33.4 million this quarter compared to last year. CNS long-term care NOI increased by $5.1 million to $20.1 million compared to last year, primarily due to annual inflationary funding increases and lower net pandemic expenses, partially offset by lower preferred accommodation revenues, annual inflationary labor cost increases, higher insurance premiums and utilities costs, and timing of repairs and maintenance due to deferrals from the prior year. Retirement steam property NOI decreased by $700,000 to $12.9 million compared to last year, primarily due to higher agency staffing costs, utilities costs, and insurance premiums, partially offset by annual rental rate increases in line with market conditions and decreases in pandemic expenses. Rent collection levels remain high at approximately 99% consistent with pre-pandemic levels. Over the past two years, we have seen significant cost pressures, in particular with respect to staffing. Agency premiums are generally 75 to 100% above regular staffing rates, and we have been experiencing a generally higher reliance on agency staff as a result of staffing shortages. We forecast that agency staffing costs for 2021 will total approximately $44 million compared to $35 million in 2020 and $19 million in 2019. The estimated impact on NOI from additional agency staffing costs is approximately $2 million for 2021 compared to 2020 or $4 million compared to 2019. We are thankful that a significant portion of the increased staffing costs are covered by government funding in long-term care. We believe that agency staffing costs will moderate as more healthcare workers re-enter the workforce and as we start to see the impact of the government's enhanced focus on training of personal support workers and nurses to address the current labor shortage. We have also experienced a significant increase in insurance premium and notable market rate increases with respect to gas and hydro. Pandemic expenses continue to decline during the third quarter as a result of the improved operating environment. We incurred $1 million of net pandemic expenses, which included retroactive government funding of $1.9 million for expenses incurred in Q1 of this year. This represents a $2.8 million decline compared to Q2 2021 and a decline of $8.8 million compared to Q3 of last year. We expect pandemic expenses to moderate further as the pandemic subsides while related government funding gradually declines. We also expect continued timing differences between the incurrence of pandemic expenses and the recognition of related government funding. To offset cost pressures, we expect that continued occupancy gains in our retirement portfolio and an improving operating environment to support our operating margins in 2022 and beyond. Moving on to slide 15. During Q3, OSFO increased by 34% to $18.3 million compared to the prior year, primarily due to higher NOI driven by the timing of government funding, lower pandemic expenses, lower interest expense, and lower administration expenses due to mark-to-market adjustment on share-based compensation, partially offset by lower recovery of current income taxes. Q3 OSFO per share increased by 34% to $0.272. ASFO increased by 10.5% to $15.7 million compared to the prior year, primarily for the same reasons as the increase in OSFO, which was partially offset by higher maintenance capital expenditures resulting from spend deferrals from last year and one-time capital improvements in the long-term care Class C community, as well as a lower construction funding principle. Q3 ASFO per share increased 10.4% to 23.4%. Looking at our debt metrics on slide 16, Our debt to growth book value improved by 260 basis points to 45.6% as of September 30th, compared to 48.2% at the end of 2020, mainly as a result of repaying our credit facilities. Debt to adjusted EBITDA improved to 7.8 years for the nine months ended September 30th, compared to 9.4 times in 2020. Our interest coverage ratio improved to 3.8 times compared to 3.1 times in 2020, and we have limited debt maturities over the next few years. In terms of our balance sheet on slide 17, Ciena maintains a strong financial position and an investment-grade credit rating. On October 7th, DBRS confirmed Ciena's issuer rating and senior and security venture ratings of BBB mid with stable trends. These ratings underscored the resiliency and strength of our business and support of our redevelopment plan. We ended the third quarter well capitalized with $222 million in liquidity and an unencumbered asset pool of $1.1 billion. I will now turn the call back to Nitin for his closing remarks.