Sienna Senior Living Inc.

Ladies and gentlemen, welcome to Ciena Senior Living Inc's Q1 2023 conference call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer, and David Hung, 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 factor sections in the company's public filing, 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, sianaliving.ca. Today's call is being recorded and a 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 over to Mr. Jane. Please go ahead, Mr. Jane.

Thank you, Cheryl, and good morning, everyone, and thank you for joining us on our call today. We have many reasons to be optimistic. As we move further into 2023, our retirement segment is showing strong year-over-year growth. Our long-term care operations continue to stabilize, and our cost management strategy is showing early signs of success. In addition, we are strengthening our ability to recruit and retain team members and have reduced our reliance on temporary agency staffing. With respect to our operating results, strong demand for our retirement residences supported an 11% year-over-year increase in our same property NOI in the first quarter. Occupancy growth in combination with rate increases supported a double-digit increase in our retirement segment. We'll continue to capitalize on the growing demand for seniors living and leverage our Aspira brand and signature programs to generate strong interest in our retirement residences. Q1 resident move-ins remained consistent and supported occupancy growth despite the typical seasonal trend of higher winter move-outs primarily to long-term care. Average same-property occupancy was 88.2% in Q1, up 300 basis point year-over-year. In our acquisition portfolio, average occupancy increased by 350 basis point to 85.7% since we acquired 12 residences in Ontario and Saskatchewan in May of 2022. For the full year, we expect occupancy to reach approximately 90% in our same property portfolio and exceed 87% in our acquisition portfolio in 2023. Our long-term care operations saw a steady increase in retirement and resident admissions, with most communities returning to occupancy levels at or above 97% by the end of the first quarter, making them eligible for full funding. Most remaining pandemic-related restrictions have not been lifted, and there is a real sense of optimism among team members, residents, and their families. The lifting of restrictions also contributed to strong results. Same property NOI in a long-term care segment increased by 9% in the Q1 compared to prior year. Demand for long-term care beds is higher than ever. Over the next 10 years, demand for long-term care is expected to increase by nearly 40%. At the end of March, the Ontario Ministry of Long-Term Care announced a funding increase for long-term care providers, providing a 2% increase in the other accommodation funding per diem. Other accommodations covers everything from housekeeping, building and property operations and maintenance, as well as dietary services. For the long-term viability of the sector, it is crucial that funding reflects the impact of inflation. Together with other sector participants, we will therefore continue to work with the government to address this funding shortfall. Moving to slide seven, among the major improvements during first quarter was our reduced aid reliance on agency staffing to full staffing gaps. We reduced the number of agencies we are working with from over 100 to less than 20 and negotiated improved contract terms such as enforcing a minimum filled rate threshold while reducing rates by approximately 15%. You will start seeing the impact of this improvement in the second quarter. Year over year, we were able to reduce overall agency costs by 35% in the first quarter and by 29% since fourth quarter 2022. Through a combination of an improving operating environment, fewer staff holidays compared to Q4, and a focus on filling vacancies with permanent team members rather than temporary agency staff. The need for agency staffing will always exist, but to a much lesser extent. In recent years, many healthcare workers across the sector left their permanent jobs to work for agencies, which had a significant negative impact on team members' morale and resident satisfaction. We will continue to pursue all avenues to lessen our reliance on agency staff. We have been working on a number of initiatives to deal with the ongoing staffing shortages. As part of our talent acquisition strategy, we have improved our onboarding process and have further intensified our campus recruitment. We have placed approximately 900 students at our residence in the first quarter alone and hope to hire many of them once they graduate. We also ramped up the placement of temporary foreign workers and we continue to employ Ukrainian refugees. In addition, we invested in an automated centralized scheduling and call-out system. The system helps to fill staffing gaps with our own team members before ships go to agency staff. It also provides tighter control on overtime and offers insight into future staffing needs. To date, the system has been rolled out across all of our long-term care communities, and plans to roll it across our retirement residences are underway. Moving to development, at Ciena, our focus of owning a diversified portfolio of private-payer retirement residences and public-funded long-term care communities is reflected in our development initiatives. Our current retirement project in Niagara Falls is scheduled to be completed in the fourth quarter of 2023. The estimated total capital investment for 100% of the joint venture with Reitman Senior Housing is approximately $55 million. Pre-leasing indicators for the 150-suite retirement residences have been strong. In addition, we have started construction at our Campus of Care project in Brantford, where we are replacing 120 Class C long-term care beds with 160 Class A beds and adding 147 retirement suites. The estimated total development cost for this project is approximately $140 million, for which we will receive approximately $3.3 million of construction funding annually over 25 years for the long-term care portion. The estimated development yield for this project is around 8%. We also continue with construction at a redevelopment project in North Bay. We'll be replacing 148 Class C beds with 160 Class A beds. The total development cost for this project, which has an approximate 7.5% development EO, is close to $80 million, for which we will receive $3.3 million of construction funding annually for 25 years. Once these three projects are complete and operational, they are expected to lower Ciena's AFFO payout ratio by mid to high single digits. With that, I'll turn it over to David for an update on our operating and financial results.

Thank you, Nitin, and good morning, everyone. I will start on slide 11 for financial results. In Q1 2023, total adjusted revenues increased by 14.5% year over year to $199.6 million. This increase was largely due to occupancy and rental rate growth and additional revenue from the 12 properties we acquired in Q2 2022 in our retirement segment, as well as flow-through funding for increased direct resident care and funding received in relation to wage enhancements in our LTC segment. Total net operating income increased by 13% to $36.3 million this quarter compared to Q1 2022, mainly due to a $3.9 million increase in same property NOI in the retirement segment, as well as additional NOI from the 12 retirement properties we acquired in Q2 of last year. Our retirement same property NOI increased by 11% to $15.3 million in Q1 2023 compared to last year, primarily as a result of strong year-over-year occupancy and rate increases, partially offset by higher labour and food costs, increased maintenance and utilities expenses. A successful leasing strategy and solid demand in key markets supported strong year-over-year occupancy growth in our same property portfolio. Same property NOI in our long-term care segment increased by 9.1% to $19.3 million in Q1 2023 due to a more stabilized operating environment in addition to retroactive funding for expenses incurred in prior years. At the end of March, we received additional information from the Ontario government with respect to the funding of third and fourth beds that have been permanently closed in our older Class C homes. The government will continue to fully fund the other accommodation per diems until March 31, 2025 for these beds. At the same time, there will be a gradual funding reduction for the nursing and personal care per diems over the next two years. Cost pressures and high inflation have impacted our operating margins in both our retirement and long-term care segments for some time. Many of our recent initiatives have been focused on cost management and early signs of their positive impact are reflected in our results. Moving to slide 12, during Q1 2023, operating funds from operations increased by 14.3% to $18.4 million compared to last year, primarily due to higher NOI and lower general and administrative costs offset by higher interest expense. OFFO per share increased by 5.9% to $0.253 in Q1 2023. Adjusted funds from operations increased by 10.6% to $18.2 million compared to last year. The increase was due to higher OFFO offset by higher maintenance costs and a decrease in construction funding income. ASFO per share increased by 2.5% to $0.249 in Q1 2023. The AFFO payout ratio was 94% in Q1 2023, a 230 basis point improvement compared to 96.3% a year ago. With respect to our debt metrics, we lowered debt to annualized adjusted EBITDA to 8.4 times in Q1 2023 from 8.7 times in Q1 2022 and increased our liquidity to $308 million as at March 31st, 2023. In addition, we paid down $29 million of our revolving credit facility during the quarter using lower cost mortgage financing with CMHC. We ended Q1 2023 with a debt to gross book value of 44.5% and a $1.1 billion of unencumbered assets, which positions us well to execute on our upcoming financing initiatives. We expect to refinance the majority of our 2023 debt maturities with CMHC mortgages at attractive rates. I will now turn the call back to Nitin for his closing remarks.