Sienna Senior Living Inc. (SIA) Earnings Call Transcript

Good day, everyone, and welcome to the Q4 2025 conference call for Sienna Senior Living Inc. Nitin Jain, President and Chief Executive Officer, is your host today, along with David Hung, Chief Financial Officer and Executive Vice President, Investments at Sienna Senior Living Inc. We want to remind you that some statements or information shared on this call are forward-looking, and actual results may differ materially. The company does not commit to updating any forward-looking statement or information. For further details, please see the forward-looking information and Risk Factors section within the company's public filings, including the most recent MD&A and AIF. A more fulsome discussion of the company's results can also be found in its MD&A and financial statements for the period, which are posted on SEDAR+ and available on the company's website, siennaliving.ca. This call is being recorded, and a replay will be made available. Instructions for accessing the call are posted on the company's website, and the details appear in the company's news release. Slides accompanying the host remarks have been posted on the company website under Events and Presentations. With that, I'll hand the call over to Mr. Jain. Please go ahead, Mr. Jain.

Thank you, Audra. Good morning, everyone, and thanks for being with us today. For Sienna, 2025 was a year of creating long-term value. We brought more than $800 million of assets onto our platform, closed out the year with strong organic growth for the 12th consecutive quarter, and strengthened Sienna's balance sheet with ongoing support from the capital markets. We issued nearly $700 million of equity and debt, and every issuance drew strong investor demand. We also grew our workforce, adding roughly 2,000 team members, and deepened our impact further in the communities we serve. Through these achievements, the scale and quality of Sienna's diversified platform have increased, and the company is well positioned for continued growth at a compelling time in Canadian senior living. In the fourth quarter, both operating platforms delivered strong results and contributed to a successful finish to the year. Same-property NOI rose by 15.4% in the Retirement segment and by 5.6% in Long-Term Care. The main drivers behind the double-digit increase in the Retirement segment were continued occupancy growth and rising rental rates. Average same-property occupancy climbed by 180 basis points year-over-year and reached 94.7% in the fourth quarter.

After the quarter ended, January monthly occupancy came in at 95.2%. Higher care revenue is also mirrored in the results from Sienna's Retirement segment. Through our Retirement platform we bring clinical care expertise to bear, and that lets residents remain with us longer even as their care requirements evolve. In addition to the solid same-property results in our Retirement segment, we're happy with how the company's optimization portfolio has performed. That portfolio takes in assets going through renovations, adjustments to service offerings, or the introduction of new services. In Q4, occupancy across the optimization portfolio rose 790 basis points year-over-year, and NOI was up 22.1%. Clearly, our emphasis on positioning assets better within their local markets is producing results. Another important factor driving the strong Retirement operations performance is a strong sales platform paired with targeted marketing campaigns. Call center leads were up more than 50% year-over-year in the fourth quarter, and tours at our properties have risen every quarter in 2025. We also stay sharply focused on hospital outreach and on excellent ties with health care partners in the local communities where we operate. We expect all of these efforts to generate strong leads and move-ins down the road. Turning to Sienna's Long-Term Care operations, fully occupied homes with expanding wait lists, greater revenue from private accommodations, and yearly inflationary increases in government funding each contributed to the strength of the results.

Sienna's Long-Term Care operations, which are government-funded, bring substantial value to our business and offer stability since they're largely protected from market volatility or economic uncertainty. Now let's turn to Slide 6. During Q4, we began seeing contributions from 2 development projects that were recently completed. In September, we opened our redeveloped long-term care community in North Bay, and that was followed in October by our campus of care in Brantford. Development projects at a large scale demand deep expertise along with trusted partnerships. With both of those in place, we're excited to proceed with our next project, which will be our first in the city of Toronto. Situated at our existing Glen Rouge site in Scarborough, it will be Sienna's largest project to date, featuring 448 beds and an estimated development cost of roughly $250 million. This project's development yield comes in at approximately 7.5% to 8%. After several years of planning, the significant improvements in government funding for projects in the GTA were a key driver behind our decision to move forward. The Glen Rouge redevelopment, which is expected to be completed in 2030, will replace 363 existing beds and add 85 much needed new beds in the Scarborough community. Through this development, we will further modernize and strengthen Sienna's Ontario platform and support the continued growth of the company's Long-Term Care business.

On the acquisition side, 2025 was an extremely busy year. We brought in 10 properties spread over 3 provinces, which added close to 1,800 beds and suites to the assets we own. In Q4, we closed 3 deals in Ontario — among them Cawthra Gardens, a long-term care community with 192 beds, and LaSalle Park, a retirement residence with 123 suites, both in the Greater Toronto area. We also picked up Hygate, a retirement residence with 213 suites in Waterloo, Ontario. Those transactions brought $193 million of assets on board in the last quarter of 2025, and that momentum continued into 2026. So far this year, acquisitions have added a further $79 million. We closed on buying interests in 2 of the properties we majority-own in Ontario and British Columbia, and we signed an agreement to purchase the Bartlett — a retirement residence with 129 suites in the Greater Toronto area — for roughly $59.4 million, to be funded from cash on hand. Sienna's pipeline of acquisition opportunities is still robust, and we feel confident about maintaining our strong pace of acquisitions in 2026. Turning to our team members: as the company expands, putting investment into Sienna's people is essential to what we accomplish. With more than 15,000 employees, we understand how important it is to have programs that back our growing workforce.

Sienna's robust culture of ownership and engagement was instrumental in the ongoing decline in turnover. Company-wide turnover on average hit a record low of roughly 19% in 2025. Together with programs centered on team member development, recognition and rewards, our efforts also produced a fifth straight year of higher team member engagement and further reinforced Sienna's operations. That leaves us well positioned to attract and retain the best in Canadian senior living. These accomplishments make us incredibly proud. They bolster our conviction that when we care well for our team members, they will deliver exceptional service to our residents and underpin the company's strong operating performance. Our dedication to enriching the work experience for Sienna's team members and enhancing resident quality of life shows in our latest accreditation results from CARF, where we kept the highest achievement status and surpassed every benchmark. This commitment is likewise visible in the ongoing gains in the company's Net Promoter Score, which gauges residents' likelihood to recommend our homes. Since we introduced this measure at our retirement residences in 2023, scores have risen by well over 30% annually, every single year. With that, I'll hand it to David for an update on our financial results.

Thank you, Nitin, and good morning to everyone. I'll begin with Slide 10, where we cover the financial results. As our MD&A disclosure requires, my remarks will refer to operating results and leave out onetime items. For Q4 2025, revenue on a proportionate basis rose 14.2% compared with a year earlier, reaching $278.4 million. That gain came mainly from occupancy and rental rate growth, along with higher care revenue in the Retirement segment. Further adding to it were contributions from our long-term care platform, among them greater flow-through funding for direct care, more private accommodation revenue, and additional revenue stemming from acquisitions and developments finished in 2025. Same-property NOI grew 10.1%, hitting $47.4 million in Q4 2025, with a 15.4% rise in our Retirement segment and a 5.6% rise in our Long-Term Care segment. Within Retirement, same-property NOI was up $3 million in Q4 2025 versus the prior year, driven largely by better occupancy and rate growth. Higher care revenue, plus keeping a strict focus on operating expenses, also underpinned the 300 basis point year-over-year gain in our same-property operating margin. We are likewise seeing solid progress on our asset optimization initiatives, which took in 5 assets within the company's retirement portfolio.

For Q4, NOI in the optimization portfolio rose more than 22% versus the same quarter in 2024. Starting January 1, 2026, we changed which assets make up the optimization portfolio, adding 2 properties and moving 1 property back into our same-property portfolio following a successful renovation. At that property, occupancy climbed from the low 80% range prior to renovation to above 95% as of today. Under the revised same-property portfolio composition, average monthly occupancy has hit or surpassed 95% since last September. Within the Long-Term Care segment, same-property NOI grew by $1.3 million. The main factor driving that year-over-year gain was continued improvement in private occupancy. In Q4 2025, operating funds from operations rose 24% to $34.2 million versus last year, largely because of greater NOI stemming from organic growth as well as contributions from acquisitions and developments finished in 2025. Adjusted funds from operations were up 19.8% to $27.9 million versus last year. That gain came primarily from higher OFFO, partly offset by more maintenance capital expenditures. Per share, OFFO and AFFO rose 7.5% and 3.9%, respectively, during Q4 2025. Sienna's AFFO payout ratio for Q4 2025 stood at 80.7%, versus 83.1% in Q4 2024.

This progress underscores Sienna's robust operating performance and the prudent deployment of the capital the company raised to finance its expansion. Across 2025, Sienna posted consistently solid results. Consistent with Siena's growth objectives for 2025, full-year same-property NOI rose 14.3% in the Retirement segment and 4.8% in Long-Term Care. Furthermore, the company's OFFO and AFFO for 2025 mirror these solid outcomes, climbing 27.1% and 25.7%, respectively, or 5.8% and 4.7% on a per-share basis. Turning to Slide 12. All through 2025, Sienna kept its financial position and balance sheet on firm footing. We closed the year with more than $500 million in liquidity alongside $1.5 billion of unencumbered assets. Access to a wide range of capital persists, and appetite for Sienna's equity and debt stays exceptionally robust. To underpin Siena's growth momentum and refinance our debt, we issued $250 million of unsecured debentures in December, and we retired our $175 million debenture upon its expiry. Following that repayment, the company faces no significant debt maturities until 2027. We likewise fully utilized our at-the-market distribution program, issuing shares for gross proceeds of roughly $101 million in Q4. And only yesterday, we announced the renewal of the ATM program.

That gives the business room to issue an additional $150 million in shares to fund its ongoing growth initiatives. Every opportunity will get careful evaluation, and we'll keep financing Sienna's expansion in a highly disciplined way. With that said, I'll hand the call back to Nitin for his closing remarks.

Thank you, David. The wider economic and geopolitical picture is still uncertain, but there is one long-term trend that stands out plainly. Over the coming 2 decades, Canada's senior population will increase substantially, and the oldest baby boomer reaches 80 this year. Meanwhile, senior housing already runs at high occupancy levels across most markets, and new supply should stay constrained for many several years. Against that background, Sienna's asset rose by nearly 30%, helped by more than $800 million added through acquisitions and developments. That has let us bring meaningful scale to Sienna's long-term care and retirement platforms, which supports both stability and appealing growth opportunities. Given our operating depth, strong balance sheet and the organizational capability to execute, we believe Sienna sits in the early stages of a multiyear growth phase. Near term, that shows up in Sienna's growth targets for 2026. In the Retirement segment we expect same-property NOI growth above 10%, and in Long-Term Care we expect low single digits. We also expect to keep up this company's significant growth through acquisitions and to further strengthen Sienna's position in the sector. On behalf of our whole team and our Board of Directors, I thank all of you for joining this call and for your continued support.

<<operator_script>> Our first question comes from Lorne Kalmar of Desjardins.

Switching briefly to the same-property NOI growth outlook for Retirement — could you perhaps shed some light on what rent growth assumptions sit behind that figure?

Thanks, Lorne. That 10%-plus figure comes from three pieces: growth in rents, higher care revenue, and the possibility of pushing our occupancy targets up further. Rent growth has been fairly steady around 4%, and we expect it to remain at that level. We also anticipate seeing additional care revenue, since residents are opting to remain with us for longer periods — because we're comfortable delivering more care, backed by how deep our expertise runs in Long-Term Care.

All right. Now, shifting over to the growth and optimization portfolio — I believe you’re at roughly 13 homes at this point. What amount of NOI upside does that portfolio hold? And what timeframe do you expect for capturing it?

Thanks, Lorne — that's a really good question. Let me make sure it's clear: when it comes to our growth and optimization portfolio, the optimization portfolio itself holds just 6 properties. The remaining ones are assets we picked up during 2025. As for the potential, margins in that optimization portfolio came in at roughly 24% for Q4, and over the medium term we'd anticipate them moving back toward the margins we see on same-property assets.

All right. So I suppose the growth mainly comes from the properties in lease-up along with the acquisitions. Okay. And then perhaps if we turn briefly to the Glen Rouge announcement. If I'm reading it right, is Glen Rouge just 159 beds? And if that's the case, does this development stand in for several Class C homes?

That's right, Lorne. So it takes the place of Glen Rouge, and it takes the place of one more home close by as well, while providing extra capacity. There's a fair amount of land at that site, which is hard to come by in the GTA. So at Glen Rouge we have 4 acres of land. So it will bring 2 homes together and add extra beds.

All right, and perhaps just one final quick question here. Regarding how you intend to finance that development, would it be through the operating line?

Yes. We’d be considering some kind of debt — it could be on the operating line, maybe a construction loan, or another type of debt.

And now we'll go to Jonathan Kelcher from TD Cowen.

Moving on to Glen Rouge, that's a fairly large project. Do you see yourselves breaking ground on additional developments in 2025? Or, considering how big it is, will this one essentially sustain you over the coming several years?

Jonathan, we’ve got 2 additional projects that are nearly shovel-ready, so we’ll be evaluating those. One commitment we have is to avoid pushing our balance sheet too far into development, and that’s something we’ll keep managing. We’re also not 30% bigger than we were last year, so there may be room to add one more project. But those are among the factors we’re weighing against the potential return from these new developments. So I think it’s too early for us to commit. It’s only February, but later in the year we might have a chance to add another one.

All right. And if we suppose that growth keeps going, then next year, most likely for certain — particularly since you'll presumably be considerably larger by then — is that how we should be thinking about it?

Exactly right. Beyond that, these kinds of projects span a number of years. So once you begin Glen Rouge, finishing it will require 2 to 3 years. So if you happen to have 2 or 3 projects underway, there's Keswick, which we anticipate wrapping up during the later half of next year. So the moment that one is done, additional room opens up for us to bring in something else. So from our standpoint, it works somewhat like a rolling process where, as projects reach completion, we will move on to starting the new ones.

Alright. So shifting topics a bit — cash taxes came in somewhat below what we'd expected for Q4. I think some of that relates to the timing of acquisitions. Could you share a bit of detail on that? And if you're going to acquire a comparable amount of assets this year, how should we think about cash taxes in 2026?

Thanks. That’s a solid question, Jonathan. You’re completely right. Our cash taxes benefited from the Hygate and LaSalle acquisitions, which we closed in December 2025. So by acquiring those 2 properties, we could claim a full year of capital cost allowance deduction, and that gave us a benefit of roughly $2 million to reduce our cash taxes in Q4 of 2025. I think when we’re thinking about 2026, the way I’d approach it is to take 2024, which had no acquisitions, and 2025, which had $800 million of acquisitions and redevelopment, and use a cash tax rate somewhere between those 2 years. And then, of course, we don’t have any forecast for acquisitions in 2026. So any additional CCA would need to be layered on top of that for potential acquisitions in this upcoming year.

Mark Rothschild from Canaccord Genuity is our next caller.

Perhaps I could begin by building on what you said about Lorne and that 10% growth. Within that figure, what occupancy gain is assumed? And how much additional occupancy improvement do you believe is achievable? I'd like to grasp how the 10% growth splits between rent growth and occupancy.

Mark, thanks for joining Sienna's inaugural call and for picking us up. That 10% figure comes from those 3 items combined. Your question about where occupancy can head from here is quite reasonable. We're in uncharted waters, to put it plainly, since Retirement has never seen 95% occupancy before. Our view remains that there's room to add a bit more, though whether that lands at 96% or 96.5%, honestly, it's a little early to say. Part of the reason is that at 95% occupancy, plenty of our homes sit at 100%, 99% — they're essentially full — while a handful are at 93%, 94%. So at this point, I'd say projecting roughly 95% is probably a sounder answer than speculating on where it could go from here.

Alright, great. Perhaps just one additional question from my side. Regarding the acquisitions, which obviously accelerated over the last year, could you speak briefly about what the accretion would look like — the potential accretion on acquisitions in today's environment, given the cap rates you'll need to pay. How much does the cost of equity, with the higher share price you now have, help with these acquisitions, or is it necessary for them? And also, does the ability to use partners — perhaps earning additional fees — help make it more accretive?

I believe the response is contained in what you just asked, Mark — it comes down to a mix of several of those factors. Partners matter enormously to us. Only a handful of chosen partners do we keep collaborating with, and that includes Sabra — our largest partnership — along with Reichmann, and we now have 2 partnerships in which it is hard to locate individuals who share the same thinking and are aligned, yet we are lucky to have 2 such partners. So I don't picture us expanding heavily into partnerships merely to collect management fees. Our aim, I think, would be to form partnerships that carry strategic logic. At the end of the day, we own and operate senior living. And cap rates mirror what the public market is doing too. And any time we underwrite a deal, we underwrite it with the long term in mind. So we concentrate hard on making sure every property gets evaluated on a debt-neutral basis, since buying something purely on debt is always simple. So I'd call it, for want of a better phrase, business as usual. We are seeing cap rates come down. We recently acquired the senior apartment building at a 5.75% cap rate, something we would not have done 4 years ago, because our trading approach was different then.

However, what the market is seeing is that a cap rate differential exists. And in our view, there remains a substantial gap between where long-term care cap rates stand, for instance, and what we observe in the public space, where many people would put it at 7% plus, and we have not come across even one long-term care home on the market above 7%. They sit more in the 6.5% to 6.75% range.