MARKHAM, Ontario, Oct. 16, 2024 (GLOBE NEWSWIRE) -- Sienna Senior Living Inc. ("Sienna" or the "Company") (TSX: SIA) announced today that it has entered into an agreement to acquire a portfolio of four continuing care homes in Alberta, consisting of 540 suites in the Calgary Metropolitan Region, Edmonton, Fort Saskatchewan and Medicine Hat (the "Portfolio" or "Acquisition") for an aggregate purchase price of $181.6M.
High quality portfolio built to the highest building standards with an average age of less than three years;
Immediate scale in the highly attractive Alberta continuing care segment with strong supply/demand fundamentals;
Government funding for 100% of care services from the Alberta Health Services (“AHS”);
High occupancy with three of the four properties exceeding 98% and one property currently in lease-up;
Immediately accretive to Operating Funds From Operations ("OFFO") and Adjusted Funds From Operations ("AFFO") per common share subsequent to closing of the Acquisition;
Acquisition at a discount to replacement value;
Investment yield expected to be approximately 6.5% during the first year of operations, with opportunity for additional growth.
"We are excited to expand our operations in Alberta, one of Canada’s fastest growing provinces, welcome new team members and serve the residents and families of Albertans,” said Nitin Jain, President and Chief Executive Officer of Sienna. "This acquisition helps us increase our national footprint and further enhance the size, quality and geographic reach of Sienna’s operating platform."
Description of the Acquisition
The Portfolio presents a compelling expansion opportunity for Sienna in Alberta, adding new, high-quality properties to the Company’s senior housing portfolio in Western Canada, and further diversifying its portfolio. As Sienna’s first acquisition in Alberta, it not only provides immediate scale, but also establishes a platform for further expansion opportunities in a desirable growth market in Canada. The Portfolio comprises 540 suites and is strategically located in vibrant, growing communities, benefitting from favourable supply/demand fundamentals in their respective markets.
Occupancy of the Portfolio, excluding one community currently in lease-up, exceeds 98%, with net operating income (“NOI”) expected to be stabilized within the first year of operations.
With an average age of less than three years, the Portfolio offers contemporary senior living accommodations with extensive care and services offerings, reflecting the changing needs of seniors. The Portfolio falls under the Continuing Care Home Type B (formerly Designated Supportive Living 4) & Type B Secure Space (formerly Designated Supportive Living 4 Dementia) segment and will be classified as part of Sienna’s long term care segment.
The following table summarizes key information about the Portfolio:
Property
Market
Completed
# of Suites
Occupancy
Type B
Type B Secure Space
Total
Airdrie Care Community
Calgary Metropolitan Region, AB
Q2 2022
90
36
126
100.0%
Shasta Care Community
Edmonton, AB
Q4 2022
72
90
162
100.0%
Fort Saskatchewan Care Community
Fort Saskatchewan, AB
Q3 2023
72
54
126
98.4%
Medicine Hat Care Community
Medicine Hat, AB
Q3 2023
90
36
126
84.1%
Total
324
216
540
95.9%
Strong Alberta Senior Housing Fundamentals
Strong Supply/Demand Fundamentals – New supply of senior living accommodations has not kept pace with growing demand as a result of the aging baby boomer generation, which is accelerating the growth of Alberta’s senior population. Wait lists and wait times for continuing care homes in Alberta continue to grow.
Business-Friendly Province for Investment and Growth – Alberta is an attractive destination for investments and in-migration due to the province’s strong economy, low tax rates and highly skilled workforce.
Government Funding - Care needs of residents in Alberta are determined by a health professional and fully funded by the Alberta Government. Services include 24-hour care, assistance with daily activities, medication management, meals, social and recreational activities, and access to medical services. With respect to accommodation, residents are responsible for covering their accommodation payment, which is adjusted annually for inflation.
Compelling Economics and Attractive Financial Returns
The Acquisition will enhance the size, quality and geographic reach of Sienna's long-term care portfolio, increasing the number of the Company’s bed/suite count across its long-term care platform by approximately 8%, and further solidifying the Company's position as the leading diversified senior living provider in Canada.
The Portfolio’s net operating income (“NOI”) is expected to be stabilized within the first year of operations and is accretive to AFFO and OFFO. Sienna expects the Acquisition to generate an approximate 6.5% investment yield in the first twelve months of operations following the closing of the transaction, with opportunity for additional growth, including further synergies from potential expansion in Western Canada.
Purchase Price and Acquisition Financing
The gross purchase price for the Portfolio is $181.6 million, subject to certain adjustments, including an additional contingent payment of up to $4 million, if certain performance targets are achieved prior to March 2026. The Acquisition is financed through the assumption of approximately $150 million of CMHC debt with a weighted average interest rate of approximately 4.6% and a remaining average term of approximately 4.7 years. The balance is financed with the proceeds from Sienna’s recent equity raise.
Acquisition Closing
Completion of the Acquisition is subject to customary closing conditions for transactions of this nature, including the receipt of all necessary regulatory approvals, including the approvals from the relevant health authorities in Alberta. Sienna expects the completion of the Acquisition to occur in early 2025.
Advisors
Torys LLP is acting as legal advisor and TD Securities Inc. is acting as financial advisor to Sienna in connection with the Acquisition. Newmark Canada is acting as financial advisor to the vendor.
About Sienna Senior Living
Sienna Senior Living Inc. (TSX:SIA) offers a full range of senior living options, including independent living, assisted living and memory care under its Aspira retirement brand, long-term care, and specialized programs and services. Sienna’s approximately 12,500 employees are passionate about cultivating happiness in daily life. For more information, please visit www.siennaliving.ca.
Forward-Looking Statements
This news release contains forward-looking information based on management’s current expectations, estimates and projections about the future results, performance, achievements, prospects or opportunities for Sienna. Forward-looking statements include: the successful closing of the Acquisition and the timing thereof; that NOI is expected to be stabilized within the first year of operations; the expected benefits of the Acquisition to Sienna shareholders, including that the Acquisition is anticipated to be accretive to the Company’s OFFO and AFFO per common share, that the Acquisition is expected to generate an approximate 6.5% investment yield in the first twelve months of operations following closing, and expected future growth. Forward-looking statements are based upon a number of assumptions and are subject to a number of known and unknown risks and uncertainties, many of which are beyond our control, and that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking statements.
The forward-looking statements in this news release are based on information currently available and what management currently believes are reasonable assumptions, including the funding of continuing care homes by government entities. Material factors or assumptions that were applied to drawing a conclusion or making an estimate set out in forward-looking statements include: the views of management of Sienna regarding current and anticipated market conditions; expected government priorities and spending; absence of material changes to government and environmental regulations affecting Sienna’s operations; management’s views as to demographic trends; the successful completion of the Acquisition and the financing thereof, and the financial and operating attributes of Sienna and the Acquisition as at the date hereof.
Although management believes that it has a reasonable basis for the expectations reflected in these forward-looking statements, actual results may differ from those suggested by the forward-looking statements for various reasons. The assumptions, risks and uncertainties described above are not exhaustive and other events and risk factors could cause actual results to differ materially from the results and events discussed in the forward-looking statements. These forward-looking statements reflect current expectations of Sienna as at the date of this news release and speak only as at the date of this news release. Sienna does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.
There can be no assurance that forward-looking information will prove to be accurate, as actual results could differ materially from those expected, estimated or implied by such statements. Accordingly, readers should not place undue reliance on forward-looking information. Risk factors are more fully described in the "Risk Factors" section of Sienna’s most recent management’s discussion and analysis, and in materials filed with the securities regulatory authorities in Canada from time to time, including, but not limited to, the Company’s most recent annual information form.
Non-IFRS Measures
Certain terms used in this news release, such as OFFO per common share, AFFO per common share and NOI, are not measures defined under International Financial Reporting Standards (“IFRS”) and do not have standardized meanings prescribed by IFRS. OFFO, AFFO and NOI should not be construed as alternatives to “net income (loss) from continuing operations” or “cash flow from operating activities” determined in accordance with IFRS as indicators of the Company’s performance. The Company’s method of calculating OFFO, AFFO and NOI may differ from other issuers’ methods and accordingly, these measures may not be comparable to measures used by other issuers. The Company believes that NOI and OFFO are useful in the assessment of its operating performance, and AFFO is a relevant measure of its ability to earn cash and pay dividends on its common shares. The definitions of these non-IFRS measures and an example of the reconciliation of OFFO, AFFO and NOI to the most directly comparable IFRS measure are provided in the Company’s most recent management’s discussion and analysis.
FOR FURTHER INFORMATION, PLEASE CONTACT:
David Hung Chief Financial Officer and Executive Vice President (905) 489-0258 david.hung@siennaliving.ca
Nancy Webb Senior Vice President, Public Affairs and Marketing (905) 489-0788 nancy.webb@siennaliving.ca
