Sienna Senior Living Inc (LWSCF) Q4 2024 Earnings Call Highlights: Strong NOI Growth and ...

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Fri, Feb 21, 2025, 12:11 AM 4 min read

Adjusted Revenue: Increased by 12.5% year over year to $246.3 million in Q4 2024.
Adjusted Same Property NOI: Increased by 22.6% to $45.5 million in Q4 2024.
Retirement Segment NOI: Increased by 15.3% in Q4 2024.
Long-Term Care Segment NOI: Increased by 29% in Q4 2024.
Operating Funds from Operations (OFFO): Increased by 33.1% to $29.4 million in Q4 2024.
OFFO per Share: Increased by 17.5% to $0.356 in Q4 2024.
Adjusted Funds from Operations (AFFO): Increased by 41.3% to $25.1 million in Q4 2024.
AFFO per Share: Increased by 25.1% to $0.304 in Q4 2024.
Liquidity: $435 million at the end of 2024, up from $307 million at the end of 2023.
Interest Coverage Ratio: Improved to 3.9 times for the 12 months ended December 30, 2024.
Debt to Adjusted EBITDA: Improved to 6.4 times at the end of Q4 2024.
Debt to Adjusted Gross Book Value: 41.1% at the end of Q4 2024.
Unencumbered Assets: Approximately $1.1 billion at the end of Q4 2024.
Same Property Occupancy in Retirement Segment: Increased by 300 basis points to 92.9% in Q4 2024.
Acquisitions: Nearly $300 million of acquisitions under contract.

Warning! GuruFocus has detected 8 Warning Signs with LWSCF.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Sienna Senior Living Inc (LWSCF) achieved its eighth consecutive quarter of NOI growth, highlighting consistent operational success.
The company reported a significant increase in adjusted same property NOI, with a 29% rise in the long-term care segment and a 15.3% increase in the retirement segment.
Sienna successfully entered the Alberta market with a strategic portfolio acquisition, expanding its geographical footprint.
The company announced two high-quality acquisitions in Ottawa and Mississauga, expected to be immediately accretive to AFFO per share.
Sienna's liquidity improved to $435 million by the end of 2024, providing financial flexibility for future growth initiatives.

Negative Points

The company faces challenges with five assets in its retirement portfolio that require optimization, currently operating at lower occupancy and margins.
Inflationary expense increases have offset some of the gains from government funding in the long-term care segment.
The development projects in Ontario, while promising, involve significant costs exceeding $300 million, posing financial risks if not managed effectively.
Sienna's reliance on government funding for long-term care operations introduces potential volatility in financial performance.
The company acknowledges the need for further improvement in care margins, which have not kept pace with increased care revenue.

Q & A Highlights

Q: Can you provide more details on the repositioning program, including timing, yields, and costs? A: Nitin Jain, President and CEO, explained that the repositioning program has been ongoing for about a year. Initially, there were 15 homes identified for optimization, now reduced to five. Some homes required operational changes with minimal capital investment, while others needed more significant renovations. The remaining five homes are expected to see substantial NOI and margin growth, with current margins at 22% compared to the same property margin of 37.3%.

Q: Are there any new development projects planned for this year? A: Nitin Jain mentioned that Sienna is considering developing an additional 1,500 to 2,000 beds, particularly in the Greater Toronto Area (GTA). The company is cautious about committing too much to development at once but expects to start one or two projects this year, with more to follow.

Q: What was the blended rent growth in the retirement portfolio for 2024? A: David Hung, CFO, stated that the blended rent growth in the retirement portfolio was approximately 4.5% for 2024.

Q: How do you see rent growth unfolding over the next few years as occupancy approaches 95%? A: Nitin Jain expressed optimism about rent growth due to limited supply and increasing demand. He noted that the U.S. has seen higher annual rent increases compared to Canada, and Sienna expects to catch up with inflation over the next couple of years.

Q: Are you comfortable acquiring non-stabilized retirement homes? A: Nitin Jain confirmed that Sienna is open to acquiring non-stabilized retirement homes, although current opportunities are mostly stabilized. The company is confident in its platform to manage such acquisitions effectively.

Q: What is the outlook for long-term care NOI growth, excluding one-time items? A: David Hung indicated that Sienna expects low single-digit growth in long-term care NOI, in line with inflation. The company is also focusing on development projects that are expected to be accretive to AFFO per share by about 3%.

Q: What is the timeline for reaching stabilized occupancy levels in the five repositioning assets? A: Nitin Jain estimated that the timeline for reaching stabilized occupancy levels in the repositioning assets is between 12 to 24 months, depending on the complexity of each project and external partnerships.

Q: How does the current acquisition pipeline look, and are there any specific market trends? A: David Hung mentioned a robust acquisition pipeline of $150 to $200 million, with opportunities in both long-term care and retirement segments. The company is actively pursuing acquisitions that align with its strategic goals.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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