Mr. Nitin Jain reports

SIENNA SENIOR LIVING INC. REPORTS FIRST QUARTER 2023 FINANCIAL RESULTS, IMPROVING SAME-PROPERTY NOI GROWTH AND STRONG FUNDAMENTALS

Sienna Senior Living Inc. has released its financial results for the three months ended March 31, 2023. The consolidated financial statements and accompanying management's discussion and analysis are available on the company's website and on SEDAR.

Sienna Senior's significant progress with respect to a number of strategic initiatives and its effective cost management resulted in strong year-over-year financial results in first quarter 2023.

"As we move further into 2023, we have many reasons to be encouraged," said Nitin Jain, president and chief executive officer. "Strong demand for our retirement residences supported significant year-over-year growth in our same-property NOI, our long-term-care communities continued to stabilize and our focus on cost management is showing early signs of success. In addition, slowing inflation and a pause to interest rate hikes are further adding to our optimistic outlook for the balance of the year."

Operating highlights:

• Same-property net operating income (NOI) increased by 9.9 per cent to $34.7-million in first quarter 2023, compared with Q1 2022, including:
  • A 11.0-per-cent increase in the retirement segment;
  • A 9.1-per-cent increase in the long-term-care segment.
• Retirement occupancy gains: Average same-property occupancy is up 300 basis points year over year to 88.2 per cent in Q1 2023 and 350 bps in the company's acquisition portfolio to 85.7 per cent since the acquisition of 12 retirement residences in May, 2022.
• Rising rates: Sienna Senior continued to achieve average annual rate increases of approximately 5 per cent in the company's retirement segment in Q1 2023.
• Long-term-care (LTC) occupancy: Average occupancy increased to 96.8 per cent in Q1 2023.
• Focused cost management resulting in:
  • A reduction in agency staffing cost of 35 per cent year over year in Q1 2023 and 29 per cent quarter over quarter compared with fourth quarter 2022;
  • A decrease in general and administrative expenses through a work force reduction and not replacing vacant positions at the company's corporate office, expected to result in annual savings of approximately $3.0-million.

Government funding updates:

• Funding update on third and fourth beds in multibed rooms: continued full funding of other accommodations per diem until March, 2025, with gradual reductions of nursing and personal care funding for Sienna Senior's approximate 350 third and fourth beds in Ontario, which will not be reopened for resident admissions;
• Funding increases for resident care, programs, and food and other accommodations: The government of Ontario announced a 2.7-per-cent increase in its flow-through funding, which covers the cost of care, programs and food, and a 2.0-per-cent increase in other accommodations funding.

Development highlights:

• Construction under way in Brantford and North Bay -- construction is progressing well at two projects, including:
  • A $140-million campus of care in Brantford, Ont., where Sienna Senior is replacing 122 Class C long-term-care beds with 160 Class A beds and adding 147 retirement suites with an estimated total development cost of approximately $140-million, and projected development yield of approximately 8.0 per cent;
  • An $80-million long-term-care redevelopment with an estimated 7.5-per-cent development yield in North Bay, Ont., replacing 148 older Class C beds with 160 new beds.
• Retirement joint venture in Niagara Falls nearing completion: Construction of a 150-suite retirement residence in Niagara Falls is scheduled to be completed in Q4 2023. The estimated total capital investment for 100 per cent of the project is approximately $55-million. Preleasing indicators for the retirement residence have been strong.

Outlook

Long-term demand fundamentals in Canadian seniors living are stronger than ever. In addition, recent macroeconomic developments, including slowing inflation and a pause to interest rate hikes, coupled with Sienna Senior's cost management strategy, are further supporting Sienna Senior's optimistic outlook for 2023 and beyond.

Retirement: With the company's successful marketing and sales initiatives, supported by strong demographic trends, Sienna Senior has been able to increase annual average rates in the Aspira retirement segment by approximately 5 per cent, and expects occupancy to further strengthen during the rest of the year.

Sienna Senior anticipates average same-property occupancy for the full year in 2023 to be approximately 90 per cent and average occupancy in its acquisition portfolio to exceed 87 per cent. The company further expects the 2023 operating margin for the full year to improve by approximately 150 bps to 200 bps compared with 2022.

Long-term care: In Sienna Senior's LTC portfolio, average same-property occupancy reached 96.8 per cent during the first quarter.

Some cost pressures are expected to remain for some time due to labour shortages and inflation, and Sienna Senior has been actively working with LTC associations and governments to have funding adjusted to accommodate significant inflationary pressures.

Developments: Sienna Senior's three projects currently under construction, including the redevelopment of a long-term-care community in North Bay, the development of a campus of care in Brantford and the development of a joint venture retirement residence in Niagara Falls, are expected to lower the company's adjusted funds from operations payout ratio by a mid- to high-single-digit percentage, once completed and fully operational.

Significant potential for growth in net operating income: Sienna Senior sees significant growth potential in its business over the next several years and is actively working on a number initiatives, which may contribute to the company's NOI expansion, including:

• Continued occupancy growth in the company's retirement segment, including incremental NOI, should the company's target for stabilized average occupancy of 92.5 per cent in its same-property portfolio be reached, which would represent a 430-basis-point increase from the average occupancy of 88.2 per cent in Q1 2023;
• Contributions from acquisitions and new developments, including incremental NOI from:
  • The company's acquisition of a 50-per-cent joint venture interest in 12 retirement properties in 2022 for $189.8-million;
  • The company's acquisition of Woods Park in early 2023 for $26.3-million, which is expected to generate an unlevered yield of 6.75 per cent;
  • The completion of the company's 70-per-cent joint venture interest in the development of a 150-suite retirement residence in Niagara Falls for $38.5-million, which has an expected development yield of approximately 7.5 per cent;
• Substantial reduction of net pandemic expenses and incremental agency costs, which were $8.2-million in 2022, as the pandemic subsides and the company actively manages incremental agency costs, while working with governments to ensure that operators are fully financed for all costs of resident care;
• Catch-up funding from the Ontario government to address funding shortfalls to offset the significant inflationary and cost pressures operators have experienced over the past years; each percentage point in additional other accommodations funding would represent an approximate annual funding increase of $1.2-million for Sienna Senior.

These initiatives, individually and collectively, could have a significant positive impact on the value of the company's business, enhancing its financial performance with growth in net operating income and operating funds from operations, and supporting Sienna Senior's adjusted funds from operations payout ratio.

Conference call

Sienna Senior will host a conference call on Friday, May 12, 2023, at 10:30 a.m. ET. The toll-free dial-in number for participants is 1-800-715-9871, conference ID: 5537911. A webcast of the call will be available on Sienna Senior's website. It will be available for replay until May 11, 2024, and archived on Sienna Senior's website.

About Sienna Senior Living Inc.

Sienna Senior (Toronto Stock Exchange: SIA) offers a full range of seniors living options, including independent living, assisted living, long-term-care and specialized programs and services. Sienna Senior's approximately 12,000 employees are passionate about cultivating happiness in daily life.

We seek Safe Harbor.