Sienna Senior Living Announces Significant Expansion of Ontario Retirement Portfolio, Entry Into Saskatchewan Retirement Market

Sienna Senior Living Inc. (“Sienna” or the “Company“) (TSX:SIA) has entered into an agreement to acquire a 50% ownership interest in a portfolio of eleven seniors’ living assets in Ontario and Saskatchewan consisting of 1,048 high-quality, private-pay suites (the “Portfolio” or “Acquisition”). Sienna will acquire the Portfolio in partnership with Sabra, who is acquiring the other 50% interest, with Sienna as the manager of the Portfolio. Sienna and Sabra will acquire the Portfolio from Extendicare Inc., with the Portfolio representing the entirety of Extendicare’s currently owned private-pay retirement properties in Canada.

The Portfolio is an attractive expansion opportunity for Sienna in its existing Ontario markets, featuring high-quality, recently built retirement residences. It also provides an entry into the Saskatchewan market with immediate scale and a platform for further expansion. Strategically located in growing communities, the properties are well positioned with coveted locations in their respective markets. With an average age of approximately six years, the Portfolio offers modern seniors living accommodation with extensive amenities reflecting the changing lifestyle preferences of seniors. While predominantly consisting of independent living (“IL”) suites, the Portfolio offers opportunities to age in-place with private-pay assisted living (“AL”) and memory care (“MC”) suites.

Sienna’s share of the purchase price for the Portfolio is $153.75 million. The Company expects the Acquisition to generate an approximate 6% unlevered yield in the first twelve months following closing of the transaction.

“Today’s announcement marks an important acquisition by Sienna and supports our outlook for the Company going forward. Sienna has invested significant resources during the COVID-19 pandemic to ensure the safety and well-being of our residents and staff. As a result of the tireless commitment to resident safety and quality of life from our entire team, the market responded through industry leading increases in retirement occupancy for Sienna in Q3 and Q4 2021, putting the Company in a position to once again invest in strategic growth and value creation initiatives,” said Nitin Jain, President and Chief Executive Officer of Sienna. “We are excited to enter into the Saskatchewan market and expand our Ontario footprint, welcome new team members and residents, and integrate high quality assets within the Sienna platform, and we look forward to the enhanced quality and growth prospects they will bring to our retirement business. In addition, our strategic joint venture with Sabra through this transaction is expected to be an additional source of future growth for the Company.”

DESCRIPTION OF THE ACQUISITION

The Portfolio consists of high-quality seniors’ living assets, strategically located in growing Ontario and Saskatchewan communities. Sienna expects to capitalize on the growing demand for quality seniors’ living in each community, and the efficiencies available through operating together with the Company’s other owned and managed retirement residences and care communities. Additionally, excess land at four of the properties represents future incremental development potential of 233 suites.

The following table summarizes key information about the Portfolio:

Property City Year Built /
Expanded
Suites
IL AL MC Total Potential
Expansion
The Barrieview Barrie, ON 2019 78 23 23 124
Douglas Crossing Uxbridge, ON 2017 102 28 18 148
Harvest Crossing Tillsonburg, ON 2011/15 100 100 52
Lynde Creek Manor Whitby, ON 2004/14 93 93 77
Bolton Mills Bolton, ON 2019 112 112
Cedar Crossing Simcoe, ON 2016 67 67 45
Empire Crossing Port Hope, ON 2015 63 63 59
Total Ontario 615 51 41 707 233
Stonebridge Crossing Saskatoon, SK 2012 89 27 116
Yorkton Crossing Yorkton, SK 2016 79 79
West Park Crossing Moose Jaw, SK 2016 57 22 79
Riverbend Crossing Regina, SK 2013 67 67
Total Saskatchewan 225 116 341
Total Portfolio 840 51 157 1,048 233

BENEFITS OF THE ACQUISITION

Recently Built, Modern Portfolio

The premium seniors’ living Portfolio offers high-quality and contemporary-design accommodations. All properties are either constructed or expanded post-2010, with an average age of approximately six years. In addition, the Portfolio offers a suite of extensive and sought-after amenities and services, such as movie theatres, fitness centres and spas. Purpose-built to high-quality standards and well-maintained, the Portfolio represents an enhancement to Sienna’s retirement platform. In addition, the joint venture intends to allocate approximately $5 million, or $2.5 million representing the Company’s proportionate ownership interest, for further capital improvements to be completed in the near-term following closing of the Acquisition.

Strategic Portfolio Expansion

The Acquisition represents a rare opportunity for Sienna to enter the Saskatchewan seniors’ living market with four desirable retirement residences, achieving immediate scale and providing a platform for future growth. Saskatchewan’s growing retirement-aged population, solid market fundamentals, workforce productivity and influx of capital investment all make this an attractive new market. The Acquisition also provides meaningful expansion in Ontario through seven retirement residences in markets within close proximity to the Greater Toronto Area, resulting in an approximate 60% expansion of Sienna’s owned and managed retirement suites within a one hour drive of Toronto. The Acquisition continues to enhance the size and quality of Sienna’s private-pay retirement portfolio, increasing the number of owned and managed retirement suites by 26%, and solidifying the Company’s position as a leading seniors’ living provider in key markets across Canada.

Track Record of Strong Financial Performance

The Portfolio has a demonstrated resiliency throughout the COVID-19 pandemic. The average occupancy of the Portfolio for the first nine months of 2021 was approximately 90%, excluding one property in lease-up that opened in 2019. Overall occupancy for the Portfolio has been trending upward since Q2 2021. Sienna expects continued occupancy growth as the pandemic subsides.

Formation of Strategic Joint Venture with Sabra

The newly formed joint venture, with Sienna acting as a manager, is an endorsement of the Company as one of Canada’s leading operators of seniors’ living properties. The joint venture is expected to become an additional avenue of future growth for the Company, as it collaborates with Sabra on new growth initiatives in Canada. As manager of the Portfolio, Sienna will generate enhanced returns on the Acquisition through a management fee income stream, expanding upon an already established operating relationship and existing revenue stream that Sienna earns as manager of eight Canadian retirement residences which are wholly-owned by Sabra.

Accretive to OFFO and AFFO per Common Share

The Acquisition is expected to be accretive to Sienna’s OFFO and AFFO per common share on a leverage neutral basis.

ACQUISITION FINANCING

The Acquisition and related transaction costs are being financed through a combination of: (i) $150 million acquisition term loan that the Company expects to refinance post-closing; (ii) proceeds from the previously announced sale of Rideau Retirement Residence and Camilla Care Community; and (iii) draws on the Company’s existing credit facilities. Following the closing of the Acquisition, the Company’s Debt to Gross Book Value ratio on a pro forma basis, taking into account expected proceeds from the sale of Rideau Retirement Residence and Camilla Care Community, is expected to increase from 46% as at September 30, 2021 to approximately 48%.

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 approvals from the Ontario Retirement Homes Regulatory Authority and the Saskatchewan Health Authority, and pursuant to the Competition Act (Canada). Sienna expects the completion of the Acquisition to occur in late Q2 2022.

ADVISORS

TD Securities Inc. is acting as exclusive financial advisor to Sienna and Torys LLP is acting as legal advisor to Sienna in connection with the Acquisition.