Ladies and gentlemen, welcome to Sienna Senior Living Inc.'s Q2 2025 Conference Call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer, and David Hung, Chief Financial Officer and Executive Vice President, Investor of Sienna Senior Living Inc. Please be aware that certain statements or information discussed in today's call are forward-looking statements, and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to the forward-looking information and risk factors section in the company's public filings, including its most recent MD&A and AIF, for more information. You will also find a more fulsome discussion of the company's results in its MD&A and financial statements for the period, which are posted on the SEDAR+ and can be found on the company's website, siennaliving.ca. Today's call is being recorded, and a replay will be available.
Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides, which accompany the host's remarks on the company website under Events and Presentations. With that, I will now turn the call to Mr. Jain. Please go ahead, Mr. Jain.
Thank you, and good morning, everyone. Thank you for joining us on our call today. During the second quarter, we had strong results. We maintained our growth momentum, which is reflected in our financial results and the closing of a number of significant transactions. We completed $315 million of acquisitions during the quarter, and we remain on track to add close to $100 million by the end of this quarter, with further potential for acquisitions during the remainder of this year. In addition, we are preparing to open our long-term care community in North Bay and our campus of care in Brantford over the coming weeks. Together, these two developments are valued at over $220 million. Our increasing scale comes at a time when demand for senior housing is accelerating and supply remains highly constrained.
These dynamics are not only making our assets more valuable, but they're also making Canadian senior living an increasingly attractive sector for long-term investments. From an operational perspective, our key performance indicators in both business segments continue to trend in a positive direction in this quarter. Same property NOI increased by 12.3% in the retirement segment and by 4.8% in the long-term care segment. Key drivers of the double-digit increase in the retirement segment were a year-over-year occupancy increase and rental rate growth. Average same property occupancy was up 150 basis points year -over -year and has reached 92.1% in the second quarter. Subsequent to the quarter, monthly occupancy increased to 93.1% in July, and we remain confident to reach our stabilized occupancy target of 95% by Q1 of next year. Our robust sales platform and focused marketing campaigns continue to generate strong interest in residences.
Our call center leads remain high, and tours have increased by over 30% year -over -year. In July, we hosted a two-day national open house at our residences, the first time we extended our open house over a two-day period, and we are encouraged by the results. We saw a 58% increase in attendance and a 66% increase in deposits compared to our previous open house last year. In addition, we maintain a robust focus on hospital outreach and excellent relationships with healthcare and business partners in the communities we operate in. All of these initiatives are expected to drive increasing lead generation and future movements. Beyond the strong same property performance, we are pleased to see the results of our repositioning efforts in our optimization portfolio.
Second quarter NOI increased by approximately 32% year -over -year in this portfolio, with an average margin increase of approximately 400 basis points compared to the same period last year. In long-term care, our fully occupied homes with growing waitlists continue to add to the strength of our operating platform. Further supporting the long-term care segment was an annual funding increase of 2.4% from the Government of Ontario. This increase comes into effect as of April 1st, 2025, and we expect similar announcements for funding increases in line with inflation from governments in Alberta and British Columbia. In addition, our recently acquired portfolio in Alberta and the acquisition of the final 30% interest in Nicola Lodge in British Columbia have added to the increase in total NOI in the long-term care segment.
Moving to slide six, our strategy of maintaining a diversified portfolio of private paid retirement residences and government-funded long-term care communities is reflected in our recent acquisitions. During the second quarter, we added six properties to our platform in Ontario and Alberta. On April 1st, we finalized the portfolio acquisition of four continuing care homes in key markets in Alberta, and are excited about this expansion, adding 540 beds in a province where we expect to continue our growth as opportunities arise. We also closed the acquisition of two retirement residences in Ottawa, adding suites in a market that has seen a significant turnaround in the recent past. In addition, we are further strengthening the footprint in the Greater Toronto Area with an acquisition of a 133-suite high-quality retirement residence and a 192-bed long-term care home. Both properties are located in Mississauga and are expected to close in this quarter.
Our highly engaged team and a structured approach to onboarding and integration allow us to grow at this accelerated pace. As we expand further, we will continue to enhance our transition processes to ensure a smooth and fast integration of the new properties, team members, and residents into Sienna's operating platform. This not only supports a positive experience for all involved, but will also further strengthen our operating results. Moving to development, we completed Sienna's first long-term care redevelopment project in North Bay, and we expect to welcome residents to their new home in the coming weeks. We couldn't be prouder of this significant milestone, which highlights our commitment to modernizing our long-term care portfolio in Ontario. We are also finalizing our $140 million campus of care in Brantford, Ontario. The campus comprises 160 redeveloped long-term care beds and 147 retirement suites.
We are looking forward to welcoming our first residents at our retirement residence at the end of this month and expect to open our long-term care home by the end of the third quarter. Once fully operational, each of our redevelopment projects is expected to grow Sienna's AFFO per share by about 3%. At the end of July, the Ontario government announced enhancements to its construction funding program for long-term care homes. The new program provides greater funding flexibility and addresses regional differences in construction costs, in particular with respect to higher building costs in the Greater Toronto Area. While we continue to evaluate the revised funding and its implications on our development program, we feel optimistic about the significant improvement given that over 80% of our development pipeline is located in the Greater Toronto Area.
Moving to slide eight, investing in our team members and building our workforce that is fully aligned is fundamental to grow and scale our operations. An important aspect of our growth story is the ownership culture we are building at Sienna, and we are particularly proud of our share ownership program. Since launching the program in 2022, more than 10,000 team members have become shareholders. This year, we made further enhancements by awarding additional shares to team members celebrating service milestones. Many of the impactful initiatives that have helped us build highly engaged teams are also highlighted in our 2025 impact report, which we released yesterday. The report highlights a meaningful difference: our 14,500 team members make every single day in the lives of our residents, families, and the communities we operate in. With that, I'll turn it over to David for an update on our financial results.
Thank you, Nitin, and good morning, everyone. I will start on slide 10 for financial results. In my commentary, in accordance with our MD&A disclosure, I will make reference to our operating results, excluding one-time items. In Q2 2025, revenue on a proportionate basis increased by 17.4% year -over -year to $253.6 million. This increase was largely due to occupancy and rental rate growth, as well as increased care revenue in the retirement segment. Adding to the increase were the contributions from our long-term care platform, including higher flow-through funding for direct care, higher private accommodation revenue, and additional revenue from acquisitions completed in 2025. Same property NOI increased by 8.2% to $45.1 million in Q2 2025, including by 12.3% in our retirement segment and by 4.8% in the long-term care segment.
In the retirement segment, same property NOI increased by $2.3 million in Q2 2025 compared to last year, largely as a result of improved occupancy and rate growth. These improvements, in addition to generating higher care revenue and maintaining a strict focus on operating expenses, supported the year-over-year 203 basis point improvement of our same property operating margin. We expect the market expansion to continue as we get closer to our 95% occupancy target and achieve additional efficiencies through scale. In addition to strong same property growth, we are progressing well with respect to our asset optimization initiatives, which includes five assets in the company's retirement portfolio. These assets will benefit from a range of initiatives that target a better market fit, including renovations, a change in suite mix, additional services, or the alternative use of a property.
Occupancy in our optimization portfolio increased by 740 basis points year -over -year in Q2, adding to the strength of our results in the retirement segment. In the long-term care segment, same property NOI increased by $1.1 million. Fully occupied homes with growing waitlists and continued improvements in private occupancy supported the year-over-year growth. During Q2 2025, Operating Funds From Operations increased by 24.3% to $29.3 million compared to last year, primarily due to higher same property NOI, as well as contributions from acquisitions that were completed in the quarter. Adjusted funds from operations increased by 21% to $24.1 million compared to last year. The increase was mainly due to a higher OFFO, offset by an increase in maintenance capital expenditures and lower construction funding income. On a per-share basis, OFFO and AFFO per share decreased by 1.5% and by 4.0%, respectively, in Q2 2025.
Our Q2 2025 AFFO payout ratio was 89.5%, a 380 basis point increase compared to Q2 2024. The decrease in OFFO and AFFO per share and the increase in the company's payout ratio are the result of the temporary dilution in connection with our equity issuances in August 2024 and February 2025, which made the significant expansion of our asset base possible. In total, we raised $288 million of equity by issuing 18.7 million shares to fund our acquisitions and developments. With a substantial amount of the capital invested in recent months and further capital being deployed during the remainder of Q3, we expect to realize the full benefit in the quarters ahead. Moving to slide 11, throughout the second quarter, we maintained our strong financial position and balance sheet.
We ended the quarter with $313 million in liquidity, $1.2 billion of unencumbered assets, and no major debt maturities until Q1 2026. Further adding to this strong financial position was the confirmation of the company's Morningstar DBRS BBB rating with stable trends. This confirmation was announced by Morningstar DBRS on August 1st and was based on Sienna's robust operating performance. With that, I will turn the call back to Nitin for his closing remarks.
Thank you, David. We are at the beginning of a major demographic shift. The leading edge of the Baby Boomer generation is turning 80 and entering a stage of life where retirement living becomes a real consideration. This powerful tailwind, combined with a strong balance sheet and a healthy pipeline of growth opportunities, puts us in a great position to take advantage of the positive momentum in Canadian senior living. With respect to our growth targets, we expect same property NOI in our retirement segment to benefit from continued occupancy and rental rate increases, and we remain confident to reach a stabilized occupancy target of 95% by Q1 of 2026. Based on our strong results during the first six months of 2025 and our outlook for the balance of the year, we maintain our guidance for Sienna's 2025 same property retirement NOI growth to exceed 10%.
Sienna's long-term care portfolio is expected to benefit from the continued stability of this segment. The 2025 target for same property NOI growth, excluding one-time items, is expected to be in low single digits. In addition, we expect Sienna's growth through acquisitions and development to continue. We are on track to add nearly $660 million of assets by Q3 of this year, and we see potential for additional growth during the balance of the year. In June of this year, we celebrated the 15th anniversary of Sienna being listed on the Toronto Stock Exchange. Our recent growth initiatives are built on the same diversified strategy that has driven our success over the past 15 years. Since our IPO, we added $2.3 billion of assets and grew from a long-term care operator in Ontario to one of the largest and most diversified senior living companies in Canada.
During this time, Sienna has delivered a total shareholder return of over 400% and has significantly outperformed the TSX, which increased by approximately 140% over the same period. Last month, Sienna was named one of Canada's best companies in 2025 by Time Magazine, a ranking based on continuous growth, high employee satisfaction, and a purpose-driven culture. We are particularly proud of this recognition, which highlights our achievements and was made possible by our 14,500 team members who are also shareholders in our company. On behalf of our entire team and our board of directors, I want to thank you for your support, and we are now ready to take your questions.
Thank you. If you have a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, simply press star one again. One moment for your first question. Your first question comes from the line of Lorne Kalmar of Desjardins. Your line is open.
Thanks. Good morning. Maybe just focusing in on the developments to start off a little bit. You guys got the two that are going to be completed this quarter. You'll have just one ongoing. Obviously, you've called out the fact that you're still evaluating the implications from the updated development scheme. I was just wondering if you could give us a little bit of insight into how you're thinking about new initiations and how many projects you think you guys can get underway in maybe the next 12- 18 months.
Hi, Lorne. Good morning. On development and the new funding change in the GTA , we are very optimistic about the funding as it is nearly increasing by close to 100%. Many of the projects which were not viable before could potentially be made viable. You always have to go through the details because the program was just recently launched. We have close to 1,000 beds in the pipeline in GTA markets, so we do expect us to continue on with some projects. It's a bit too early to comment on which one will go first, but I would expect at least one project in the next 12- 18 months, considering that some of the next projects would be bigger than 160 beds that we have done in the past.
Okay, that's very helpful. Just a bit more of a technical one, I guess. On the construction funding subsidy for North Bay and Brantford, when do you guys expect that to come on? Would that come on right when they're completed and you get the full benefit in 4Q?
Thanks for that question, Lorne. We would start getting the construction funding when the first resident moves in. That would be in several weeks from now when we start moving residents to the new building. We've already completed the building in July, and we've gotten $4 million of development grant from them already. We're currently just undergoing final ministry inspection, and within the next few weeks, when the first resident moves in, that's when we would get the construction funding subsidies.
Okay, just to confirm, that $4 million development grant doesn't hit FFO.
No, it does not. It would go against the cost of construction.
Perfect. Okay, thank you so much. I'll turn it back.
Your next question comes from the line of Jonathan Kelcher of TD Cowen. Your line is open.
Thanks. Good morning. Just sticking on the development front, for Brantford, for the retirement home, how should we think about the cadence of lease up for the property? Have you guys started leasing that yet?
Hi, Jonathan. Good morning. We have started leasing up. We have deposits already, and residents are ready to move in when the homes open, which probably is the end of this month or first week of September. Usually, for a property that size, a regular lease up is around two and a half to three years. Our goal would be to do it faster, but we'll provide more detail on it as it opens up, and we'll start to see more and more visibility. For some of the services, such as the assisted living and memory care, they're more in time where people don't really put deposits. It's a need-driven service, and the retirement home that we're building in Brantford has assisted living, has memory care. We do expect that once it opens, it'll get filled out pretty fast, at least those wings.
Okay, how many deposits would you have? Is it a lot, a little?
I would say it's in line with what you would expect when a building opens.
Okay, fair enough. On your same property NOI outlook for retirement, you guys kept it at 10%+ , but you did do 14%, give or take, in the first half. Should we maybe think about this as kind of 10%+ for the back half of the year?
Yeah, I would say that's not an assumption like that would make sense. We see margin growth, we see occupancy change. We saw a little bit of dip in occupancy in the second quarter, which is more driven by where we ended the first quarter. As you know, it's an average that when you start low, it takes a bit of time to build it up. The numbers we're seeing in July where occupancy is trending up, we do expect to deliver on the 10%+ target we have for this year.
Okay, and then just lastly, on the 95% that you expect to hit in Q1, is there any reason to think that you can't get to 96% or maybe even a little bit more as the year progresses next year? 95% is not just a magic stop number, is it?
I agree with you 100%. I think there was a time when 95% was really the end mark for retirement. We've seen many of our homes delivering much above 95%. You always have in a portfolio a few properties in a market which is a bit oversupplied for a year or two. I would say the reality is the majority of the homes and an average of 95% would be much above 95%. You might have a few homes which are at 90% or in the high 80s%, just depending on market conditions or if it is going through some optimization or renovation. Your question around that 95% is not really the high watermark. We agree with it completely. I think there is a lot more potential after 95%.
What do you think the high watermark would be for a portfolio like yours?
Yeah, I mean, it's just very difficult to predict. We have homes which are running at 100% quarter after quarter for multiple quarters. You know, one could argue, can everything become like that? I think that would be very optimistic. You know, getting to 96%, 97% is not unreasonable. I just think we have to first get to 95% before we start talking about some of those other numbers.
Okay, that's helpful. That's it for me. I'll turn it back. Thank you.
Thank you.
Again, if you have a question, please press star one on your telephone keypad. Your next question comes from the line of Himanshu Gupta of Scotiabank. Your line is open.
Thank you and good morning. Just sticking to retirement home occupancy, how was your occupancy performance in Q2? Does that make you on track to reach your 95% target?
Yeah, I mean, you know, our occupancy target, our occupancy for, we started the quarter in Q2 a bit late. We had to do a bit of catch-up. We had significantly more move-outs in Q1 than we saw in the past. It takes a bit of time to catch that up. We are happy with our July results where we are tracking around 93% or so. I would say we don't see much change in the trend. We had a very successful open house. Our leads are up, our deposits are up, our tours are up. That's what gives us the confidence of getting to that 95% in Q1.
Got it. Assuming like a seasonal dip in February, March, I mean, technically you have to get to that 95% by December or January. It's like four or five months ahead of us and 200 basis points to cover. Would you like to say that?
Yeah, that's correct. There is seasonality. There is also a combination of you might have markets where there's a lot of, as long-term care homes are opening up, you might have a dip when the new homes open up, but that'll get absorbed quickly. It might take a month or so. We are not seeing the level of seasonality we used to see in the past. The move-outs in Q1 were more driven by additional long-term care homes opening so that people on the waitlists go up and it takes a month or so to backfill the retirement home. It's hard to say, Himanshu, at this time that would be done by December. I would say we would stick to the target of by Q1, we'll get to 95%. All things are trending towards that.
Okay, nice. Thank you for that. Turning attention to retirement home NOI margins, good to see some expansion in Q2, you know, on a year-over-year basis. In the past, you guys have said like 70%- 75% of revenue from, you know, incremental occupancy should go to NOI. Is that math still working? That's how you see it going forward as well?
Yeah, that's right, Himanshu. We have said before that between 75%- 80% of any occupancy increase would fall to the bottom line. We still continue to believe that, particularly now that we're above 92% occupancy, that would be more true than ever.
Awesome. Okay, thank you. Maybe the last question is on North Bay. That 3% AFFO accretion, would you say that most of it or the bulk of it is coming from that annual construction subsidy and not much of incremental? Fair to say that?
Yeah, no, I mean, it's going to come from a combination of incremental NOI. Remember that North Bay, it is a bigger building than the older building that we have currently. We're also going to get more NOI from higher preferred revenues. There will also be, of course, the lift from the construction funding subsidy as well, of which it would be $3.3 million on an annual basis. It's really the combination of the two.
Okay, thank you, guys. I'll turn it back. Thank you.
With no further questions, that concludes our Q&A session, and it also concludes today's Conference call. You may now disconnect.