Lois Cormack - President, Chief Executive Officer Nitin Jain - Chief Financial Officer

Troy Maclean - BMO Jonathan Kelcher - TD Securities Pammi Bir - Scotia Capital Michael Smith - RBC Capital Markets

Ladies and gentlemen, welcome to the Sienna Senior Living Inc. Q1 2015 Conference Call. Today’s call is hosted by Lois Cormack, President and CEO; and Nitin Jain, Executive Vice President and CFO. Please be aware that certain information discussed today is forward-looking. Actual results could differ materially. The company does not undertake any duty to update any forward-looking statements. Please refer to the risk factors section in our company’s public filings for more information. Today’s call is being recorded and a replay will be available. Instructions for accessing the call are posted on the company’s new website siennaliving.ca. And details are provided in the company’s news release. The company has posted slides which accompany the hosts’ remarks on the company website under Events & Presentations. With that, I will now turn the call over to Ms. Cormack. Please go ahead Ms. Cormack.

Thank you, Alana. Good morning and thank you for joining us on our call this morning. With me on the call is Nitin Jain, our Chief Financial Officer. I will review the highlights of Q1 and Nitin will discuss the financial results in more detail. Now starting with slide 4, we’ve had a very busy and exciting first quarter in preparing for our rebranding to Sienna Senior Living Inc. Our ticker has now changed to SIA as of May 1. Having completed the heavy lifting on integration of our 2013 acquisition, our team is feeling energized and aligned with our new direction and our four key internal areas of focus. First: improving the resident experience and satisfaction from the very first interaction with Sienna Senior Living. Secondly: focusing at the local level on each community that we serve building our reputation and relationship with our local partners. Third: creating a culture of employee engagement with many initiatives focused on our team such as orientation, education and leadership development. And finally: improving our key support services such as the website, intranet and our IT infrastructure. These areas of focus are continuing to strengthen our operating platform for optimal performance, further growth and strengthening our reputation. We delivered solid results in Q1 with 1.3% increase in long-term care, same property NOI and 10.8% increase in same property retirement net operating income. We were pleased with the refinancing on Kingston, Kanata and Astoria with a two-year credit facility on the same terms as the previous facility. Now starting with long-term care, our long-term care occupancy was 98.1% and there continues to be strong demand for private accommodation with 99% average occupancy in Q1. To date, 63.3% of class-A private beds have been converted to one of the increased rates, ranging from $19.75 to $23.25 per day. We had 1.3% increase in same property NOI for long-term care. Consistent with our commitment to developing our team, we are very proud of 31 of our registered nurses who recently completed a certification in Gerontology with the Canadian Nurses Association. This further enhances their skills and caring for our increasingly complex and specialized long-term care residents. We continue to build our expertise in caring for residents with specialized care needs such as dementia and constant [ph] care and our operations team, are working closely with hospitals and others to improve the resident experience and the quality of care. Now moving to slide 7, the Ministry of Health on long-term care announced the details of the enhanced long-term care renewal strategy at the end of Q1. This is for the older long-term care bed, which are approximately half of the total 76,000 beds in the province. The enhanced long-term care renewal and closely construction premium of $16.65 per resident per day for a period of 25 years for operators who upgrade to the new A-structural classification. The licensed term for our A-homes has been extended from 25 years to 30 years. The construction premium will be slightly higher for small homes and homes that build to a lead silver standard. And for homes that are retrofitted and do not fully meet the design standards for A-Class homes, the premium will be less. This program is complex, as older homes have to continue to care for residents 24 hours a day, seven days a week while the homes are being built or redeveloped. It is also preferred that beds be rebuilt within the local house integration boundaries. And there are no additional new beds planned for the provinces this time. Our team has been very busy doing a detailed analysis of our options for each of our older homes. And at this point we expect that most will require Greenfield development on new sites as it is not possible to build on the current site around the existing homes. We’re feasible, we intend to rebuild with long-term care as the anchor in addition to private pay, assisted living and memory care for a seniors’ living campus. We know that this development program is going to occur over several years and it is a great opportunity for Sienna Senior Living. It will further enhance the quality of our portfolio and to add incremental NOI in the longer term. Now moving to slide 9 on retirement. Our retirement home occupancy at the end of the quarter was 86.8% up 4.3% over Q1 last year, same property net operating income improved by 10.8% over Q1 last year. As it’s often the case in the winter months, we did experience some resident attrition related to illness and traffic with flow with the harsh winter weather which was not ideal for senior and the families to get out to our homes. Our respite program which is a short-stay program for residents recovering after an illness was very popular. The respite program had a high utilization rate with many converting to permanent residency. This is a strong measure of satisfaction with our retirement living services and the lifestyle that we offer. The assisted living services that we now provide in each community were also well utilized this winter. And we expect that over time there will be a growing demand for assisted living services due to increasing age and frailty of seniors before they consider retirement living. This trend is driven by Seniors Living longer with healthier lifestyles and accessing home care for as long as they possibly can. Seniors Living is very much a local business and resident preferences in Kanata, are different than they are in Grimsby or in Port Coquitlam. And we are responding to resident needs in each community with the appropriate service packages, menus and leisure programs. We expect that our sales and marketing efforts will benefit tremendously from the rebranding of the company to Sienna Senior Living as well as our new website which is more, consumer friendly. We are very well positioned to be able to meet the needs of residents as their health needs change. Now I will turn it over to Nitin to provide more detail on our financial performance.

Thank you, Lois and good morning everyone. Before I begin, I would like to note that you’ll find a fulsome discussion of our results in our MD&A and financial statements, which are posted on SEDAR and can also be found on our new website siennaliving.ca under the Investors section. I will start on slide 10. In the first quarter of 2015, Sienna Senior Living generated net operating income of $20 million, which is up $0.5 million or 2.4% versus the same period last year. Our retirement NOI growth was a solid 10.8% and our LTC NOI growth was 1.3%. Moving to slide 11, in the first quarter of 2015 diluted operating funds from operations per share was up $0.01 or $4% over first quarter 2014, similarly diluted adjusted funds from operations per share increased by $0.01 or 2.3% for the first quarter of 2015 over the first quarter of 2014. Moving to slide 12, during Q1 of 2015 we financed two credit facilities which are secured by senior retirement home assets. We were able to refinance the credit facilities for two years at a variable rate of BA plus 187.5 basis points same as previous rates on favorable debt service coverage ratios. This is in line with the debt strategy to maintain a blend of fixed and variable debt so we can take advantage of the current interest rate environment and providing us with flexibility with our cash. After the first quarter, we used excess cash of $5 million to pay down on one of the lines resulting in increased liquidity. Moving to slide 13, in accordance with our focus on reducing leverage in the long-run, at the end of Q1 2015, debt to gross book value was at 56.4%, which is 1.2% below our Q1 2014 debt to gross book value of 57.6%. Our interest coverage ratio increased by 50 basis points from 2.7 on March 31, 2014 to 3.2 as of March 31, 2015. And our payout ratio was a comfortable 69% allowing us to retain $3.7 million of cash in the first quarter which we used to pay down debt and to build liquidity for e-development and strategic acquisitions. With that, I would like to turn it back to Lois.

Thank you, Nitin. Looking ahead, our teams are excited about celebrations occurring in all of our homes in the coming weeks involving resident, staff and many local stakeholders as we launch the new name of our homes in every community that we serve. As we implement the Sienna Senior Living name and brand philosophy, we believe that we will achieve the benefit of operating under a common brand. And we’re in the process of eliminating the complexity associated with supporting numerous sub-brands. In 2014, we were focused on integration and preparing for our rebranding. We are now focused on our growth strategy. One: organic growth by continuing to improve retirement home occupancy and net operating income. Two: planning for development of our older long-term care homes in combination with adjacent retirement home development. Three: focusing on acquisition opportunities within Canada. And four: continuing with disciplined cost management strategies. It is a very exciting time for the Seniors Living sector, with demand that is constantly growing, seniors and their families are seeking a range of service options to meet their ever-changing needs. Both publicly and privately funded options are highly regulated. Sienna Senior Living continues to build a very strong and sophisticated operating platform and has an experienced team committed to creating shareholder value. We have a very promising future as a leading provider in Senior Living. Thank you for your participation today. Nitin and I will be pleased to answer your questions.

[Operator Instructions]. The first question is from Troy Maclean with BMO. Please go ahead.

Good morning.

Good morning, Troy.

On the LTC renewal plan, how many beds memory care assisted living beds would you expect to add to your portfolio through rebuilding all of the homes?

Well, Troy, thank you. Right now it’s too early to tell. We’re really in the process of narrowing down which projects we want to begin with. We’re doing a lot of analysis on that. And as I indicated, most do require new Greenfield development, in some cases we have excess land and many we’ll be acquiring land. So, the design of the new complexes, our intention is where we can to add retirement home adjacent to the LTC with LTC as the anchor. And so the additional suites, we’re still in the planning process.

And do you plan to go for lead silver certification and how much more is the premium if you attain lead?

So the lead silver certification is an additional $1 to the construction premium. And it is our intention to build the lead silver if we can.

And then, when would you start to, when do you expect to start development of the new homes, is it a year or two away or is this going to take a few years to kind of get the plan in place?

Well, there is a lot involved just because the, it’s a new program for the ministry as well and it is relatively complex because it involves half of the beds in the province. So we have recently completed, every operated had to complete a survey which was pretty comprehensive. All of them have now gone into the ministry, they’re doing their analysis. And even from the day that you’re kind of ready to go as an operator, there still is approvals required by the ministry and the local health integration networks and so on. So, it’s a little bit early to tell Troy in terms of when we would actually start. Our hope is within the next year or so ideally.

And then, just on the retirement homes, you mentioned three of the lead silver properties expect to reach 90% occupancy in 2015. What’s the current occupancy rate for those three properties?

We don’t really get into each one of them separately Troy but our occupancy for all of those properties have been inching towards the 90%. So we are happy with the progress. And as Lois talked about Q1 is usually a tougher quarter because of the weather and infections and so on and so forth. So, we’re happy where we are and we’re still on the target of reaching 90% with three of those properties excluding Kanata which is an oversupplied market.

And then for Kanata, do you expect to see much improvement in occupancy there in 2015 or that’s just thread water for now?

That occupancy, sure, you can Lois.

Yes, there would be small minor incremental improvement. It’s just, it would be slow because it’s a very well supplied market and there is always new product coming into that market.

Thank you, I’ll turn it back.

Thank you, Troy.

Thank you. The next question is from Jonathan Kelcher with TD Securities. Please go ahead.

Thanks, good morning.

Good morning, Jonathan.

Just on acquisitions, what does the - well, first of all do you expect to complete any this year?

It’s difficult to tell Jonathan, we’re always looking for acquisitions. For us what’s important is that they are strategic so that they’re complimentary to our portfolio and the areas that we want to be in, in terms of maximizing our operations. That we’re very, we’re stringent on underwriting. And so, it’s difficult to tell. What I can say is we’re committed to growth and that we’re always looking for strategic acquisitions.

Is there a lot out there right now in terms of potential acquisitions?

I think there are some opportunities here and there. I mean, as Lois talked about, there are always opportunities we’re looking at. The numbers have to make sense and it has to make sense with our portfolio. So, there are deals out there, I think we just have to make sure that they make sense for us in the long-run.

Okay. And then just secondly on the, and this might be too early to ask the question. But just on yesterday’s announcement by the government of Ontario, how do you think that will impact or can impact your home healthcare business going forward?

It really won’t Jonathan because we have our business is all personal support workers. And as we understand the announcement, it pertained to complex care and post acute and more registered staff. So it really won’t impact us at all for the most part.

Okay. Thanks, I’ll turn it back.

Thank you.

Thank you. The next question is from Pammi Bir with Scotia Capital. Please go ahead.

Thanks, good morning.

Good morning, Pammi.

Just going back to the long-term care renewal program, when you look at it on a home-by-home basis, are you satisfied with the subsidy or the new subsidy. Or is the discussion with the ministry still ongoing for possible changes there? And then secondly, what sort of average or range of returns does the new subsidy produce for the projects that you’re looking at?

Pammi, so each project is unique. Some of the older projects have significant land value where they are today because there are assets which are 40 years old and in great locations. So us going through this program and we do Greenfield developments on many of them, we’ll be able to surface the land value. So, I think just subsidy is one portion of it, the land would be another. I think in terms of what we look for spread, it’s starting with your VAC which is, and we want to state, when we do that that neutral 55 debt, 45 equity and have some spread on top of it, even though the redevelopment program has lower risk because there is really no lease-up once you open you move your older residents to the new home. So there is no lease-up risk. The risk would be with construction in our, that’s what we’re committed on working with partners to make sure we reduce that construction risk as well.

So, in terms of the spread or your VAC, are you looking for something in the 300, 200 basis points range or is that sort of sufficient to compensate for the lower risk?

I think the 200 or lower is probably what makes sense for us just because other than construction risk there is really no lease-up risk with the long-term care redevelopment program. So we feel very good about being able to manage our risk with a smaller spread versus what we might look in other kind of opportunities.

And then on the, just going back to that first question about the $16.65, is there any chance that that could move up?

Well, for this round, so we are working through our association. It’s a complicated program. And so every project is different but we are working closely with our association and the ministry to look at what is required to make these all of the projects viable.

Okay. And then of the 14 homes in your portfolio, how many does the new funding work for at this stage?

We’re still looking at that Pammi, we’re doing analysis on a home-by-home basis looking at all of the variables including the land.

Right, okay. And then just going back to the timing again, for the projects that you think you could start within the next year, what would you estimate the costs for those are just based on your initial work and then, I presume you just arrange construction financing for those?

Yes, so, Pammi, when we said that within the next year that would be one project. So, with this flow program for all operators, so we do have some excess land in one of our locations. Sites that require land that’s a longer term because of all of the approvals and so on, so it would be one project that we would hope ideally within kind of a year or little more than a year away, so, again, construction financing wouldn’t - would not be difficult.

Right. So that one project is the only one that has excess land that you can start?

I think that’s just as an example Pammi. I think what, as Lois talked about, we’re looking at project by project where it makes sense because some of it is related to land, other is working with the ministry and there the needs of the beds are. So, I think it’s too early for us to commit that it’s going to be on there, we already have land. I think to Lois’ point, each project is unique. We’re in the process of doing some planning. And I think it’s a little bit early to give you more concrete direction than that.

Okay. And then just one last one, just under the old subsidy, were there any homes redeveloped at Sienna that you could perhaps recover some of the subsidy at the higher rate?

We didn’t redevelop any under that, the previous program.

Okay. All right, thank you.

Thank you. [Operator Instructions]. The next question is from Michael Smith with RBC Capital Markets. Please go ahead.

Thank you, and good morning. I was wondering if you could just as an overall comment, would you say that you’re generally happy with the new LTC renewal plans.

No. No, I mean, I think the ministry worked very hard to consult with stakeholders and worked hard to get a program that would work for some projects. There is always room for improvement and there is always a lot of variables associated with each one because it is retrofitting or upgrading and working with current licenses in current locations. So we always hope for improvements. And we are pleased with the ministry to approach the collaborating with the factors as well as with the local health integration networks. We’ve met with all of our local health integration networks and they’re very, very helpful and supportive of this. So, it’s a very helpful approach.

And there have been more flexible on their design standards. Could you just give us some color on that?

With a, flexibility for design standards there is really if you’ve got a home that you can retrofit on the current site. So it would be for example taking a wing of a home and upgrading it within the current footprint. And if you do that, if you don’t meet the A-Class - A structural classification design standard, there is, penalties. So you wouldn’t get the full $16.65 per resident per day if you alter from the current A-design standard. So, we have very few like we imagine all of ours are Greenfield for that purpose because of where the home is located on our current land is very difficult to build around it.

Okay. And if you start with the campus approach, it really becomes a new decision because now it’s not just rebuilding LTC it’s actually enhancing your business, with the campus of care approach. So, like how do you think about returns on that front? Because you don’t actually have to do the campus of care, you could just buy land and build - rebuild the LTC. So, are you looking at internal rate of return kind of metric or I know it’s early on but or is it just a going in kind of yield. There will be, I take it lease-up risk for the non-LTC component.

Right, Michael. So absolutely, I think to your point, campus of care will do wherever it makes business sense to do with this demand for retirement. So, LTCs and I think having the LTC as an anchor is a great place to start because you get some synergies in your construction cost as well. And you’re absolutely right, IRR is one of the factors we look at, we’ll always look at accretion and some of the other things we look at. And I think when it comes to IRR LTC has a different risk profile as I talked about before because the risk is really on construction. And retirement has a bit of a different risk profile because of the lease-up we just talked about. However, there is potential for future growth and NOI faster because you might be able to get better growth in NOI year-after-year which changes in private pay rates. So, I think it’s a combination, yes, but as a general rule, usually you would want a better return on your retirement portfolio than on the LTC as a start. But again with the campus approach we might be able to do something on a plan which works for both and nearly helps us set up for future.

Okay, thanks. And just switching gears, can you give us some color on your home care business?

Yes. So with home care, the change in that business was really an internal transition. Our home care business used to provide education services to our long-term care home. And we’ve changed that, we’ve now implemented e-learning system for long-term care. So our education has delivered much more efficiently using an e-learning platform. So that was a change in how we deliver education services internally. So that was a big piece of the reduction in the home care NOI. The most - that was the majority of it. The other is just the home care sector is going to transition it has been for some time and continues to do so. With increasing requirements for home care service providers, from wage changes that government passed through. So there is some transition there which has also resulted in margin compression on the CCAC business.

Are you optimistic on the future of the home care business?

Well, I think for us, we have to sort of wait and see. There is a lot of policy change right now sort of in process and you saw the announcement yesterday with an investment in more complex home care which doesn’t really impact our business at all because of the service that we provide. So I think we’re sort of looking at all of the opportunities and what comes out and sort of what the policy direction is.

Thank you.

Thank you.

Thank you, Michael.

Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Ms. Cormack.

Well, thank you all for joining us on the call this morning. We hope that you have a great summer. And we look forward to providing our second quarter results at the end of August 2015. Thank you. And have a great day.

Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.