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

Troy Maclean - BMO Capital Markets Jonathan Kelcher - TD Securities Brad Sturges - CIBC World Markets Yash Sankpal - Dundee Securities Michael Smith - RBC Capital Markets Pammi Bir - Scotia Capital Nelson Mah - Laurentian Bank

Good morning ladies and gentlemen. Welcome to the Leisureworld Senior Care Corporation Fourth Quarter 2014 Financial Results conference call. I would now like to turn the meeting over to Ms. Lois Cormack, CEO. Please go ahead, Ms. Cormack.

Thank you, Sebastian. 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. Today’s call is being recorded and a replay will be available. Instructions for accessing the call are posted on our website and details are provided in our news release. We have posted slides which accompany our remarks on our website under Events and Presentations. Please be aware that certain information discussed today is forward-looking. Actual results could differ materially. We do not undertake any duty to update forward-looking statements. Please refer to the risk factor section in our public filings for more information. Our financial results summarize our performance. I will review the highlights, and Nitin will discuss the financial results in more detail. So turning to Slide 4, in reviewing our fourth quarter we are very pleased with the integration of the large acquisition completed in December of 2013. Our net operating income was as expected with an increase of approximately $3.1 million over Q4 last year or 18%. Operating funds from operations were $10.4 million, a 6.5% increase over the same quarter last year. Adjusted funds from operations was $11.2 million, a decline of 2% over the same quarter last year due to increased maintenance capital expenditures. We have aligned our team of 7500 employees around a common vision and mission and we’re building a culture focused on improving the resident experience. Our internal and external stakeholders are excited by and supportive of our new brand direction, including our plans to change the name of the company to Sienna Senior Living after our annual meeting on April 21st. We are also renaming our homes in accordance with our commitment to focusing on the communities that we serve. I will provide some insight on the performance of our core businesses. So on long-term care we continued to deliver solid results with a 1.5% increase in same property NOI this quarter, and a 1.7% over the full year 2013. Moving onto Slide 6, [stakeholders] have been providing input to the Ministry of Health and Long-Term Care working through the details of the enhanced long-term care renewal strategy, and we anticipate that the program details will soon be released. We are now doing detailed planning on a redevelopment strategy for our older homes and we anticipate to execute over a ten-year period if the problem is feasible for all homes. The license term for A homes and new builds will be extended from 25 to 30 years, and once the program is announced we will finalize our planning and look forward to sharing those details with you. Moving onto retirement, our retirement home occupancy at the end of the quarter was 86.8%, up 3.9% over Q4 last year. Same property net operating income improved by 1.5% over Q4 last year and 6% for the year. We’re making very good progress on repositioning our lease up homes and are now providing assisted living and respite services. Our team is working hard to establish our reputation as leaders in retirement living in every community we serve. Moving onto Slide 8, the same property home care business had a year-over-year reduction in NOI of 200,000 or 7.6% decrease. This is primarily due to increased cost supporting the CCAC business with the new regulatory and quality requirements. Preferred Health Care Services continues to do an excellent job at meeting these requirements and we continue to invest in our staff with extensive orientation and education. As a high-quality provider, we expect to increase our CCAC volume over time. So in summarizing the fourth quarter, we had a positive growth in OFFO and net operating income as a result of successfully integrating the 2013 acquisition as well as same property improvement in long-term care and in retirement. Now I will turn the call over to Nitin Jain 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 be found on our website. I will be starting on Slide 9. In the fourth quarter of 2014, Leisureworld generated net operating income, or NOI of $20.7 million, or up $3.1 million or 18% over the same period last year. On a same property basis, NOI was $15.8 million, which is an increase of 1.1% over fourth quarter of 2013. For the full year, we generated NOI of $81.8 million, which is up $18.5 million or 29.2% over full year 2013. On a same property basis, NOI was $62.3 million, an increase of $1.3 million or 2.1% compared to 2013. Our improved NOI performance is due to the acquisition and same property improvements in retirement and long-term care. Moving to Slide 11, for the 12 month period diluted OFFO per share was up $0.10 or 10% over the same period last year. Please note prior year diluted OFFO per share excludes the impact of the subscription receipts which were issued in April 2013 in conjunction with the 2013 acquisition. Similarly, diluted AFFO per share increased by $0.08 or 6.3% over the 2013 year. The increase in AFFO was partially offset by increased maintenance capital expenditure year-over-year to account for the increased properties due to the acquisition and management’s focus on keeping our assets in good physical condition through preventive maintenance. Now moving to our financial position on Slide 13, Leisureworld continues to be in a strong financial position. In accordance with our focus on reducing leverage in the long run at the end of Q4 2014 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%. We are pleased that our interest coverage ratio increased by 30 basis points from 2.8% on December 31, 2013 to 3.1% as of December 31, 2014 and our payout ratio was a sound 67.6% allowing us to retain cash to pay down debt and building liquidity for redevelopment and strategic acquisitions. An update on our refinancing efforts are on Slide 14. During Q4 of 2014 we successfully refinanced two property level mortgages with a ten-year term, we increased loan to value on both the properties by $7.4 million from $26.6 million to $34 million and our blended interest rate for the two properties decreased from 4.6% to 4.2%. We used part of the $7.4 million incremental debt to reduce our credit lines by $7 million. Our average term to maturity increased from 3.1 years to 5.3 years between December 31, 2014 over December 31, 2013. At December 31, 2014 our current portion of long-term debt was $66 million, which reflects our debt and credit facilities that are due within the next 12 months. We are in the process of refinancing a portion of current debt due in Q2 2015 and are close to finalizing the terms and conditions with the lenders. With that, I would like to turn it back to Lois.

Thank you, Nitin. I’m happy to share that since the close of Q4 we have welcomed two very experienced executives to our team. Paul Rushforth retired in Q4 and we are pleased that we have recruited Joanne Dykeman, Executive Vice President for Long Term Care. Joanne is a well-known and respected leader in senior’s living with over 18 years of experience in all aspects of seniors living operation. Most recently, Joanne was in the role of Vice President with Revera Long Term Care Canada. We also filled the previously vacant position of VP and General Counsel with Cristina Alaimo. Cristina is an accomplished senior business lawyer having practiced with Goodmans for several years, prior to taking on roles as in-house VP and General Counsel with both public and private companies. Joanne and Cristina bring tremendous depth and breadth to our executive team. We are fortunate to have a very strong and experienced team in all areas of the business. Now looking ahead, we are excited about implementing our new brand strategy and the name change to Sienna Senior Living as well as naming all of our homes. Our new brand direction came about after almost a year of consultation with our stakeholders and has many benefits. It will assist us in repositioning as a diversified seniors living provider. The renaming of our homes is consistent with our commitment to having a strong local presence in every community that we serve. Seniors living is a local business and this change will assist us in attracting staff and residents locally backed by the promise of a strong parent brand. The name Sienna Senior Living is a name that emanates warmth and one that we can ascribe meaning to over time as we deliver on our [brand promise] the warmth of human connection. It also enables us to achieve synergies as we align all divisions under a common brand. In 2014, we were focused on integration and strengthening of our support services to the homes. We have made excellent progress in this regard and we are now focused on our growth strategy. As we continue to strengthen our retirement living service and reposition The Royale homes achieving stabilized occupancy. Two, we are focused on strategic acquisition opportunity, three, we continue to maximize our current asset with disciplined cost management and revenue maximization strategies, and finally, planning for redevelopment of our older long-term care homes. We want to thank you for your participation today, and Sebastian, Nitin and I will be pleased to answer your questions.

[Operator instructions] The first question is from Troy Maclean from BMO Capital Markets. Please go ahead.

Good morning.

Good morning Troy.

Just on the same property outlook for the LTC portfolio in 2015, is 1.5% a good rate - a good run rate for 2015?

So as we talked in our outlook Troy, the increase in the OA was around 0.7%, which is half of our [CPI] increases. So we look at 2015 as though it is going to be a very stable year to what we see in 2014. We don’t see it will be 1.5% in 2015. We see it as more stable to what we saw in 2014 results.

Okay, and then just on acquisitions, are you seeing much in the way of retirement home properties available for sale?

Well, we are always looking for strategic acquisition opportunities and diligent underwriting. So, we are always looking, can’t really comment on anything specific beyond that.

Okay, and then just on the G&A, I’m just wondering if because I know you have the brand spend in 2015 and the conversion to the new name, but what is a good - what is a kind of a good run rate for G&A for 2015?

What we saw in G&A for 2014 just after inflation, I think that is a pretty good run rate. In Q4 of 2014 we had around $150,000 of branding cost. So if you can strip that out and in 2015 we expect over the first two quarters and some might spill into the third quarter we have an additional $0.5 million of G&A cost for rebranding similar to what we talked about in our last conference call.

Okay. Thank you. I will turn it back.

Thanks Troy.

Thank you Troy.

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

Thanks, good morning.

Good morning Jonathan.

Just first to clarify something you said Lois during your remarks, the licenses for the A homes are they going to get five years added to them, is that - did I understand that correctly?

Yes. Yes that Ministry is working on that. They announced this fall that they would do a regulatory change to change the license term for A class homes and new builds from 25 to 30 years.

Okay, that is good. Secondly, what were the two properties that you financed and when in Q4 did you do it?

Say that again, so the two properties we refinanced and the second part Jonathan?

Well I’m just trying to get an idea of what sort of spread versus tenure the government of Canada bond that you ended up getting, so I’m just wondering when in the quarter you actually did the financing?

Sure. So unfortunately we did it right before the rate adjusted, but no one could have predicted that, but we are very happy with what we were able to refinance. So we refinanced during the first week of December and it was Bloomington Cove and [Indiscernible] and it was a combination of mortgage, debt and construction loan. So our average was around 4.5% for those two properties and we were able to bring it down to 4.2% and a big thing for us was getting a 10-year term on it because we are committed to building our debt latter and ’21 to ’24 we had nothing expiring. So we wanted to put something there. We wanted to extend the loan to value, so we can deploy cash in other places, reduce our lines as needed and getting the right DSCR. So we are very happy with what we will refinance at that point.

Okay, and what was the tenure at the time you did that, I guess…

I don’t remember the top of my head, but I’m happy to share that with you shortly.

We can go back and look that up. Secondly on liquidity, you guys are up to 29 million in cash, and I guess you are building a balance for the redevelopment, how much of a balance do you think you will as your plan stand out you think you will need to kick off the development or redevelopment and how much of that cash can you put towards acquisitions today if you see any opportunities come across?

Sure. We look at our liquidity Jonathan in a combination of our available cash, which was around $29 million, and we have two other credit lines, which we have another $25 million available. So, total of $55 million. And in separate from that we retained $16 million of cash throughout the year. We don’t have final numbers for redevelopment yet, but as Lois talked about, our redevelopment is going to take over next 10 years so we will have we think between retaining around $16 million of cash a year, having some lines, having excellent access to capital markets. We think we will be able to execute on our strategy with the right program under redevelopment.

Okay, thanks. I will turn it back.

Thank you, Jonathan.

Thank you. The next question is from Brad Sturges from CIBC. Please go ahead.

Hi there.

Hello Brad, how are you?

Good, good. In terms of just on the topic on strategic acquisitions, focusing more on the long-term care segment, what would be your thoughts in terms of what you are seeing in the markets there, are you seeing any increase in transactions, [Indiscernible] your product available for sale ahead of any potential announcement coming from the government on the redevelopment?

I guess we haven’t - there is - we haven’t seen a lot of activity. I think there has been over the past year or so some smaller ones with smaller operators looking to exit. I don’t think there has been a lot of activity and it would take people time when the final program design comes out it will take, every operator will need some time to look at it and understand what it means for them and what their options are. So, we don't expect there is going to be a lot of activity in the short term. Although over the longer term I think there is more opportunities certainly for consolidation as well, the business becomes more and more complex as redevelopment gets closer.

And from your perspective looking at it strategically if an opportunity came up and it was a mix of newer homes and homes that had redevelopment potential is that something that's in your will or do you prefer one or the other at this stage?

I think for us it has to be strategic and in line with our strategies so we have got homes in a number of locations that we want to redevelop eventually and many of those will require Greenfield site. So, we would want to be, we are interested in assets that are convenient or close to or in accordance with our strategy and locations that we want to redevelop in.

Okay. Great. Thank you.

Thank you. The next question comes is from Yash Sankpal from Dundee Capital Markets. Please go ahead.

Thank you. Good morning.

Good morning Yash.

Just on, FFO per share growth, your quarterly FFO per share has been steady for last three quarters of 2014. So, I was wondering how management and the board thinks about that and are you guys targeting any kind of FFO per share growth for 2015, 2016 and if what are some venues other than acquisitions you think the growth will come from?

Yes. I think there is couple of areas. The one where always working hard to improve our current assets just through really disciplined cost management and revenue maximization opportunities so that's we are always doing at. The second is we still have good upside on our retirement home platform so we are - we expect to continue to make good solid gains in occupancy over the year and -

And the redevelopment would be a key part of our in the long run not in the 2015 and 2016, but in the long run that's been our growth as well.

And then, in the acquisitions that we look at would be strategic.

So, if you were to guess a number or make an educated guess for 2015/2016 what kind of goal should we expect?

So, I think if you maybe look at by line of business maybe that's the better way to answer that so as we answer Troy’s question we expect LTC to be really stable to what we saw in 2014. Retirement Lois had talked about our lease up homes being leased up towards end of this year, so I think there is some math you can do there. It won’t be the whole year of lease up but it will be towards the end and Canada which is a very oversupplied market would be further into 2016 rather than 2015. And another two sides of our business managed services, very stable side of a business is very small, same thing with the home care so not going to be much difference with few percentages here or there so for us long term care is going to be stable and the retirement is going to have modest growth as we lease up our properties.

But you’re also getting cost savings from your refinancing so that should also impact your FFO of share growth right?

Yes, sure I mean, this was, we had around 40 basis or 20 basis point of savings and its over $30 million so that's around 60,000 or so it’s not material. And our refinancing which is coming up in 2015, we expect to roll it over for similar terms what we had before obviously with the decline in interest rate and since its available we’ll see some leadings as well but again it’s pretty small at $66 million, so we will see some of it but not something material.

Okay. And just maybe on pay-out ratio and cash on hand, do you guys give any consideration to do that increase or do you guys want to hold on to that cash and use it for external growth?

Sure. Our Board reviews our dividend policy every quarter having said that we do believe we have very secured dividend and one of the best for it to secure it is having a low pay-out ratio. We continue to, our focus is on cash retention because we believe we have a great use of it between redevelopment and acquisitions. So no change at today but that's something our board will always look at in quarterly basis.

And just one last question if I may. Lois if you could give some color on your Ontario retirement homes like what the - how the environment looks and all?

We were really pleased with Q4 and that's often because it is a bit of a seasonal business and Q4 we had really good kind of net move ins across the board and so that's how we ended where we ended. And in Q1 I mean it tends to be seasonal again like in the cold weather not a lot of seniors are coming out to look at retirement homes and we also have outbreak. So Q1 tends to be little slower in traffic but overall we are consistent with where we ended the December 2014.

Okay. That's good. Thank you.

Thank you, Yash.

Thank you. The next question is from Michael Smith from RBC Capital Markets. Please go ahead.

Thank you. Just on the LTC redevelopment program design, it sounds to me like we are getting pretty close is that a fair assessment?

We think so Michael. The ministry has been saving for over a month now that it would be out any time. So we do expect it is eminent.

Okay. And in your prepared remarks, Lois you were suggesting that you are sort of looking at you already planning for the redevelopment and you are looking at redevelopment over ten year so is it fair to say that you have a pretty good sense of what to expect and maybe if you can give us some color as to why ten years?

Well because we have 14 homes that we would like to upgrade to the standard. We just - it’s a big project. There is a lot of planning. It’s not like the initial development program earlier that we did. This is current assets moving residents, moving staff. So its logistically much more challenging and we intend to grow to acquisition as well. So we think ten years is reasonable and that’s assuming it’s feasible for all of our homes. We don't know the final details. We are doing our planning based on our best assumptions.

And is your sense that it will be feasible for all homes or you unsure of few situations?

We really can’t comment on that at this point Michael just because every situation is very unique depending on the size of the home, the location of the home whether we are able to consolidate size and move some beds across or between lengths, so there is a lot of variables that go into every single project and although we can do our plan based on assumptions it will really require very detailed planning on every project as we get closer and closer the changes in cost of constructions and so on all of these are variables that play in every project and make every project different.

Fair enough. Just switching gears if we were to exclude Canada what would you - would you expect the retirement occupancy to keep trending up to and to what levels kind of would you see at the end of the year?

Well, our goal is it continues to be to get to 90% by the end of year. The homes that are in lease up are in well supplied markets, but our team has done a very good job in re-positioning them. We provide rapid services now in all of the homes. We provide assisted living services and that enables residents to stay longer and we find now when seniors are coming looking for a home, they don't want to move twice. They want to know that they will be able to purchase service when they need it and we are getting good uptick on rest of the suites as well. We find that there is some senior will come, try out the rest and stay come back and then often the conversion rate on rest of the suites is good, so we have got a really good team and getting really programs and services in place and really starting to establish our name in each local community.

Thank you.

Thank you. [Operator Instructions] The next question is from Pammi Bir from Scotia Capital. Please go ahead.

Thanks and good morning. Just going back to the retirement home question again, with respect to the 90% you mentioned Lois, just to clarify that was excluding Canada or is that including -?

Yes, you are right Pammi. That's excluding Canada. We don't expect that Canada will get to 90 this year. It’s really well supplied market, very competitive. We are doing well there because we have been an assisted living unit, but we don't expect it will get to 90 this year.

And where is the - can you provide a breakdown for the individual properties for the retirement homes where they are today or as of Q4?

So, we don't give - we don't talk about specific properties but for the royal homes in general, our - we saw similar increases what we see in all our occupancy like it went up to around 82% in last quarter versus 80.6% so we - those homes are leasing up. It’s just going to take some time for us to get there.

Okay and then Nitin, your comments about maybe some better growth on the retirement home portfolio on the same property basis than what you see, what we should expect I guess from the long term care segment would that imply something in that 1% to 2% range or I mean I guess if you are targeting 90% ex Canada that would arguably be little higher than that range, wouldn't it?

Yes, but some of it will be throughout the year Pammi, so it’s not going to be all in Q1 so our current as our occupancy is 86.8 then as we get to 90%, so you’ve 3 percentages going up between the next four quarters and as Lois talked about the Q1 is always [indiscernible] its winter month that's not the time lot of seniors move. So the homes would start to lease up, but it will be towards the second or towards the later half of the year. So you won’t see all of that increase in our 2015 numbers.

Okay. And then maybe just one last one with the refinancing that you are working on for Q2 material is coming up where are you seeing rates on those properties and should we assume from your comments that again that these will be more ten yearish type terms?

No. So for the Q2 2015, thanks for the clarifying question. So I should have clarified as well. So it’s currently a variable rate, it’s a BA plus on 187 basis points and our goal is to keep it variable, our spot of a debt strategy, we want that mix off fix and floating. So, our intent is to roll it over as floating debt for that portfolio and obviously with the decline in the BA, we will see some savings in that.

Right. Okay. Alright that helps. Thank you.

Thank you. The next question is from Yash Sankpal from Dundee Capital Markets. Please go ahead.

Just on your redevelopment program, given the scale of the project are you planning to hire a specialist who can just take care of the whole project or do you think you can manage that within your - with your existing team?

Absolutely, we are including now Yash, we’ve got, we will recruit expertise in those areas. Development is very different than operations and although we have done this in the past, we got the great team here and we know a lot of the experts that are in the business of developing senior housing. We will absolutely bulk up our team to focus on the development arm.

And to just add to that Yash, what Lois is talking about is we are looking for a VP of development, but for us the construction we have no intention to do construction in house, we would be partnering with the developers with our in-house expertise managing that developer.

Okay and just what kind of IRR would you guys will be looking for in order to project to be feasible?

So the way we look at it Yash is, we look at our rated average cost of capital and just a very rough math just AFFO yield of less than 9% than that of 3.5, so you get a rate of around 6 and a quarter on our whack and it needs to have a bit of premium to it. Now in the long term care side because there is no lease up risk and we have been doing this business for a long time so we understand how to do it well. So, we don't see much risk in that and if we’ve the right development partner our cost are a bit fixed as well. So it would always be north of our cost of capital and it will depend on each project so I can’t give an exact range, but weighted average cost plus some basis points to it.

Okay. Okay. Thank you.

Thank you Yash.

Thank you. The next question is from Nelson Mah from the Laurentian Bank, please go ahead.

I have a question on your maintenance CapEx, when you budget for 2015 do you budget a bit higher on a per bed basis?

The way to look at our maintenance capital, so we hit exactly in 2014 would be budgeted which was [$3.8] million and I don't have per bed number right on top of the mind, but we expect 2015 is going to be in that range adjusted for inflation.

Okay. Thank you.

Thank you. There are no further questions at this time. I would like to turn it back over to Ms. Cormack.

Thank you, Sebastian. Thank you everyone for joining us on the call this morning. We look forward to seeing you hopefully all of you at our AGM on April 21. Thank you. Have a good day.

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