Lois Cormack - President and CEO Nitin Jain - Executive Vice President and CFO

Troy MacLean - BMO Capital Markets Pammi Bir - Scotia Capital Jonathan Kelcher - TD Securities Yash Sankpal - CIBC. Michael Smith - RBC Capital Markets.

Good day, ladies and gentlemen. Welcome to Sienna Senior Living Inc.'s Q4 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 factor section in the 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, Wayne. Good morning, everyone, and thank you for joining us on our call this morning. With me on the call today is Nitin Jain our Chief Financial Officer. I will review the highlights and then Nitin will proceed to discuss the financial results in more detail. We are very pleased to report another strong quarter to end what has been a great year for Sienna Senior Living. Our team continues to execute on the brand repositioning and on enhancing our operating platform. Management is confident that we have executed in all key areas. One, financial performance, two quality of care and service, three, resident and family satisfaction and finally employee engagement. For the 2015 year, our same property net operating income was up 4.4% over 2014. In the fourth quarter of 2015, our same property NOI was up 6.4% over the prior year period. Now in the fourth quarter of 2015 diluted OFFO per share was up 6.3% and diluted AFFO per share was up 5.9% each over the fourth quarter of 2014. Making headway on our strategy to grow the retirement platform, we completed the acquisition of Traditions of Durham, which we believe to be a great addition to our high quality portfolio of retirement residences. Tradition is a 140-suite independent and assisted living residence located in Oshawa, Ontario which we have managed for some time. The residence enjoys a great reputation on the Oshawa market and we know that asset well. With this tuck-in acquisition we also welcomed approximately a 100 new employees to the Sienna team. Now moving to retirement. Our retirement home occupancy at the end of the quarter was 93.6% up 6.8% over the fourth quarter of last year and our net operating income improved by 20.4%. We were very pleased to have strong traffic in each retirement location over the fall as we know that the winter month typically see higher attrition rates. We continued to develop and refine the Sienna experience for residents with improvements in both culinary and major [ph] services. Now on long term care, the long term care division had net operating income growth of 2.5% as the price accommodation in A Class home continued to convert to the new rates. In Q4 and during the entire year, we made improvements in all key quality indicators and now outperform the provisional average on all key quality indicators. In addition, our team delivered a number of individual and team quality award for successful project implemented all which improved outcome for residence. Now with respect to redevelopment, we continued to plan for our C bed redevelopment projects which are subject to regulatory and municipal approvals. In 2015, resident satisfaction results were positive with improvements over 2014. And programs such as Cyber-Seniors are being very well received. Our Cyber-Seniors program bring high school students into our community to help residents learn to use technology which enables them to stay current and in touch with their family and friends. At Sienna, our 8000 employees take care of nearly 7000 residents everyday, and the key to our success is high employee engagement and satisfaction. We are very pleased with our 25th team engagement results. 92% of our team members are aware of the Sienna vision and mission and support the direction of our company. And we believe that this is indicative of the strong culture and the brand that we are creating. With that, I’ll turn the call over to Nitin to provide further detail on the 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 for the period, which are both, posted on SEDAR and can also be found on our website siennaliving.ca. I’ll start on slide nine. In the fourth quarter of 2015, Sienna Senior Living generated net operating income of $22 million, which is up $1.3 million or 6.4% versus the same period last year. Our retirement business had another commendable quarter with strong NOI growth of 20.4% and our long-term care NOI growth was a stable 2.5%. The retirement growth was driven by strong occupancy gains and our ads [ph] at occupancy increased by 6.8% to 93.6% versus Q4 2014. For the full year 2015, we generated net operating income of $85.4 million, which is up $3.6 million or 4.4% over 2014. In the fourth quarter of 2015, diluted operating funds from operations per share were up $0.02 or 6.3% and diluted adjusted funds from operations were also up $0.02 or 5.9% over fourth quarter 2014. The increase was driven by strong year-over-year performance in both the retirement and our long-term care division. Our maintenance capital expenditure for 2015 was $3.8 million as per our expectation and also as previously advised. Our Q4 2015 administrative expenses were $4.5 million which is consistent with the spend in Q4, 2014. For the year end 2015, administrative expenses were $18.2 million which are $700,000 higher than the comparative 2014 period. The increase is driven by inflationary increases year-over-year and also one time rebranding expense of $489,000 which is in line with the estimated expense of $500,000 for rebranding which was disclosed earlier in 2015. The company completed the acquisition of Traditions of Durham on December 31, 2015 for a consideration of $37 million subject to customary adjustments and assumption of the existing property level mortgages of $22.7 million. The mortgage matures in March 2020 and bears an interest rate of 3.49%. The remainder of the purchase price was paid through cash on hand and drawn downs on the company’s credit facilities. For the next 30 months, the vendor will provide the company with an annual net operating income guarantee through income support of upto $550,000. Now moving to slide 10. We continue to maintain a strong financial position. In the fourth quarter of 2015 we were pleased that DBRS confirm the A (low) rating on a Series B Debenture with a stable outlook. At the end of Q4, 2015 our debt to gross book value was 55.6% which is 80 basis point below our fourth quarter 2014 metrics. The decline was driven by voluntary repayments towards the company’s revolving credit facilities, monthly payments to the Series B Debenture principal reserve fund and to mortgage liabilities. Our interest coverage ratio increased by 30 basis point from3.2 at the end of Q4, 2014 to 3.5 at the end of Q4, 2015. Our 2015 payout ratio was 66.2%, 140 basis points lower than 2014 payout ratio allowing us to retain $16.7 million of cash which we use to pay down our debt and partially fund the traditions of Durham acquisition. We continue to focus on keeping our balance sheet strong with the intention of executing on our strategy of our strategic acquisitions and further continue to invest to give you development of our Class C long term care debts. With that, I would like to turn it back to Lois.

Thank you, Nitin. This has been a great year for Sienna Senior Living. Our team delivered solid performance on all quality of services, care and financial metrics. With a successful rebranding initiative and a brand of repositioning as a high quality senior living provider focused on improving the residents experience and employee engagement, we continue to strengthen our retirement platform and our management expertise all with excellent results. We also made substantive progress in modernizing our back office systems with upgrades to our information technology, payroll and financial recording systems, which inturn is improving support to all of our retirement residences and care communities. In the coming year, we expect to deliver more of the same. We expect modern growth in our retirement division, driven by occupancy and rate increases aided by our improved online presence and by our sales and marketing focus on the unique needs of each senior. In long term care, we expect stable performance consistent with 2015 through the continued conversion of A Class private bed to the new rates. And we expect that the province wide long term care C Class redevelopment program will gain some traction this year and allow us to make progress on this front, subject to government approvals and program feasibility. We are permitted to continuing to grow the company and as always looking at strategic opportunities to add long term shareholder value. Thank you for your participation today and we look forward to seeing you at our AGM on Tuesday April the 19th. Now Nitin and I will be pleased to answer your questions.

Thank you. [Operator Instructions] The first question is from Troy MacLean from BMO Capital Markets. Please go ahead.

Good morning.

Good morning, Troy.

Is there much room to move occupancy higher in the retirement home portfolio or are we at a stabilized levels now?

Hi, Troy. Yes, so we are pleased with where we are at, where we ended the year. And we would expect that this would be our average occupancy for 2016 for the entire year.

And then what type of rental lift are you kind of expecting for and on the average rate the residents pay in 2016?

Troy is it a question on the average rented fees year-over-year is that what your question is?

Yes.

So each community is different Troy. It depends on the market and so on, but so there is a bit of a range anywhere from overall from 1% to 3% and then there is the results of care services, so we continue to augment care services as well. So we do anticipate you know good moderate growth and continued growth in retirement through a range of this as we continue debt services I will achieve stabilized occupancy for the entire year overall and there we’ll continue to see some opportunities as rate increases both at the local community level and actually suite by suite.

And then do you have any comments on the acquisition market you know just curious if it’s you know less competitive than it was you know this time last year. And what your expectations are for 2016?

Really Troy for us, you know our acquisitions on the mantles have not changed. You know we tend to look for big strategic opportunities for us to expand across the country, even at the same time here very diligent and how we underwrite those assets, this need to make sense for us both operationally and financially. So we continue to do that and Traditions was a great example you know this and asset we knew quite well. It was an easy transition for us and fits great with our existing retirement portfolio.

Perfect. Thank you. I’ll turn it back.

Thank you, Troy.

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

Thanks, good morning. Just can you maybe expand on the retirement home portfolio, the same property NOI growth, you know occupancy certainly was a driver, but what are some of the other areas, areas that were helping the gains?

So on the – I guess our progress on retirement, I would say, there’s no silver bullet here, really as you know we took about a significant rebranding and we think that that’s really been a great enabler for us. As we focus on each community, our part of our rebranding is to focus every much on senior and the local community and respond to what that community needs. So, we haven’t done -- we don’t do across the board incentives. We really work with each resident and support them through their transition as they moved into to their residence. So I think there is that. There is also the – we just really improved our whole operating platform, strong operations and consistent operations in each community. We certainly made improvements in all of the areas that residence care about. Food and beverage are the culinary experience with the farm-to-table program that we’ve talked about previously, our leisure program. So I think its just overall a number of things that we work very, very hard at as well as we continue to add assisted living services as residence require them, so that they can enable them to live with us longer as they wish to and are able to.

Okay, that's helpful. And was it that all specific to any particular homes like one or two or is it again more broad-based?

Pammi, is the question around our growth is was it across that portfolio or was it one two specific home is that what you’re asking.

Yes, with the retirement homes.

Yes. So I think the ones that we had, that we talked about previously that we had anticipated that we would achieve stabilized occupancy by year-end. We did that. The one that we indicated we would not is Kanata [ph], because that’s the well supplied market and so that has not yet achieved stabilized occupancy as we indicated at the beginning of the year, but certainly made good progress in all of the others as we had thought that we would.

Okay. Maybe just switching gears to the renewal program for the Class C beds. Any better visibility on expected spending this year and perhaps if you have any thoughts on 2017?

Yes. I mean, this program significant initiatives for the entire province. There is over – there is about 35,000 Class C beds which is actually half of the bed stock in the Province needs to be upgraded to A Class. And so the Ministry is really working hard to put all of the infrastructures in place to support this. And the projects that we are planning that to that we had mentioned in our last call we continued to plan on and both are – both really at the point now where we require Ministry approvals to get to the next level. And certainly, we would expect as the program get traction on the provincial engines get working on this we would anticipate certainly more -- some attraction in 2016 and 2017. And of us ourselves in terms of spend I think it’s probably too early to tell because we’re still waiting on approvals and just not too sure of the timing of that.

Okay. And then, maybe just turning to the credit facilities on the Ontario and DC retirement homes, what are your thoughts there with respect to terming those out? I know they are non-due until I guess next year but just curious as your thoughts there with the homes I guess closer to stabilization?

Pammi, for us – thanks for the questions. For us we really like the mixture of fix and floating debt. So, for throughout the 2015, we retained around $16.7 million of cash and that was a great place for us to park that cash at a good returns were safe. And then we did the acquisition for tradition. We won’t really dependent on that market at that point. We assume the mortgage and we drawdown our credit facility. So we really like that flexibility. So, in 2016 or 2017 when it comes due, we’ll take a look at it again, but we are happy with the mix but again we’ll make a decision closer to that point in terms of whether we do fix or variable.

Okay. Then just one last one, with just your commentary around the sort of moderate growth outlook for retirement homes and sort of stable for long-term care. How do you feel about the overall FFO outlook for this year?

Pammi, we don’t really give guidance for us, since if you look at long-term here for the last couple of years, the growth has been around 1.5% to 2% range, and you know that’s good stable predictable business, so I think you can expect something like that. For retirement as Lois talked about in 2015 we had excellent results. Our NOI growth for the whole year was 13%. We don’t expect that to continue on because as we reached leased up stages in most of our retirement portfolio, so it will be lot more moderate than that. I think that’s probably as far as we go in terms of guidance.

Okay, that's helpful. Thank you.

Thank you.

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

Thanks. Good morning.

Good morning, Jonathan.

Just on the operations front, do you think you'll be able to get Kanata stabilized in 2016?

Yes. Yes. When we would say stabilize, the Kanata is going to be around 90 or slightly less just because of that market.

Okay. And then just looking at Q1 this year and I know occupancy usually dips a little bit just for a little seasonality in Q1, but given that the warmer winter this year, do you expect it to stay a little higher than it normally would?

That’s hard to say. We don’t really – I mean, if you look at over the course of time there’s always seasonality and its may not be a function of weather so much as it is flu and outbreak. So – and seniors just don’t typically make the choice in the winter months to do a move it, usually fall is good traction which we experienced in the spring. So it would probably be consistent with previous years.

So, it’s a normal seasonal pattern?

Yes.

Okay. And then just turning to acquisitions, you guys have obviously managed Traditions of Durham for a while before acquiring it. Is there much in the way of further opportunities among some of the assets that you managed to bring in? And is that -- would that be a preferred way for you guys to acquire assets given that you would know the assets well before buying them?

Since there is not a lot there, we do manage a couple of retirement communities, so there might be a little opportunity there, but we think that there is going to be opportunity in 2016 for acquisitions. We’re always looking and say that things that are strategic for us and that are going to add shareholder value. We were very disciplined in 2016 or 2015 rather, there was a lot of activity in the market and we continue to be disciplined, but take advantage of opportunities that are strategic for us and accretive.

Okay. That’s great. Thanks. I’ll turn it back.

Thank you.

Thank you. The following question is from Yash Sankpal from CIBC. Please go ahead.

Good morning.

Good morning, Yash.

Your leverage ticked up a bit in the quarter. So, are you comfortable with the current level? What is your long-term goal for that?

Sure. Yash, my strategy on debt has not changed. Our focus continues to be cash retention and paid down leverage. And if you look at Q3 of 2015 we are much lower where we ended up. And as we talked about just accessing the public market for a small equity does not make sense for us when the acquired tradition. So, we finance it through our credit line and that’s why we like the flexibility. So that’s why went up a bit. But we continue focus on reducing our leverage in the long term. You talked about low 50s before and that’s strategy has not changed for us.

And I see that you have around 20 million due this year. So is it related to a specific maturity or is it you only distributed over 2016?

So, half of it is just regular principle repayment which we’ll do every month and the other half which is $10 million is due end of the year, which is for a specific property and we have more than a time when we’ve actually started to look at it in terms of some of the options what to do with it and we’ll provide further advise on it as we get little bit closer to final plans.

Okay. What I'm trying to understand is, how much dry powder do you think you have, if you were to make big acquisitions like, how much more can you draw on you lines?

So we have another $30 million of liquidity just on our lines. We continue to have great access to public markets when we assumed the Traditions of Durham, mortgage it was no problem at all for us either. So, I don’t think that our current credit lines are anyway going to be hindrance for us to grow, it just a matter of finding the right opportunity for us.

But I thought $20 million of that TD line is just for your working capital purposes?

We have different credit line, so we have a line under our bond which is $20 million and which is for general purposes. We can use it for as needed. And the same goes for our Kingston and Kanata facility, which is again a credit line and we can use it as needed.

Okay. I think that's it from me.

Okay. Thank you, Yash.

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

Thank you. Just on the rebuilding of the Class B and C properties, beyond the two projects you have on the go now, do you need or are you anticipating enhancement to the incentives from the government. Do you need it to progress with developments beyond the two you have on the go?

Well, I think Michael as we’ve indicated, each of these projects is very unique for us, most are going to greenfield and we do the project feasibility as a big factor before we would ever consider undertaking one. And so, we do need to continue to run that out and make sure that each one feasible and get an adequate return in order to proceed, so that would be states that all of the others are at.

So you've got two that sort of match your criteria, the other one is you're looking at?

For us Michael, the first stage of applications not only financial there were some other criteria as well as in terms of land availability and do you have the right zoning or not, so it wasn’t just financial for the first two. So again as Lois talked, but I think its difficult to comment on which ones meet the criteria, which ones don’t, because you know there specific set of factors under it. But at the same time as we progress there might be a need for a further funding but again at this point that’s – we are working with what we have.

Okay. And to switching gears, can you remind us of what the cap rate was for Traditions of Durham?

Sure. So the going in cap rate for that property was 6.6%.

6.6%. Okay. Thank you.

Thank you. The following question is from Yash Sankpal from CIBC. Please go ahead.

Just on the transaction cost, the number was little bit big in the quarter, was it entirely related to the Oshawa acquisition or was there something?

Correct. That was the biggest part of it, Yash, that’s correct.

Okay. Thanks.

Thank you.

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

Thank you everyone for joining the call today. We really appreciate your support over the past year and we really hope that you will be able to join us at our AGM on April the 19th. So thanks again and have a great day.

Thank you. That concludes today’s conference call. Please disconnect your lines at this time. And we thank you for participation.