Lois Cormack - President and Chief Executive Officer Nitin Jain - Executive Vice President and Chief Financial Officer

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

Ladies and gentlemen, welcome to Sienna Senior Living Inc.’s Q2 2016 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 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 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, Paul. Good morning and thank you for joining our call this morning. With me on the call is Nitin Jain, our Chief Financial Officer. I'm going to begin by reviewing some of the key highlights for the year-to-date. We'll touch on our strategic objectives and growth plan. Nitin will then discuss the financial results in more detail. To start off, we are very pleased to report another strong quarter of financial and operating results for Sienna. During the quarter, we continued to execute on our strategic objectives, which are strengthening our operating platform, building our brand recognition, maintaining a strong balance sheet and growing the company. Throughout our remarks, we will touch on some of the progress that we continue to make on these objectives. I’ll also refer you to Pages 4 to 6 of our MD&A, which summarizes our key achievements in each of these four areas. And moving on to Slide 5, we are very pleased to report that we had a 5.2% increase in same property net operating income for the quarter and 5.6% increase year-to-date. As well as, 7.5% increase in diluted OFFO per share for the quarter and a 9.5% increase year-to-date. Now moving on to our operating result from Slide 6, we continued to experience strong occupancy for our retirement residences, finishing the quarter with overall occupancy of 93.5%. This is up 4.7% over the second quarter of last year and is up 2% compared to Q1. Additionally, same property net operating income for our retirement residences was up 19.3% over the same period last year. For long-term care, same property net operating income increased 1.2% over the prior year. We believe that this strong year-over-year growth in net operating income is attributable to our continued focus on improving the resident experience, strengthening our operating platform, and building our brand recognition in every community that we serve. On August 2nd, we were very pleased to announce the closing of our $255 million BC expansion, which includes a portfolio of eight high-quality assets, all situated in great locations throughout British Columbia. Additionally, as a result of this acquisition, we were very pleased to welcome over 1,300 dedicated and experienced team members to the Sienna team. This grows our workforce by approximately 20%. As part of this agreement, Sienna also acquired a 50% ownership interest in Pacific Seniors Management. This is a very well respected management company and we now have a local office to support our operations in Western Canada. Sienna also has the option to acquire ownership interest in two newly built seniors’ residences out of discount to fair market value. We believe that this transaction represents a great opportunity to leverage a strong operating platform, a development partner, and relationships with local stakeholders. This expansion has increased our retirement suite by 29% and funded beds by 11%, as fully seen on Slide 11. Further solidifying Sienna’s position as a leading seniors living provider in key markets in Canada. We also continue to expect that this acquisition will be immediately accretive to OFFO per share and AFFO per share on a leverage neutral basis. I will now turn the call over to Nitin for our financial summary.

Thank you, Lois and good morning everyone. Before I begin, please note that you’ll find a more fulsome discussion of our results in our MD&A and financial statements for the period, which are posted on SEDAR and can also be found on our website siennaliving.ca. I will start on Slide 13. Net operating income for the second quarter of 2016 was $22.6 million, representing an increase of $1.6 million, or 7.7% compared to the same period last year. And same property NOI increased by $1.1 million, or 5.2% over the same period last year. Our same property long-term care NOI had stable performance and grew by 1.2% for Q2, 2016 versus the same period last year. Our retirement dividends saw another strong quarter which strong same property NOI growth of 19.3% over Q2, 2015, driven by strong occupancy gains. Moving to Slide 14, in the second quarter of 2016, diluted OFFO per share was up $0.02 or 7.5% and diluted AFFO per share was up $0.03 or 9% over the second quarter of 2015. These increases are attributable to the strong year-over-year operating results and the retirement acquisition at the end of 2015. Our Q2 2016 administrative expenses were $4.5 million, a decrease of 300,000 compared to Q2, 2015 primarily due to one-time rebranding cost recorded in the prior year. Moving to our financial position Slide 15, at the end of Q2, 2016, our debt to gross book value was 53.5%, which is 190 basis point below our second quarter of 2015 metrics. The decline was driven by voluntary repayments to what 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 20 basis points from 3.3% at the end of Q2 2015 to 3.5% at the end of Q2 2016. Sienna continues to be in a healthy financial position and remain committed to maintaining a strong balance sheet and liquidity. During the quarter, we completed the sale of Preferred Healthcare Services on April 28, 2016, for total cash proceeds of $16.5 million. Moving to Slide 17, as Lois mentioned, we are very pleased with the completion of our $255 million BC expansion. To finalize the acquisition, we launched a $120 million bought deal public offering of subscription receipts on April 18, 2016, with an over-allotment option of 15%, which was fully exercised for total proceeds of $138 million. A total of $8.8 million subreceipts were issued and the holder of these receipts received a total of $1.2 million of dividend equivalent payments in Q2, 2016. As a result of the completion of acquisition, each outstanding receipt was automatically exchanged for one common share of the company, resulting in the issuance of $8.8 million common shares. Sienna also assumed approximately $135 million in existing mortgages at a weighted average interest rate of 3.9% with a weighted average term to maturity of 5.2 years. In addition, Sienna issued $10 million of shares to the principal of Baltic Investment Company. This acquisition is immediately accretive and would add $8 million of NOI in 2016. Annually, the NOI contribution would be approximately $18 million. After the close of this transaction on August 2, 2016, the company’s debt to gross book value was approximately 53%. This includes the equity raise through the over-allotment option. With that, I would like to turn it back to Lois.

Thank you, Nitin. Overall, we believe that our results combined with the closing of the BC acquisition demonstrates our ability to execute on our strategic objectives and continues to position Sienna as a leading provider in the seniors living sector. As we move forward, we expect to continue to experience organic growth through occupancy, rate increases, and disciplined cost management, in addition the 377 private-pay suite acquired with our recent acquisition. The second component of our growth strategy is development. We look forward to exploring development opportunities with our BC partner as we look to continue to expand our presence in key markets in British Columbia. Also, having received ministry approval, we are proceeding to upgrade one of our long-term care homes in Ontario from Class C to new Class A beds. With respect to acquisition, we continue to be strategic and disciplined in our approach. We’ve remained focused on executing and integrating our strategic acquisition and growing our portfolio in key markets in Canada. We believe that these previous achievements along with the continued strengthening of our operating platform positions Sienna very well for future opportunities. By continuing to focus on executing the company’s strategy, we are confident that 2016 will be another strong year for Sienna and its shareholders. Thank you all for your participation on the call today. And Nitin and I will be pleased to take your questions.

Thank you. We will now take questions from the telephone lines. [Operator Instructions] The first question is from Jonathan Kelcher from TD Securities. Please go ahead. Your line is open.

Thanks, good morning.

Good morning, Jonathan.

The first question just on the - I guess, the retirement home operations. Your occupancy, now you are up at 93.5%. Would you view that as basically stabilized or do you think there is opportunity to drive that higher?

Good morning, Jonathan. Yeah, we are - that’s pretty much where we expect to be overall. As you know in this business, there is some seasonal variation in occupancy. So, if you look at a total year, we would expect to be pretty much consistent with where we ended at the end of ‘15.

Okay. So, and I guess then the year-over-year growth in the strong same property NOI that if I’m just looking back at occupancy that we would expect that to slow in Q3 this year and you’re not expecting 20% for the year?

Right, Jonathan. The 19.3% in Q2, as we’ve stabilized, that is going to slow down. Yeah, you should not expect 19% growth for the balance of the year. As Lois pointed out, where we ended the last year, we believe our average occupancy would be in the range of where we are today. So, similar growth to what we - if you average that over the 2015, whatever number it comes out, I think that would be the right way to use it.

Okay. And then just secondly, the Nicola property in BC, is that stabilized?

Yes, it is.

Okay and so you now have the option to acquire that. Is that something we could expect to see in Q3 or Q4 this year?

Yeah, we are very interested in these option properties. They are great locations, really nice assets. So, it is our intention to exercise. We’re just in the process of undergoing the due diligence.

Okay. Thanks. I’ll turn it back.

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

Thank you and good morning. My question is just on the Class C rebuilt for the 2200 beds. It didn’t seem like that there was any progress made from this quarter from last. Is that a fair assessment?

Yes, that’s right, Michael. There is no further directions, although we believe that the ministry now has fully staffed their office and has their processes in place. So, we do expect over the coming six months, year that we’ll get some further traction on this program and we do expect that there will be good opportunity for us as we look at which ones get approved and which locations we will be doing some thinking about seniors’ campuses.

And your - are you - do I detect a little bit of optimism in terms of their flexibility and their financial incentives?

I wouldn’t say that anything has changed with the model itself, just I think that the approval process and so on, I think the processes are now in place or getting in place that we would expect further traction on that program in the coming months.

Okay. Okay. And just switching gears, if we go to the retirement homes, now with occupancy hitting stabilization, what type of rental growth would you expect over the next few years? What percentage per year?

Yeah, it varies community by community. Overall, we would say 2% to 3%.

Two to 3%. Okay, thank you.

Thank you, Michael.

Thank you. [Operator Instructions] The next question is from Yash Sankpal from CIBC. Please go ahead.

Good morning.

Good morning, Yash.

And the first question is for Nitin. You had a tax shield item in the quarter. Can you maybe explain that and how much more of that should we expect in the future?

Sorry, Yash, I think you had caught me by bit of a surprise, Yash. So, I’ll have to get back to you on that answer. Is that a specific tax yield that you are referring to in this quarter or is it something that is –?

It’s AFFO item. It’s there I think, but we can chat offline.

Okay. Thank you.

And now this is for Lois. Your retirement home margins were new high at 46.7%. Was that anything one-time or do you think you can achieve similar margins in the future?

Yeah, I would say sort of if you look at ‘16 year-to-date would be what we would expect going forward.

Okay, thanks. And, Lois, maybe you could provide some color around acquisition environment and cap rates that you are seeing right now across the country?

Well, I can’t really comment on any specific acquisition or transaction activity other than to say that we believe that this sector is a good place to be and there is always going to be further consolidation opportunities in the space.

I mean I’m sure you saw the HCN sold on Alberta portfolio. Did you guys take a look at it?

We can’t comment on that, Yash.

All right. Okay, thank you.

Yash, I got your question. This is the tax benefit from a capital loss of 861,000. Is that what you are referring to?

Yes.

Okay. That has to do with the sale of Preferred Healthcare Services business and again I’m happy to talk to you in a bit more detail as needed.

Okay. We’ll chat offline. Thank you.

Thank you. The next question is from Pammi Bir from Scotia Capital. Please go ahead. Your line is open.

Thanks and good morning. Just thinking about the acquisition environment again and just given the size of this transaction that you’ve just closed and I suspect there is going to be a fair bit of work in just ensuring a relatively smooth integration. But what’s your thought on possible other opportunities that could surface that you might transact on or would you say that you are really focused at this point on integrating the existing or the BC expansion?

Well, we are - our team has done a tremendous job on preparing for the integration and that’s well enhanced. We are always looking for strategic opportunities and are well positioned to do that either tuck-in or smaller or larger portfolios. I think we have the ability to do any of that and I can’t really comment on any specific acquisition opportunity other than to say that we are always looking for things that are strategic and sit with our objectives.

Okay. Maybe just thinking about the retirement home portfolio again, can you comment on what you are seeing from a supply standpoint? You’ve obviously had some great traction from an occupancy perspective in the portfolio. But given that momentum, are you starting to see supply new starts in some of your markets? Has that started to accelerated yet?

In some markets - there is going to be supply coming on stream in the next couple of years in some of the markets that we are in.

Sorry, Lois, can you maybe be a little more specific like which markets are you seeing that pace?

Sorry, I think - so sorry, we have a couple of communities there and there is activity in that market for future development specifically.

And in Ontario anything or?

In Ontario there is nothing right now on our radar. Specific Oshawa, there is always activity going on there. Kingston, there is some activity plan. So, it varies by community, but I would say that there is always new product coming on or in the works in any community.

Okay. Thanks very much.

Thank you.

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

Well, thank you, Paul and just I wanted to thank all of you for joining our call this morning for your ongoing support and wish you all the best for the rest of the summer. Hope you get some time to enjoy. 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.