Sienna Senior Living Inc.

Sienna Senior Living Inc.

April 18, 2016 15:30 ET

Sienna Senior Living Announces Significant Expansion in British Columbia and $120 Million Bought Deal Public Offering of Subscription Receipts

MARKHAM, ONTARIO--(Marketwired - April 18, 2016) -


  • Acquisition of best-in-class seniors housing portfolio in British Columbia ("BC")
  • Strategic acquisition of a 50% ownership interest in a BC management company
  • Options to acquire ownership interests in two newly built assets at a discount to fair market value
  • Immediately accretive to Adjusted Funds from Operations ("AFFO") per common share

Sienna Senior Living Inc. ("Sienna" or the "Company") (TSX:SIA) announced today that it has entered into an agreement (the "Acquisition Agreement") to acquire (the "Acquisition"):

  • a portfolio of seniors housing assets in BC, consisting of two high-quality private-pay independent living ("IL") retirement residences (the "IL Properties") and six best-in-class long-term care ("LTC") residences (both private-pay and funded) providing LTC, IL and assisted living ("AL") (the "Baltic Properties" and together with the IL Properties, the "Acquired Properties");
  • options to acquire up to a 100% interest, at a discount to fair market value, in two additional newly built seniors housing assets (the "Option Properties"); and
  • a 50% interest in Pacific Seniors Management General Partnership ("PSM"), the current manager and operator of the Baltic Properties (the "Management Interest" and together with the Acquired Properties and the Option Properties, the "Purchased Assets").

The aggregate purchase price for the Purchased Assets is approximately $255 million (the "Purchase Price"), inclusive of $1 million for excess land having future expansion potential. The implied capitalization rate on Net Operating Income ("NOI") for 2016 is approximately 7%.

The IL Properties consist of 223 IL suites, in aggregate, in two retirement residences known as Mayfair and Rideau Manor. Mayfair is located in Port Coquitlam, one of the fastest growing municipalities within the Greater Vancouver Area ("GVA"). Rideau Manor is located in the prominent Brentwood area, next to Brentwood Town Centre, in the heart of Burnaby.

The Baltic Properties consist of an aggregate of 761 beds in six LTC residences known as Brookside Lodge, Lake Country Lodge, Lakeview Lodge, Mariposa Gardens, Ridgeview Lodge and The Cascades and are well located in BC. The Baltic Properties are comprised of 70 IL suites, 55 AL suites and 636 LTC beds. Approximately 20% of the beds comprising the Baltic Properties are private-pay and approximately 80% are funded through the BC Regional Health Authorities. The average age of the Baltic Properties is approximately 8 years and the occupancy was approximately 98% as at March 31, 2016.

The acquisition of the Management Interest represents an important partnership with the holder of the other 50% interest in PSM (the "PSM Partner"). The PSM Partner's principals are highly respected leaders within the seniors housing sector in BC, with a successful track record of designing, developing and operating seniors housing assets. The PSM Partner will continue as the managing partner of PSM initially, with the management responsibilities transitioning to Sienna over a two year period following closing of the Acquisition. Subject to certain earlier purchase rights, Sienna will be required to purchase the remaining 50% interest in PSM from the PSM Partner in June 2019 for a specified cash purchase price of approximately $1.7 million, subject to certain adjustments.

"Today's announcement is an example of Sienna's focus and patience in the pursuit of accretive acquisitions that improve the quality of our portfolio, enhance our growth profile and drive long-term value creation for our shareholders," said Lois Cormack, President and Chief Executive Officer of Sienna. "We are particularly excited about the prospect of partnering with the PSM Partner and the new growth opportunities that will result from this partnership. The transaction represents a rare opportunity to expand our presence and management platform in BC, and is in line with our strategy to diversify the types of seniors housing in our portfolio."

The Option Properties consist of an aggregate of 374 beds in two newly built state-of-the-art LTC residences known as Nicola Lodge and Glenmore Lodge. Approximately 10% of the beds comprising the Option Properties are private-pay and approximately 90% are funded through the BC Regional Health Authorities. Nicola Lodge located in Port Coquitlam, commenced operations in April 2016. Glenmore Lodge, located in Kelowna, is expected to commence operations in the second quarter of 2017. The Option Properties are a result of recent awards of contracts for funded beds to the PSM Partner and incorporate design elements and features generally found only in private-pay retirement residences. Sienna has the option to acquire up to a 100% interest in each of the Option Properties, with the purchase price for the initial 50% interest being at a discount to fair market value. In respect of each such property, Sienna may acquire an initial 30% interest upon occupancy stabilization plus an additional 20% interest following the fifth anniversary of the closing of the first option. Sienna will have a further option to acquire the remaining 50% interest at fair market value following the tenth anniversary of the closing of the first option.

"We look forward to working with Sienna to capitalize on the significant growth opportunities available to us," said Jerry Nowee, Managing Partner of the PSM Partner. "Our complementary cultures, commitment to our communities and shared vision for seniors living make Sienna and us excellent partners. We look forward to continuing our strong partnership with BC Health Authorities, and to a long-term relationship with the Sienna team," added Will McKay, Managing Partner of the PSM Partner.


Strategic Expansion of Sienna Portfolio

The acquisition of the Acquired Properties increases Sienna's retirement suites by 29% and LTC beds by 11%, further enhancing the quality of the Company's portfolio and solidifying Sienna's position as a leading seniors housing provider in key markets in Canada. In particular, the Acquisition represents an opportunity for Sienna to increase its presence in the attractive BC seniors housing market with high-quality assets and scale for growing current and future operations. The Acquisition will more than triple Sienna's bed count in the province, meaningfully enhancing Sienna's geographic diversification and contributing to NOI growth (with the total BC contribution to Sienna's bed count increasing from 6% to 17% as a result of the addition of the Acquired Properties).

Significant Expansion into Private-Pay

The Acquired Properties include an aggregate of 377 private-pay suites/beds, accounting for 38% of all suites/beds in the Acquired Properties. The acquisition of the Acquired Properties increases Sienna's private-pay accommodations by 31%, and aligns with the Company's strategic focus on diversification and growth in key markets in Canada. Upon closing of the Acquisition, Sienna will own five private-pay retirement residences in the GVA. Further, the Baltic Properties have 154 private-pay beds, furthering Sienna's goal of meeting the growing demand for the IL, AL and LTC options as a diversified seniors housing provider.

Immediately Accretive on Debt Neutral Basis

The Acquisition is immediately accretive to Sienna's AFFO per common share (a "Share") on a leverage neutral basis. Accretion is expected to increase following the initial year after the Acquisition based on projected same property growth in NOI.

Strong Local Management Platform

Sienna's ownership of PSM, in partnership with the PSM Partner, will provide the Company with the opportunity to leverage an established operating platform and existing relationships with local stakeholders, including the BC Regional Health Authorities. The PSM Partner, a well-respected seniors housing operator and developer, will initially continue as the managing partner of PSM, with Sienna assuming the management functions over a two year period following closing of the Acquisition.

Generates New Meaningful Growth Opportunities

The Baltic Properties currently contain 154 private-pay beds that offer near-term organic growth potential. The excess land at three of the Baltic Properties represents additional development potential for 171 new private-pay suites/beds. The acquisition of interests in the Option Properties, upon occupancy stabilization (at a discount to fair market value), is expected to add to the value creation for Sienna shareholders. The establishment of a relationship with the PSM Partner is expected to lead to further growth opportunities for Sienna, including development of new properties. The PSM Partner has a successful track record of identifying attractive development opportunities and winning RFP processes, and an excellent reputation in the BC seniors housing sector for quality of care, service delivery expertise, knowledge of the market and regulatory processes. Sienna will have the opportunity to participate in future RFP opportunities awarded to the Baltic Partner on a 50-50 basis. In addition, the PSM Partner, through PSM, has extensive experience in the development and lease-up of LTC properties, and represents a strong partner for Sienna in the BC market.


The IL Properties are high-quality, private-pay retirement residences located in rapidly growing markets within the GVA. Sienna expects to capitalize on the growing demand for quality seniors housing in these markets and the efficiencies available through operating the IL Properties together with its three currently owned luxury IL retirement residences in the GVA. All Baltic Properties have been developed or substantially rebuilt by the PSM Partner or its affiliates and are operated by PSM. The Baltic Properties have been built, completely renovated, or significantly expanded in the last 10 years and consistently maintain occupancy in the high 90%'s producing stable cash flow. These properties are built to the highest quality standards, featuring an intimate and warm design focusing on small, residential neighborhoods within each property.

The following table summarizes key information about the Acquired Properties:


Suites / Beds by Type Private-Pay
Suites / Beds
Year Built /

Expansion Beds
Mayfair Port Coquitlam 85 - - 85 85 2000 98.8 -
Rideau Manor Burnaby 138 - - 138 138 1973 87.7 -
IL Total 223 - - 223 223 91.9 -
Brookside Lodge Surrey - - 116 116 14 2009 98.3 -
Lake Country Lodge Winfield 41 - 49 90 45 2002 / 2008 94.4 -
Lakeview Lodge West Kelowna - - 114 114 14 2013 99.1 134
Mariposa Gardens Osoyoos 26 10 109 145 31 2008 95.9 19
Ridgeview Lodge Kamloops - - 129 129 23 2008 97.7 18
The Cascades Chilliwack 3 45 119 167 27 1986 / 2005 / 2008 98.8 -
Baltic Total 70 55 636 761 154 97.5 171
Grand Total 293 55 636 984 377 96.2 171


(1) Occupancy as at March 31, 2016.

The Option Properties are the most recent developments by PSM Partner or its affiliates following successful competitive RFP processes pursuant to which funding contracts were awarded by the local BC Regional Health Authorities. The Option Properties are expected to reach full occupancy within four to six weeks following the initial move-in date.

The following table summarizes key information about the Option Properties:

Beds Private- Expected Option Exercise Dates /
Property Location IL AL LTC Total Pay Beds Move-In Date Ownership Interest
Nicola Lodge Port Coquitlam - - 256 256 18 April 2016 30% in 2016; 20% in 2021; 50% in 2026
Glenmore Lodge Kelowna - - 118 118 18 May 2017 30% in 2017; 20% in 2022; 50% in 2027
Total - - 374 374 36


The Acquisition and related transaction costs are being financed through a combination of: (i) the assumption of approximately $137 million in existing mortgages, at a weighted average interest rate of 3.9% and a weighted average term to maturity of 5.5 years; (ii) the issuance of $10 million of Shares to an affiliate of the Baltic Partner, at the same price as the offering price for the Subscription Receipts (the "Consideration Shares"); and (iii) net proceeds of the $120 million bought deal public offering (the "Offering") of Subscription Receipts described below. Following the closing of the Acquisition, the Company's Debt to Gross Book Value ratio is expected to remain unchanged at approximately 55%. The affiliate of the Baltic Partner that will hold the Consideration Shares has agreed to a 12 month lock-up on the Consideration Shares.


Sienna has completed extensive financial and legal due diligence on the Acquisition that is customary for a transaction of this size and nature, including reviewing and commissioning property condition reports and environmental assessments on the Acquired Properties, as well as a quality of earnings report from a major accounting firm.

The Purchase Price payable for the Acquisition is subject to customary post-closing adjustments. The Acquisition Agreement contains representations and warranties customary for transactions of this nature, certain of which are qualified as to materiality and knowledge and subject to reasonable exceptions. The Acquisition Agreement provides that $2 million will be set-off from the Purchase Price to be spent at the Company's discretion on capital expenditures for the Acquired Properties.

Completion of the Acquisition is subject to customary closing conditions for transactions of this nature, including the receipt of all necessary third party (including lenders) consents and regulatory approvals, including approvals from the BC Regional Health Authorities and pursuant to the Competition Act (Canada). Sienna expects the completion of the Acquisition to occur in the third quarter of 2016.


Sienna has entered into an agreement with a syndicate of underwriters led by TD Securities Inc. to sell, on a bought deal basis, 7,590,000 Subscription Receipts at a price of $15.85 per Subscription Receipt (the "Offering Price") for gross proceeds of approximately $120 million. The underwriters have been granted an over-allotment option (the "Over-Allotment Option") to purchase up to an additional 1,138,500 Subscription Receipts at the Offering Price, exercisable, in whole or in part, no later than 30 days after the closing of the Offering. If the Over-Allotment Option is exercised in full, the gross proceeds will be approximately $138 million.

Each Subscription Receipt represents the right to receive one Share, at no additional consideration on the closing of the Acquisition. In addition, while the Subscription Receipts remain outstanding, holders will be entitled to receive cash payments ("Dividend Equivalent Payments") per Subscription Receipt equal to, and paid on the same date as, dividends declared by Sienna on each Share. Such Dividend Equivalent Payments will have the same record date as the underlying Shares. It is expected that the first Dividend Equivalent Payment purchasers under this offering will be eligible to receive will be payable on June 15, 2016 to holders of record on May 31, 2016.

The net proceeds from the Offering will be deposited in escrow pending the closing of the Acquisition (the "Acquisition Closing"). The Acquisition Closing will be deemed to occur upon the closing of a substantial part of the Acquisition in which the purchase price attributable to such Acquisition Closing represents at least 80% of the Purchase Price or approximately $204 million. If the Acquisition Closing occurs on or before November 30, 2016, the escrowed proceeds from the offering of Subscription Receipts will be released to the Company and used by the Company to pay a portion of the Purchase Price. If the Acquisition Closing does not occur by November 30, 2016, or the Acquisition is terminated at an earlier time, or Sienna advises the underwriters or announces to the public that it does not intend to proceed with the Acquisition, holders of the Subscription Receipts will receive the full purchase price of such Subscription Receipts plus any unpaid Dividend Equivalent Payments owing to holders of the Subscription Receipts.

On or before April 22, 2016, the Company will file with the securities commissions or other similar regulatory authorities in each of the provinces and territories of Canada, a preliminary short form prospectus relating to the issuance of the Subscription Receipts. Closing of the Offering is expected to occur on or about May 6, 2016, subject to Toronto Stock Exchange and other necessary regulatory approvals.

The securities offered pursuant to the Offering have not and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act. This news release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction.


TD Securities is acting as exclusive financial advisor and Goodmans LLP is acting as legal advisor to Sienna in connection with the Acquisition.


Sienna Senior Living (TSX:SIA) is one of Canada's largest owners of seniors housing and the largest licensed long-term care provider in Ontario. The Company's 8,000 employees are dedicated to helping you live fully, every day in each of its three lines of business: retirement living, third party management services and long-term care. The Company owns and operates 35 long-term care homes and 11 retirement residences, representing a combined 6,939 beds/suites across Ontario and British Columbia. For more information, please visit


This news release contains forward-looking information based on management's current expectations, estimates and projections about the future results, performance, achievements, prospects or opportunities for Sienna. Forward-looking statements include: the Company's intention to complete the offering, successful closing of the Acquisition; the expected benefits of the Acquisition to Sienna shareholders, including that the Acquisition is anticipated to be accretive to the Company's AFFO; that accretion is expected to increase following closing of the Acquisition based on projected same property growth in NOI; expected future growth and development opportunities; the financing of the Acquisition through the assumption of existing debt, the issuance of Shares and cash derived in part from a portion of the proceeds of the public offering; and the expected Debt to Gross Book Value ratio following the closing of the Acquisition. Forward-looking statements are based upon a number of assumptions and are subject to a number of known and unknown risks and uncertainties, many of which are beyond our control, and that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking statements.

The forward-looking statements in this news release are based on information currently available and what management currently believes are reasonable assumptions, including the funding of long-term care facilities by government entities. Material factors or assumptions that were applied to drawing a conclusion or making an estimate set out in forward-looking statements include: the views of management of Sienna regarding current and anticipated market conditions; expected government priorities and spending; absence of material changes to government and environmental regulations affecting Sienna's operations; management's views as to demographic trends; Sienna's ability to maintain good relationships with unionized employees; the successful completion of the Acquisition and the financing thereof, and the financial and operating attributes of Sienna and the Purchased Assets as at the date hereof.

Although management believes that it has a reasonable basis for the expectations reflected in these forward-looking statements, actual results may differ from those suggested by the forward-looking statements for various reasons. The assumptions, risks and uncertainties described above are not exhaustive and other events and risk factors could cause actual results to differ materially from the results and events discussed in the forward-looking statements. These forward-looking statements reflect current expectations of Sienna as at the date of this news release and speak only as at the date of this news release. Sienna does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.

There can be no assurance that forward-looking information will prove to be accurate, as actual results could differ materially from those expected, estimated or implied by such statements. Accordingly, readers should not place undue reliance on forward-looking information. These factors are more fully described under "Risk Factors" in the short form prospectus, in the "Risks and Uncertainties" section of Sienna's MD&A for the year ended December 31, 2015 and in materials filed with the securities regulatory authorities in Canada from time to time, including, but not limited to, the Company's most recent Annual Information Form.


Certain terms used in this news release, such as AFFO and NOI, are not measures defined under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. AFFO and NOI should not be construed as alternatives to "net income (loss)" or cash flow from operating activities determined in accordance with IFRS as indicators of the Company's performance. The Company's method of calculating AFFO and NOI may differ from other issuers' methods and accordingly, these measures may not be comparable to measures used by other issuers. The Company believes that NOI and AFFO are useful in the assessment of its operating performance and that these measures are also useful for valuation purposes and are relevant and meaningful measures of its ability to earn and pay dividends on its Shares. Examples of reconciliations of NOI and AFFO to the most directly comparable measure calculated in accordance with IFRS are provided in the Company's MD&A for the year ended December 31, 2015.


Copies of related documents, such as the preliminary short form prospectus, underwriting agreement, subscription agreements and marketing materials will be available on SEDAR ( as part of the public filings of Sienna and on Sienna's website at

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