Siennanior Living Inc Aktie

Ladies and gentlemen, welcome to Sienna Senior Living Incorporated's First Quarter 2026 Conference Call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer; and David Hung, Chief Financial Officer and Executive Vice President, Investments of Sienna Senior Living Inc.

Please be aware that certain statements or information discussed today are forward-looking, and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to forward-looking information and Risk Factors section in the company's public filings, including its most recent MD&A and AIF for more information. You may also find more fulsome discussion of the company's results in its MD&A and financial statements for the period, which are posted in the SEDAR+ and can be found on the company's website, siennaliving.ca.

Today's call is being recorded, and a replay will be available. Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides, which accompany the host's remarks on the company's website under Events and Presentations.

With that, I will now turn the call over to Mr. Jain. Please go ahead, Mr. Jain.

Thank you, Tina. Good morning, everyone, and thank you for joining us today. Sienna's growth momentum continued in the first quarter of 2026. We started the year with strong organic growth for the 13th consecutive quarter and continued to expand through acquisitions, including our most recent announcements of the purchase of a recently opened Long-Term Care home in the Greater Toronto Area and a retirement residence in the Ottawa region.

We're also progressing well with our Long-Term Care redevelopments and have been successful in sourcing land for future developments in the GTA. Each of these achievements is supporting Sienna at a compelling time in senior living. The sector remains exceptionally strong, driven by the fast-growing demand from an aging population, constrained near-term supply and minimal exposure to the current geopolitical volatility.

During the first quarter, both operating platforms delivered strong results. Same-property NOI increased by 15.8% in the Retirement Segment and 1.7% in Long-Term Care. Excluding one-time items in both years, our Long-Term Care segment delivered 6.7% same-property NOI growth. Key drivers of the double-digit increase in the Retirement Segment was the year-over-year occupancy increase, continued rental rate growth and additional care revenue. Average same-property occupancy was up 180 basis points year-over-year and reached 94.7% in the first quarter. This was supported by a 20-basis-point margin growth. Quarter-over-quarter, occupancy remains flat compared to Q4 of 2025, largely as a result of typical seasonal trends and harsher-than-usual winter conditions in many of our key markets.

Our robust sales platform and focused marketing campaigns were supporting our year-over-year growth. The significant increase in tours at a recent national open house in February generated nearly 500 new leads and reflects the broad reach of our marketing and sales campaigns. We also maintain a robust focus on hospital outreach and excellent relationships with health care partners in the local communities where we operate. All of these initiatives are expected to drive strong lead generation and future move-ins. An additional key driver behind the strong performance of our retirement operations is higher care revenue. This is a result of our new Aspira wellness program with more efficient processes, improved staffing models and consistent care offerings. The program was launched in 2025 and has led to an approximate 25% increase in care revenue.

With respect to Sienna's Long-Term Care operations, fully occupied homes with growing waitlists, higher revenue from private accommodations and government funding increases all added to the strength of these results. Sienna's government-funded Long-Term Care operations add significant value to our business and provide stability given that they're largely insulated from market volatility or economic uncertainty.

We continue to be active on acquisition front with $188 million of transactions closed or under contract to date in 2026. We increased the ownership interest in 2 of Sienna's majority-owned properties in the Greater Toronto Area and in Kelowna and finalized the purchase of The Bartlett, 129-suite retirement residence in the Greater Toronto Area. In addition, we entered into 2 purchase agreements at the end of last week, including Rockland Manor, our 160-suite retirement residence in the Ottawa region and Ballycliffe, a newly developed 224-bed Long-Term Care community in the Greater Toronto Area. Rockland Manor will be acquired for approximately $41 million with an initial investment yield of 6%.

The gross purchase price for Ballycliffe, which includes the rights to a 25-year-old -- 25-year construction funding subsidy, is approximately $68.3 million and the investment yield is approximately 6.75%. Both properties will be acquired below their replacement cost and financed with cash on hand. They are great examples of the broad range of opportunities available to us to expand our portfolio. Sienna's acquisition pipeline remains strong, and we are confident to maintain a significant pace of acquisitions through the balance of this year.

Moving to redevelopments. We're also advancing our redevelopment pipeline, in particular, in the Greater Toronto Area. We expect to start construction at Sienna's first project in the city of Toronto later this year, where we are redeveloping a 448-bed Long-Term Care community at our existing Glen Rouge site. This is one of several projects in our 1,600-bed pipeline. More than 80% of the pipeline is located in the GTA, where new funding has significantly improved the development fundamentals. We've been actively sourcing land for projects in the GTA that do not have sufficient land at their existing sites. With the recent purchase of a site in Brampton, we're getting closer to our goal of having all lands for every C home project. Each completed redevelopment will modernize and strengthen our Long-Term Care platform and support the continued growth of our business.

Beyond our acquisitions and redevelopments, we remain focused on creating value within our existing portfolio through asset optimization, strategic renovations and general enhancements to our retirement and Long-Term Care platforms. In our Retirement segment, our initiatives are focused on better aligning residences with market demand, exploring alternative property uses or expanding services by adapting them to support seniors as their care needs change. We increasingly apply our expertise in clinical care at our retirement platform. Our updated wellness program increases residents access to in-house wellness and care, helps improve their quality of life and allows them to stay in our retirement homes longer.

In Long-Term Care segment, we continue to make improvements to the Circle platform through ongoing input from residents, families and team members. Our Circle approach places residents at the center of everything we do. With initiatives such as the Circle Spa and Circle Cafe, each initiative are designed to elevate the resident experience, and we see the impact reflected in resident satisfaction surveys and our consistently strong accreditation results.

Moving to our team members. As we continue to expand, the timely integration of each new community in our operating platform remains a top priority. Delivering an exceptional resident experience from day 1 begins with our team members. With approximately 15,500 employees, we recognize the importance of investing in programs that foster a strong culture of ownership and engagement. Our initiatives range from town halls that foster learning and connections, leadership development to recognition and share ownership programs through which shares have been awarded to over 12,000 team members. We are also investing in our team member health and well-being and have introduced a new employee and family assistance program with greater access to mental health, wellness and work-life support.

Each of these initiatives play a role in the continued reduction in turnover which reached a record low of less than 20% in 2025. Our initiatives also resulted in the fifth consecutive year of increased team member engagement and helped reduce Sienna's agencies costs, which are below 1% of total labor cost. We're extremely proud of these achievements, which put us in a strong position to attract and retain the best in Canadian senior living.

With that, I'll turn it over to David for an update on our financial results.

Thank you, Nitin, and good morning, everyone. I will start on Slide 11 for financial results. In Q1 2026, revenue on a proportionate basis increased by 17.3% year-over-year to $286.3 million. This increase was largely due to acquisitions, occupancy and rental rate growth as well as increased care revenue in the Retirement segment. Adding to the increase were the contributions from our Long-Term Care platform, including higher flow-through funding for direct care, increased private accommodation revenues, $1.1 million in retroactive funding from the BC government and additional revenues from acquisitions and developments completed in 2025. Same-property NOI increased by 7.9% to $47.4 million in Q1 2026, including by 15.8% in our Retirement segment and by 1.7% in the Long-Term Care segment.

In the Retirement segment, same-property NOI increased by $3 million in Q1 2026 compared to last year, largely as a result of improved occupancy, rate growth and higher care revenues. Combined with our strict focus on operating expenses, the year-over-year operating margin improved by 280 basis points. In the Long-Term Care segment, same-property NOI increased by $1.3 million. Continued improvements in private occupancy and government funding increases were the key drivers behind the year-over-year growth.

Our Q1 results include onetime items relating to prior years, including retroactive funding from the government of British Columbia in 2026 and WSIB refunds in 2025. Excluding these onetime items in both years, same-property NOI would have increased by 10% overall, including by 13.8% in the Retirement segment and by 6.7% in Long-Term Care.

During Q1 2026, operating funds from operations increased by 42.5% to $37.1 million compared to last year, primarily due to higher NOI and lower cash taxes. Adjusted funds from operations increased by 45.1% to $35.1 million compared to last year. The increase was mainly due to higher OFFO and construction funding income for redevelopments completed last year, offset in part by an increase in maintenance capital expenditures. On a per share basis, OFFO and AFFO increased by 21.5% and by 23.5%, respectively, in Q1 2026. Sienna's Q1 2026 AFFO payout ratio was lowered to 68.5% compared to 86% in Q1 2025. This improvement highlights Sienna's strong operating results, the contributions from our completed redevelopments and accretive acquisitions as well as the progressive deployment of capital to fund growth initiatives.

We ended Q1 2026 with a strong financial position, including approximately $557 million in liquidity and nearly $1.5 billion of unencumbered assets. At approximately 37%, our net debt to adjusted gross book value is conservative and our weighted average cost of debt remains low at 3.9%. Year-over-year, we also further improved Sienna's debt service coverage ratio to 2.6x from 2.4x in Q1 2026. Sienna had approximately $160 million of debt coming due in the next 12 months. Given our access to a broad range of capital, we are confident in our ability to refinance our expiring debt at attractive terms.

With respect to our equity, demand for Sienna shares remained strong. As a result, we were able to fully deploy Sienna's $150 million at-the-market distribution program during Q1, which provides the necessary liquidity to fund our continued growth through acquisitions and developments.

With that, I will turn the call back to Nitin for his closing remarks.

Thank you, David. We believe that our ability to operate and invest across the full continuum of care continues to differentiate Sienna and gives us a wide range of growth opportunities from private pay independent living to government-funded long-term care and from acquisitions to redevelopments. Our strategy supports our growth initiatives at a time demand for senior living continues to grow while supply remains constrained. Against this backdrop, we grew our assets by approximately 30% last year, and the momentum continues in 2026 with nearly $200 million of acquisitions closed or under contract and a $250 million redevelopment project starting later this year.

Yesterday, we announced the renewal of the ATM program, which gives us the opportunity to issue another $150 million of equity to grow and scale our platform. With the strong support of our investors, we remain extremely selective when considering opportunities to expand. We will continue to stay disciplined in our approach to raising and allocating capital and will maintain a strong balance sheet. In the near term, our confidence is reflected in Sienna's growth targets for 2026. Excluding onetime items, we expect same-property NOI growth in excess of 10% and occupancy to exceed 95% in the Retirement segment. And in Long-Term Care, we anticipate low to mid-single-digit growth, not factoring in onetime items.

Canadian senior living is performing exceptionally well, and we believe Sienna is ideally positioned to benefit in both the near and long term. With the support of our 15,500 team members who are at the heart of our success, we are confident in our ability to capture the tremendous opportunities ahead. On behalf of our entire team and our Board of Directors, I want to thank all our shareholders and all of you on this call for your continued support.

Tina, we can open now for questions.

[Operator Instructions] Our first question is from the line of Lorne Kalmar with Desjardins.

Maybe just touching on the announcement around defunding the third and fourth beds. I was wondering how many of those -- about 300 that you have, do you think that you can actually have redeveloped by 2030?

That is actually a great question. There is a chance that we can probably redevelop half of them or would be in the process of redeveloping others. The big thing that from our view, what government is focused on is the path for redevelopment of these beds, knowing that if the funding is removed, it will be very hard to continue to run those beds, and it is in no one's interest to close any capacity in Long-Term Care. So our belief is as we continue to build and redevelop, the advocacy from our association and from us would be to continue to keep this funding at least to a sustainable level to keep these homes and beds open.

Okay. And then maybe just sort of sticking on the LTC redevelopment theme here. You announced the purchase of the land in Brampton. Could you maybe give us a little bit of color on exactly what the plans for that site are. And you also mentioned you're getting close to acquiring all the land that you need for your C redevelopment. How many more sites would you need to acquire?

We're down to 2 less sites, which we have to acquire. And at that stage, we would have land for every single C home redevelopment that we have to do. The Brampton site, we just acquired, we have a home a few kilometers from there that we will move there eventually. The project, if everything works well, you're probably in construction 18 to 24 months from now and then 24 months of construction. So your date of 2030 is pretty aligned with what we will do. But we also have other projects. And one of the -- our commitment is that, obviously, we want to expedite Long-Term Care redevelopment, but we would not take significant development risk. In our mind, it's 10% of our asset base. So it's now close to $3.5 billion in assets. So $200 million to $300 million probably in development at any given stage in total. So we'll just manage those things. But we do think there's a path for us to redevelop all of our C homes now, considering there is a robust CFS funding for GTA.

Okay. That's great to hear. And then maybe just one last kind of ticky-tacky one for David. Just on the G&A, I think if you exclude the SOAR and the share-based comp, it was about 21% year-over-year. Could you maybe just give us a little bit of color on if this was a timing issue or if this is sort of a good run rate going forward?

Sure. I can -- happy to answer that. It's a couple of things. First of all, it would -- the growth would include additional headcount as a result of the acquisitions that we made in 2025, normal wage inflation on a year-over-year basis. And we did have some incremental professional fees in the quarter, call it about $0.5 million that would not continue through 2026.

Okay. So effectively, we should kind of reset our G&A expectations based on the 1Q results?

Yes. I think if you normalize for some of the onetime costs within G&A, you could normalize for a set for 2026.

Your next question comes from the line of Jonathan Kelcher with TD Cowen.

Just turning to the retirement operations and on your optimization portfolio, how do you see occupancy growth playing out for that portfolio this year?

Yes, sure. We continue to make good progress on our optimization portfolio. And we do continue to see that it will grow. Our occupancy in that portfolio was around 85%. And as we continue to right size some of the properties within there, we would expect that the occupancy for a couple of those properties will grow towards stabilization. And as that happens, we will move those properties into our same-property portfolio.

Okay. So the target would be to move 1 or 2 of them into same property by next year?

That's correct. That's fair.

Okay. And then on the rate growth you're getting in the retirement portfolio, are you getting much pushback on that? And secondly, can you maybe break down what you're seeing on new leases -- on turnover leases versus what you're seeing on renewal leases?

Jonathan, so for rental rates, we are around, call it, 4% increases. We do quite a bit of education with inflationary increases and what has happened to food cost and utility and everything to explain why our rents are going up. Our goal is to be very disciplined without creating a lot of shocks in the system. So we're not after higher rent increases in 1 year and upsetting every resident that lives with us. I would rather have a steady state for multiple years. And we take the same approach on new leases. It is market dependent. I mean there are some markets where we are seeing higher than 4% increases at a new lease given what has happened in the market. And in some cases, it is closer to the 4%. And in cases where we have optimization portfolio, you might see flat changes because the goal is to build occupancy there rather than increase rate first.

Okay. Fair enough. And then just lastly on the Ballycliffe, the 6.75% investment yield, how does that break down between NOI and construction financing for funding?

Sure. That's a good question, Jonathan. The 6.75% is on the NOI itself. As you know, there's 2 streams of income on Ballycliffe, one being the NOI and one being on the 25 CFS. So the 6.75% is on the NOI. And then on the CFS, we would have -- the way we would have looked at it is based on the present value of that cash flow using a risk-adjusted discount rate.

Okay. So that $6.75 million, is that on the $68 million?

No, it would be on the piece relating to the NOI.

Okay. And what would that piece be? I'm just trying to get how much to add into NOI versus how much to add into AFFO as well.

Yes. I think that maybe the right way to look at that, I mean, you remember that we bought Cawthra Gardens a year ago, and we also bought that at 6.75%. So if you were trying to kind of work through the numbers, you might take Cawthra Gardens as an example and then use that as a good jump off for calculating your NOI.

Your next question comes from the line of Brad Sturges with Raymond James.

Just on your acquisition commentary, you're expecting a significant pace. Do you have a target in mind for what you could achieve this year? And maybe just give a bit more context of what you're seeing in the pipeline beyond what's been announced or closed so far this year.

Brad, I would say -- I would just tweak it and say I think we see good pace, not significant pace. And the reason why that is important is there is a lot of opportunities in the market. There's also a lot of competition. We get our fair share of deals. And our goal is not to overpay. And obviously, I'm saying -- stating the obvious here. But there is a bit of frothiness in some of the deals. And for us, if it doesn't make financial sense, we would rather not grow.

So we don't have a specific target in mind. But what we did last year, which was close to $600 million in acquisitions and $200 million in development and our run rate is towards that. I mean our development is already $250 million for this year, and it's May and we have, call it 1/3 of the year in, and we are at around $200 million of acquisitions. So that could be achievable. It's not a stated target or an outlook, but that could be reasonable, what we might achieve this year.

Okay. I appreciate that. And just on -- my other question would be just on leverage. It's ticked down a little bit below, I guess, what you would suggest as your target. I guess would it be fair to say, given some of the expected acquisition activity going forward and maybe a bit more ramp-up on development, would that normalize back into your target range by -- over the course of the year? Or how should we think about leverage going forward?

Yes, Brad, it would. We would expect our leverage targets to normalize a little bit. Q1 leverage is on the lower side because we issued the $150 million through our ATM. That said, we're going to use the bulk of that proceeds for our recent acquisitions for Rockland Manor and Ballycliffe. So by the end of the year, all else being equal, we would expect that our leverage ratios would tick back up.

Our next question is from the line of Himanshu Gupta with Scotiabank.

So first on LTC, Long-Term Care, I mean, you increased your outlook to low- to mid-single-digit now. So what led to that change?

Sure. Himanshu, there's really 2 reasons. The first one is because our Long-Term Care NOI, we did grow by 6.7% in Q1 if we exclude onetime items. The second is because the government of Alberta announced a 7.25% funding increase. They had originally announced 1.25% and then changed it to 7.25% as a result of the cost pressures that operators were facing throughout the last several years. So we would expect that a good portion of that incremental 6% would flow to the bottom line. And for that reason, we changed our outlook to single to mid-digit growth this year.

That Alberta funding increase, that will be retroactively from April last year, I believe. Have you received any retroactive amount from Alberta yet or that's going to show up in Q2 and onwards?

Yes. We have not received any of the funding yet. They just announced that in April. Some of the increase is going to flow through to wages. Again, the government of Alberta recognized the cost pressures that operators are facing. And we may need to increase wages somewhat. So not all of it would flow to the bottom line, but a good portion of it should. But to answer your question, we have not received any of it yet.

Got it. So that 6% -- 6.7%, whatever you achieved in Q1 was without the Alberta impact. And so you could literally be at this run rate for the rest of the year.

That's right. The 6.7% did not include the funding for Alberta, the funding increase, I should say.

Okay. Moving on to retirement homes. Obviously, seasonal dip in Q1 so far on the occupancy side. Are you feeling -- I mean, as you get into April and May months, are you seeing some glass ceiling here at 95% on an overall portfolio basis? Or based on the lead generation, you think 95%, 96% could be achievable here?

Where we feel confident is that we will get back to 95%. Can we get to 96%? I think that remains to be seen. We saw similar things last year where our occupancy dipped till April, May and then it climbed up. We actually didn't see seasonality early in the year. Like in January, if you would ask us this question, we did not see that. But February, we started to see a decline. So our expectation is we will be 95% plus. I think -- could it get to 96%? I think it's -- I can either -- I can argue either way on that one at this moment, Himanshu.

Yes. That's fair enough. And maybe just on retirement homes, margin expansion looks like tracking ahead of what your full year guidance is in Q1. Was it ahead of your internal expectations as well in Q1, the margin expansion?

That's -- I don't know -- that's a fair question. But I would just say when we saw a dip in occupancy and one of the things we're staying quite focused on is not to give into incentives because that will have significant tail to it, and we saw margin challenges when we buy properties from people who have done incentives. So we'll stay quite focused and only go for incentives in very specific market. Our care has been a big change into our margin because when we started -- our care hours went up significantly, but 2 years back, we actually lost money every time we provided a care hour. So that has been a big change. And then just when you are at 95% plus, you're optimizing the portfolio, the operating team has a good rhythm of making sure the homes are running well. So it really is a combination of those things. But I would say we are not overly shocked where our margin is, and we expect to continue on that trend.

Got it. Last question is on acquisition cap rates. Bartlett at like, I think, 5.75%, Ballycliffe at like 6.75%, they're both kind of in the same market, both kind of newly developed as well. Is 100 basis points the spread between Retirement Home and LTC? And I know there's a funding element to Ballycliffe or LTC, there, I mean, a few nuances to it. But bigger picture, is 100 basis points the right spread between RH and LTC here?

Absolutely. We are -- we have been talking about it for a period of time. There is -- there are hardly any LTC deals. The last 2 public ones were ours. They both were at 6.75%. The Alberta one that we bought last year was really in the same range. And these -- both these properties, the Ballycliffe that we bought and Cawthra Gardens that we bought last year, they had 2 or 3 other bids attached to it. So it wasn't that we were looking to pay 20% above market, and it was -- they were all very, very close. So the reality is it is nearly impossible to find anything below 6.75% from an LTC perspective. And you're right, I mean, retirement is in a 5.5% to 6% range depending on the market.

Tina, do we have a next question?

Your next question is from the line of Pammi Bir with RBC Capital Markets.

Maybe just sticking with the acquisition side. Nitin, I think you mentioned it's getting more competitive. Have you considered maybe perhaps trying to secure like a steady pipeline or cadence of acquisitions by maybe partnering up with some developers to build that -- build sort of a multiyear pipeline of opportunities? Or is that -- is there still enough out there that you can continue to compete effectively on one-off or portfolio deals?

Pammi, great question. I mean we would -- we have considered some partnerships and in fact, have done -- we did one with Reitmans a few years back on a retirement home that we now own together. And eventually, we will buy that. So that would be under consideration, but I wouldn't call it a big strategy. We might -- if we find the right partners, we might get one every year or in 18 months, but it's not a place where we're looking to invest a lot of money. A lot of these forward contracts in our mind have significant risk. 5, 6 years from now, the market could look different.

We're also at a place where we have many markets where we don't really have any properties. So Quebec being one, Alberta, we only have one retirement home that we manage. So we feel there is enough opportunities for us to grow. And at some stage, it probably will become important for us to look at those partnerships, and we might consider it. And the last one, just for us, in many cases, the joint ventures are looking for development dollars. And at this stage, our development focus is in LTC. It's economically quite robust, and it's a need that we have to resolve for our C homes.

Okay. Yes, makes sense. And then just you mentioned in some markets, you don't have exposure, maybe in others, of course, you maybe have more heavier exposure. I'm just curious, we've seen the Competition Bureau scrutinize. It seems like they're scrutinizing deals more. So I'm just curious if you've seen that come up in any of the transactions that you've been involved with or not really the case at this point?

I would maybe just give a broader question -- broader answer to it. There's really -- other than probably one city we can think of, we don't really have any market concentration in any market where we think this would become an issue. I mean we announced a deal -- property in Ottawa, we have 6% or less properties in Ottawa and the threshold is close to 30% plus. So it could be 5x our size in Ottawa. Quebec, we have 0 properties. Alberta, we have 1, which we actually manage and not even own. BC, we only have 4 retirement homes.

So we do believe that we have a lot of tailwinds on our side as it relates to competition, and we could really grow our portfolio without running into significant challenges. Now they might decide -- competition bureau obviously might decide to look into a deal. And if that happens, we will obviously work through it at that stage. But broadly speaking, we feel given our market concentration and our number of properties, this is not going to be a material impact on us for a medium to long term.

Okay. And then just maybe a couple of other ones. Just on the tax recovery in Q1. Just can you maybe just remind us how we should think about the right run rate for 2026 with the accelerated depreciation?

Sure. I think the way that we would think about it is, obviously, in 2024, we didn't have too many acquisitions. In 2025, we did have more. And so I think as you're thinking about 2026, if you exclude the $3.9 million tax benefit, the tax rate should be somewhere between 2024 and 2025 as a percentage of income before taxes. So the cash tax rate would be as a percentage of income before taxes would somewhere be in the range between 2024 and 2025.

Okay. All right. And then just lastly, just in BC, are you anticipating any sort of changes from a cost standpoint in terms of the labor wage, I guess, leveling that you're kind of reviewing at this point? Or anything you can share on that front would be helpful.

Yes, we continue to work both through our association and directly with government. At this stage, we do not feel there will be a material impact on labor. Signs from the government is for all the funded properties, government will fund those things. And for retirement, the reality would be that would have to flow into rent increases. So at this stage, we don't really think there would be a material change, but they continue to provide more information on it.

Okay. And maybe lastly, just on your comments, Nitin, about Quebec and the no exposure. Is that a market where maybe there are some transactions that you're looking at? Or are you sticking to maybe where you already have an existing presence?

That is a market that is of interest to us. When the right opportunity comes along, we would look at those. Obviously, we look at opportunities everywhere and now including Quebec.

Your next question comes from the line of Tal Woolley with CIBC Capital Markets.

Just wanted to talk a bit about funding to start. So fair to say you're not expecting any base rate increase for LTC in Ontario this year?

I wouldn't say that, Tal. I mean we haven't -- the ministry hasn't announced the funding increase for 2026, 2027 yet. We would expect that the funding increase would be in line with inflation.

Okay. And then for these Class C beds, it sort of reminds me a little bit of like what's -- what happened with the Class C licenses. They were all supposed to come off at a cliff in 2025 and then have subsequently been extended. Have the -- have yourselves or the industry thought about given the demand that we can sort of see building for some of these services and appreciating the fact that these beds are maybe not suitable under every circumstance, have you, as an industry, started to think about ways to repurpose these assets like maybe it's for hospital step-downs or transitional care rather than maybe full-time residential? Like is there any thought given around how do you best utilize these assets in the interim?

Great point and completely agree with you. I think there is quite a bit of work going on and different people are doing different things. I'll just use 2 of our examples. Our old property in North Bay that got sold and it is now being used for residential purpose. And the one we had in Brantford, the city bought it, and they're also using it for residential purpose, including some of the places we didn't have -- they couldn't find accommodation for people. So I don't believe that you will see many of these buildings being demolished because there is a demand.

Now in some cases, the buildings are so far gone that you have no other choice. But we have the same interest. We have a couple of buildings where in locations such as downtown where it will be hard to replace. So we'll continue to find ways to see if they can be repurposed for something else.

Okay. And then earlier on the call, you made a comment, I think, saying that you really were losing money per care hour, I think, 2, 3 years ago. Was that like across the entire system? And are we just sort of now beginning to see the contribution of profitability from the care side of the business?

I would just say that, that was the case for us at Sienna, like where we had multiple programs under care and some -- and that was my comment to you was in aggregate and in smaller homes when you provide care because you need to maintain a certain level of staffing, which is going to be very important for us as it relates to quality. We -- at an overall level, either we were breaking even or losing a bit of money. And the big part of it was rather than cutting services, making sure we are, first of all, selling the right care opportunities, putting them in the right package and making sure we have the right staff to deliver that. So it took us some time, and we also didn't want to have major shocks in the system by having significant increases. So we were quite tempered in our approach of how to change some of those rates and change some of those packages. So it took us a couple of years to do that. I do not know if it was a Sienna thing or it was across the industry.

And this is just on the retirement side of the business.

That's absolutely. In Long-Term Care, this is not applicable.

Right. Okay. And then just lastly, you still -- you've announced a couple of deals that have yet to close. Have you got any more specific visibility on exactly when you might think the remaining assets under contract might close?

Are you referring to Ballycliffe and Rockland Manor?

Yes. Yes. Just wondering for modeling like when we should start including these.

Ballycliffe, we're expecting to close in the second half of the year and probably later than earlier part of the second half of the year. Rockland Manor would be within 60 days.

Our next question comes from the line of Sairam Srinivas with ATB Capital Markets.

A quick one for me. Just looking at Ballycliffe, it's actually quite surprising to see a 2025 vintage community come out on the transaction market. Could you perhaps just comment on the kind of the transaction here and the counterparties that are selling the asset?

Yes. This is a property we bought from Chartwell. So I think I can't really comment why they sold it. But obviously, it is a perfect fit for us. We are in the GTA. We have a lot of scale here, and it fits exactly what we're trying to build at Sienna.

And our next question comes from the line of Giuliano Thornhill from National Bank Capital Markets.

Just I'll keep it brief. I'm just -- I'm wondering, obviously, the larger operators are moving forward with redevelopment like yourselves. Are the economics beginning to work for the smaller operators yet? And do you think maybe that more funding needs to be announced to kind of incentivize that if that's not the case?

I would say the funding is appropriate in most cases, Giuliano, in most of the markets. So I don't think that would be an issue. And if you're a private owner operator, you, in fact, can borrow close to 85%-90% on this. So I think these projects are viable, and that's why we are seeing a lot of LTC being built, which is great because we need to build close to 60,000 beds as a sector. So it is great to see that. And so there has never been more beds being built at this time. And we also look at that as a potential opportunity 3, 4 years down the road because we are actively looking to grow our LTC, including in Ontario. So hopefully, there'll be opportunities on the other side of it, which we are confident that there would be.

Okay. Great. And I just wanted to clarify on the earlier comment about the Alberta funding increase from 1.25% to 7.25%. Does that entirely relate to other accommodation funding? Or will that just be kind of revenue and then flow down into NOI?

No, that would be completely accommodation funding.

[Operator Instructions]

I think, Tina, we are done. There are no more questions.

With no further questions in the queue. Thank you for joining today's call. You may now disconnect.

Ladies and gentlemen, welcome to Sienna Senior Living Inc.'s Q4 2025 Conference Call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer; and David Hung, Chief Financial Officer and Executive Vice President, Investments of Sienna Senior Living Inc.

Please be aware that certain statements or information discussed today are forward-looking, and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to the forward-looking information and Risk Factors section in the company's public filings, including its most recent MD&A and AIF for more information. You will also find a more fulsome discussion of the company's results in its MD&A and financial statements for the period, which are posted on SEDAR+ and can be found on the company's website, siennaliving.ca.

Today's call is being recorded, and a replay will be available. Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides, which accompany the host remarks on the company website under Events and Presentations.

With that, I will turn the call to Mr. Jain. Please go ahead, Mr. Jain.

Thank you, Audra. Good morning, everyone, and thank you for joining us today. 2025 was a year of long-term value creation for Sienna. We added over $800 million of assets to our platform, ended the year with strong organic growth for the 12th consecutive quarter and enhanced Sienna's balance sheet with the continued support of the capital markets. We issued nearly $700 million of equity and debt with each issuance being met with strong investor demand. We also expanded our workforce by adding approximately 2,000 team members and further deepen our impact in the communities we serve.

These achievements have increased the scale and quality of Sienna's diversified platform and positioned the company well for continued growth at a compelling time in Canadian senior living. During the fourth quarter, both operating platforms delivered strong results and continued to -- and contributed to the successful finish to the year. Same-property NOI increased by 15.4% in the Retirement segment and by 5.6% in Long-Term Care. Key driver of the double-digit increase in the Retirement segment were the continued occupancy increase and rental rate growth. Average same-property occupancy was up by 180 basis points year-over-year and has reached 94.7% in the fourth quarter. Following the quarter, monthly occupancy was 95.2% in January.

The result of Sienna's Retirement segment also reflect higher care revenue. We apply our expertise in clinical care at our Retirement platform, which allows residents to stay with us longer as their care needs change. Beyond the strong same-property performance in our Retirement segment, we are pleased with the results of the company's optimization portfolio. This portfolio includes assets that are undergoing renovations, changes in service offerings or the addition of new services. Occupancy increased by 790 basis points year-over-year in the optimization portfolio in Q4 and NOI grew by 22.1%. Our focus on better positioning assets within the local markets is clearly delivering results.

Additional key driver behind the strong performance of Retirement operations are a robust sales platform and focused marketing campaigns. Year-over-year, call center leads grew by over 50% in the fourth quarter, and the number of tours in our properties have increased each quarter in 2025. We also maintain a robust focus on hospital outreach and excellent relationships with health care partners in the local communities where we operate. All of these initiatives are expected to drive strong lead generation and future move-ins.

With respect to Sienna's Long-Term Care operations, fully occupied homes with growing wait lists, higher revenue from private accommodations and annual inflationary government funding increases all added to the strength of the results. Sienna's government-funded Long-Term Care operations add significant value to our business and provide stability given that they are largely insulated from market volatility or economic uncertainty.

Now moving to Slide 6. In Q4, we started to see the contributions from 2 recently completed development projects. We opened our redeveloped long-term care community in North Bay in September, followed by our campus of care in Brantford in October. Large-scale development projects require deep expertise and trusted partnerships. With both in place, we are excited to move forward with our next project, which will be our first in the city of Toronto. Located at our existing Glen Rouge site in Scarborough, it will be Sienna's largest project to date with 448 beds and an estimated development cost of about $250 million. The development yield for this project is approximately 7.5% to 8%.

After several years of planning, the significant government funding improvements for projects in the GTA were a key driver for us to move forward. The Glen Rouge redevelopment, which is expected to be completed in 2030, will replace 363 existing beds and add 85 much needed new beds in the Scarborough community. With this development, we will further modernize and strengthen Sienna's Ontario platform and support the continued growth of company's Long-Term Care business.

2025 has been a very active year on the acquisition front. With the acquisition of 10 properties across 3 provinces, we added nearly 1,800 beds and suites to our asset base. During the fourth quarter, we finalized 3 acquisitions in Ontario, including Cawthra Gardens, a 192-bed long-term care community and LaSalle Park, 123-suite retirement residence, both located in the Greater Toronto area. In addition, we acquired Hygate, a 213-suite retirement residence in Waterloo, Ontario. These acquisitions added $193 million of assets during the final quarter of 2025, and we carried the growth momentum into 2026.

Since the beginning of the year, we added another $79 million through acquisitions. We finalized the purchase of interest in 2 of our majority-owned properties in Ontario and British Columbia and signed a purchase agreement for the Bartlett, a 129-suite retirement residence in the Greater Toronto area for approximately $59.4 million, which will be financed with cash on hand. Sienna's acquisition pipeline remains strong, and we are confident to continue our significant acquisition pace in 2026.

Moving to our team members. As we continue to grow, investing in Sienna's team members is fundamental to our success. With over 15,000 employees, we recognize the importance of programs that support the company's growing workforce. Sienna's strong culture of ownership and engagement played a key role in the continued reduction in turnover. Average company-wide turnover has reached a record level low of approximately 19% in 2025. Along with programs focused on team member development, recognition and rewards, our initiatives also resulted in the fifth consecutive year of increased team member engagement and further strengthen Sienna's operations.

It puts us in a strong position to attract and retain the best in Canadian senior living. We are extremely proud of these achievements. They reinforce our belief that if we take good care of our team members, they will provide exceptional service to our residents and support the company's strong operating performance. Our focus on enhancing the work experience for Sienna's team members and improving resident quality of life is reflected in our most recent accreditation results from CARF, where we maintained the highest achievement status and exceeded every benchmark. This commitment is also evident in the continued improvement in the company's Net Promoter Score, which measures residents' likelihood to recommend our homes. Since introducing this measure at our retirement residences in 2023, scores have increased by well over 30% each and every year.

With that, I'll turn it over to David for an update on our financial results.

Thank you, Nitin, and good morning, everyone. I will start on Slide 10 for financial results. In my commentary, in accordance with our MD&A disclosure, I will make reference to our operating results, excluding onetime items. In Q4 2025, revenue on a proportionate basis increased by 14.2% year-over-year to $278.4 million. This increase was largely due to occupancy and rental rate growth as well as increased care revenue in the Retirement segment. Adding to the increase were the contributions from our long-term care platform, including higher flow-through funding for direct care, increased private accommodation revenue and additional revenue from acquisitions and developments completed in 2025.

Same-property NOI increased by 10.1% to $47.4 million in Q4 2025, including by 15.4% in our Retirement segment and by 5.6% in our Long-Term Care segment. In the Retirement segment, same-property NOI increased by $3 million in Q4 2025 compared to last year, largely as a result of improved occupancy and rate growth. In addition, higher care revenue and maintaining a strict focus on operating expenses supported the year-over-year 300 basis point improvement in our same-property operating margin. We are also making good progress with respect to our asset optimization initiatives, which included 5 assets in the company's retirement portfolio. Q4 NOI in the optimization portfolio increased by over 22% year-over-year compared to the same period in 2024.

Effective January 1, 2026, we updated the composition of the optimization portfolio and included 2 additional assets while returning 1 asset to our same-property portfolio after its successful renovation. Occupancy in this property increased from the low 80% range before its renovation to over 95% today. Based on the updated same-property portfolio composition, average monthly occupancy reached or exceeded 95% since last September. In the Long-Term Care segment, same-property NOI increased by $1.3 million. Continued improvements in private occupancy were the key driver behind the year-over-year growth.

During Q4 2025, operating funds from operations increased by 24% to $34.2 million compared to last year, primarily due to higher NOI as a result of organic growth in addition to contributions from acquisitions and developments completed in 2025. Adjusted funds from operations increased by 19.8% to $27.9 million compared to last year. The increase was mainly due to higher OFFO, offset by an increase in maintenance capital expenditures. On a per share basis, OFFO and AFFO increased by 7.5% and 3.9%, respectively, in Q4 2025. Sienna's Q4 2025 AFFO payout ratio was 80.7% compared to 83.1% in Q4 2024.

This improvement highlights Sienna's strong operating results and the disciplined use of capital the company raised to fund its growth. Sienna delivered consistently strong results throughout 2025. In line with Siena's 2025 growth targets, same-property NOI for the full year increased by 14.3% in the Retirement segment and by 4.8% in Long-Term Care. In addition, Sienna's strong results are reflected in the company's OFFO and AFFO in 2025, which increased by 27.1% and 25.7%, respectively, or by 5.8% and 4.7% on a per share basis.

Moving to Slide 12. Throughout 2025, Sienna maintained a strong financial position and balance sheet. We ended the year with over $500 million in liquidity and $1.5 billion of unencumbered assets. We continue to have access to a broad range of capital and demand for Sienna's equity and debt remains exceptionally strong. To support Siena's growth momentum and refinance our debt, we issued $250 million of unsecured debentures in December, and we repaid our $175 million expiring debenture.

With this repayment, the company has no major debt maturities until 2027. We also fully deployed our at-the-market distribution program, issuing shares for gross proceeds of approximately $101 million in Q4. And just yesterday, we announced the renewal of the ATM program. This allows the company to issue another $150 million of shares to finance its continued growth initiatives. We will carefully evaluate each opportunity and continue to finance Sienna's growth in a very disciplined manner.

With that, I will turn the call back to Nitin for his closing remarks.

Thank you, David. While the broader economic and geopolitical environment remains uncertain, one long-term trend is very clear. Canada's senior population is set to grow significantly over the next 2 decades with the oldest baby boomer turning 80 this year. At the same time, senior housing is already operating at high occupancy levels in most markets and new supply is expected to remain limited for many several years.

Against this backdrop, Sienna's asset increased by nearly 30% with the addition of over $800 million through acquisitions and developments. This has allowed us to add meaningful scale to Sienna's long-term care and retirement platforms, supporting both stability and attractive growth opportunities. With our operating depth, strong balance sheet and the organizational capability to execute, we believe Sienna is in the early stages of a multiyear growth phase.

In the near term, this is reflected in Sienna's growth targets for 2026. We expect same-property NOI growth in excess of 10% in the Retirement segment and in the low single digits in Long-Term Care. We also expect to continue this company's significant growth through acquisitions and further strengthen Sienna's position in the sector. On behalf of our entire team and our Board of Directors, I want to thank all of you for this call and for your continued support.

[Operator Instructions] We'll take our first question from Lorne Kalmar at Desjardins.

Just quickly on the same-property NOI growth expectations for Retirement. Can you maybe give some color in terms of the rent growth expectations that are underpinning that?

Thank you, Lorne. Our 10% plus is made up of rental growth, care revenue increase and potential further increase in our occupancy targets. Our rental growths have been quite consistent in the 4% range, and we expect them to stay there. And we will continue to see more care revenue as residents are choosing to stay longer with us, given our -- that we are not afraid of providing more care with our depth of expertise in Long-Term Care.

Okay. And then maybe just turning to the growth and optimization portfolio. I think you guys are what about 13 homes now. How much NOI upside is there in that portfolio? And how long do you think it will take to realize that?

Yes, that's a great question, Lorne. So just to clarify, within our growth and optimization portfolio, we only have 6 properties within the optimization portfolio. The others are assets that we acquired in 2025. And in terms of the potential, our margins within the optimization portfolio were around 24% in Q4, and we would expect over the medium term that they would get back towards our same-property margins.

Okay. And then I guess on the -- I guess the growth is kind of the ones in lease-up and the acquisitions. All right. And then maybe just quickly turning to the Glen Rouge announcement. If I read correctly, I think is Glen Rouge only 159 beds? And if so, is this development replacing multiple Class C homes?

Correct, Lorne. So it replaces Glen Rouge, and it also replaces another home nearby and adds additional capacity. We have quite a bit of land on the site, which is difficult to find in GTA. So we have 4 acres of land at Glen Rouge. So it will be combining 2 homes and adding additional beds.

Okay. And then maybe just one last quick one. In terms of just how do you plan to fund that development? Would that be on the operating line?

Yes. We would be looking at some form of debt, whether it's on the operating line, potentially a construction loan or other form of debt.

And next, we'll move to Jonathan Kelcher at TD Cowen.

Just continuing on the Glen Rouge development. Fair size development. Do you envision starting any more developments this year? Or is this going to be sort of given the size, it's just going to sort of carry you through for the next few years?

Jonathan, we have 2 other projects, which are getting close to shovel-ready. And so we will look at those. One of the commitments we have is not to have our balance sheet too much into development. So that is something we'll continue to manage. We're also not 30% bigger since where we were last year. So we might have a capacity to add another project. But those are some of the things we are assessing against the potential return of these new developments. So I think too early for us to commit. It's only February, but we might have an opportunity to add another one later in the year.

Okay. And assuming you continue growing then next year probably for sure, just given that you'll likely be that much bigger. Is that the way to think about it?

Correct. And also, these projects take multiple years. So when you start Glen Rouge, this is going to take 2 to 3 years to complete. So if you have 2 or 3 projects at the go, we have Keswick, which we expect to complete in the later half of next year. So when that completes, it gives us more capacity to add something. So for us, it is a bit of a rolling thing of as projects get completed, we'll get started on the new ones.

Okay. And I guess just switching gears on the cash taxes were a little bit lower than we had anticipated in Q4. And I guess part of that is due to the timing of acquisitions. Can you maybe give a little bit of color on that? And assuming you're going to be acquiring a similar amount of assets this year, how should we think about cash taxes in 2026?

Sure. That's a good question, Jonathan. You're absolutely right. Our cash taxes got the benefit of the acquisitions of Hygate and LaSalle, which we did close in December of 2025. And so with the acquisition of those 2 properties, we were able to take a full year of capital cost allowance deduction and able to get a benefit of around $2 million to lower our cash taxes in Q4 of 2025. I think when -- as you -- as we're thinking about 2026, the way that I would think about it is taking 2024, which had no acquisitions and 2025, which had $800 million of acquisitions and redevelopment and using a cash tax rate that is somewhere in between those 2 years. And then, of course, we don't have any kind of forecast in terms of acquisitions for 2026. So that any additional CCA would have to be layered on top of that for potential acquisitions in this upcoming year.

We'll go next to Mark Rothschild at Canaccord Genuity.

Maybe starting just following up on your comments with regard to Lorne to the 10% growth. What is assumed as far as occupancy increase in that? And how much more improvement in occupancy do you think you can get? So I understand the breakdown in the 10% growth from rent growth versus occupancy.

Mark, welcome to Sienna's first call for you, and thank you for your coverage. The 10%, it is a combination of those 3. And your question is very fair on where occupancy can go from here. We are, for lack of a better word, in unchartered territory because 95% occupancy has not happened in Retirement before. We continue to believe there is some opportunity to add more, whether that number is 96% or 96.5%, frankly, it's a bit too early to tell. And part of it is that at 95% occupancy, we have many homes, which are at 100%, 99%, they're running at full occupancy and then we have a few which are 93%, 94%. So I would say, at this stage, I think saying that we will be around 95% is probably a better answer than to say where it could go from here.

Okay. Great. And maybe just one more for me. As far as the acquisitions, which clearly picked up over the past year, just talk a little bit about how the accretion would look -- potential accretion would look on acquisitions in the current environment at the cap rates that you're going to have to pay. To what extent does the cost of equity, a higher share price that you have now help or is needed for these acquisitions? And also, does the fact that you can use partners, maybe earn additional fees, what helps push it into be more accretive?

I think your answer is in the question you asked, Mark, it's a combination of quite a few of those things. We are very sensitive about partners. We have very few select partners that we continue to work with, including Sabra, which is our biggest partnership and with Reichmann, where we have now 2 partnerships where it's difficult to find people who think the same way and are aligned, but we're fortunate to have 2 partners such as those. So I wouldn't see us getting big into partnerships just to earn management fees. I think our goal would be to do partnership that makes strategic sense. End of the day, we are owners and operators of senior living. And cap rates reflect what is happening in the public market as well.

And whenever we underwrite something, we're underwriting it for the long term. So we're very focused on ensuring each property is assessed on a debt-neutral basis because it is always easy to buy something just on debt. So I think it's, for a lack of better word, business as usual. We see a decline in cap rates. We just bought the senior apartment building at 5.75% cap rate, which we would not have done 4 years back because we were trading differently. But market is recognizing that there is a cap rate differential. And we feel there is still a big gap into where long-term care cap rates are, for example, and where -- what we're seeing in the public space where a lot of people will assess it in 7% plus, and we haven't found a single long-term care home for sale above 7%. They're more in the 6.5% to 6.75% range.

We'll move next to Tom Callaghan at BMO Capital Markets.

Maybe just sticking with the acquisition side of things. Can you just talk a little bit about the pipeline today and whether or not that's weighted towards one side of the business versus the other? And then maybe just geographically speaking, where you see the most opportunity?

Yes. No, thanks, Tom, for that question. Because we are a diversified company, we operate both in Long-Term Care and Retirement. We actually are seeing opportunities in both lines of businesses, and we continue to pursue acquisitions in both lines of businesses. In terms of where we're finding opportunities, they actually are across all the provinces that we operate, Ontario, Alberta, BC. And we are quite selective in terms of what we're looking for. But the pipeline remains robust, and we continue to be actively looking for opportunities.

Okay. Got it. And then maybe just to build on that, like do you have a preference geographically speaking, like when you evaluate these different opportunities? Obviously, almost a year ago now, you entered into Alberta. So just how are you thinking about capital allocation from a geographic perspective as you work through these opportunities?

Tom, we don't really have an allocation at this stage. But I guess, broadly speaking, we don't -- we have 1 retirement home in Alberta, which we manage for Sabra. We don't own any. So I think if you buy 2, we'll suddenly grow up by 200% there. So we find Alberta to have a lot of opportunity because we're not there yet. We only have 4 Long-Term Care homes. In Ontario, we have quite a bit of Long-Term Care and Retirement homes. But there are also a lot more opportunities in Ontario. So I think it's a bit hard to tell you. For us, the bigger focus is making sure it's a big enough building, the age of the building, the location of the building, the size of the population that is in the market area. So for us, that is more important versus which geography we might be in. And as David mentioned, the fact we can drive on both lanes on the highway of Long-Term Care and Retirement, that has been very effective for us.

Got it. Makes sense. Maybe just last one for me on the expense side of things, like growth has clearly moderated there, agency staffing down materially. And Nitin, I think you mentioned turnover at record loads in Q4 there. So just how are you thinking about overall expense growth into 2026? And are there areas where you see opportunity for further efficiency gains?

Yes. I mean the way we're looking at 2026 is that our operating expenses would be relatively in line with inflation. We think we've done a really good job at being efficient with respect to our expenses. So I wouldn't say that there'd be a lot more areas of opportunity, let's say, in agency or whatnot. But we would continue to be very disciplined with our costs, and it would grow in line with inflation.

And we'll go next to Himanshu Gupta at Scotiabank.

So first on Retirement home occupancy, anything on the flu season? How did that impact? How did you handle? And then how is the February or March occupancy looking like?

Himanshu, so we are not seeing a huge impact of the flu season seasonality. We haven't disclosed February and March results yet. We might see some softness here or there. And I think I would say this would be across the whole year in question which was asked earlier, where do we go from here? In our mind, when you're at 95% occupancy, you're running pretty close to perfection. So if we -- let's say, if we have a month which is 94.5%, and I'm not foreshadowing what February, March would be, I'm using it as an example, I would think more of it is that this is just -- in our mind, 94.5% or 95.5% is pretty close to what 95% occupancy looks like. And the goal is to inch towards an average of 96% throughout the year as we progress because that would be the next milestone, I guess. So -- but we don't think that's more seasonality. I would say that's just more an idea of you have many homes which are running at 100% if they run at 98%, they're still excellent operations, but it might reduce your occupancy by a few 10, 20 basis points.

Okay. Fair enough. So nothing meaningful at such impact from flu season. Okay. Fair enough. And then moving from stabilized to kind of growth portfolio, how is the lease-up coming on the Hygate property in Waterloo? Like what kind of expectation do you have for stabilization there?

We don't really get into individual property, but we are -- we had a certain expectation from underwriting, let's say, it's 18 months or so to stabilize from 60% to 95% plus. We are well on our way. We had some good early wins on that property. So it's tracking what we -- where we thought it would be, if not a little bit better.

Got it. I mean the reason I ask, is that like a template for your kind of growth portfolio, like the time frame to stabilize this property from like 65% or 70% to like 95%, like 18 months or so, like fair to say that?

I guess it is fair to say that, but the reality is this is a one-off. And what I mean by that is rest of the properties we bought were way ahead in occupancy. The Bartlett is close to 97%. So if you find something a lower occupancy, yes, I think that's a reasonable thing that we can potentially get at least a faster given our scale, if you're buying from an individual owner operator. But it really is a mix of things in Hygate, we think that opportunity exists. But for many others, we bought them at near stabilization. And I think that's a good diverse mix where you have some which are accretive right away, and there's some which will have accretion in 18 months or 24 months, but you will have an opportunity to have a bit extra, which is -- would be the case in Hygate.

Got it. Okay. And then on the optimization, I think, David, you mentioned 24% margins in Q4. And did you give any time frame of getting to that like similar to same property margin?

No, we haven't given any time frames. But what I would say is that we are continually working on our optimization portfolio. Case in point, we had one property that we did significant renovations to, and we were able to get the occupancy from 80% to 95%. And so we've moved that out of the portfolio. Now that being said, we also moved 2 in. So we're going to, on an ongoing basis, have maybe 1 or 2 movements within the optimization portfolio. But our intention is to get them out of the optimization portfolio as soon as possible.

Got it. Okay. Fantastic. Maybe just the last question now. I mean, the Popular Toronto Glen Rouge project you announced. I mean if I look at the development yield, it's very similar to North Bay or maybe slightly lower than North Bay. While the government funding has increased significantly in that project in GDA now. I mean, I would have thought like yield would have been even higher than North Bay. Just can you elaborate, is there a reason it's 7.5% to 8% here?

Sure, Himanshu. The whole idea is I think we should expect similar yields what we saw in North Bay, which was close to 8%. We would see similar for GTA projects. When the funding went up significantly, it wasn't that projects had a 7% yield and the idea was to get them to 10%. The reason government increased the construction funding significantly is that prior to that increase, projects were not viable, like your yields were 4%. So doubling it will get it to 7.5%, 8%. And some of it, it just -- this will take a bit longer. The number of beds, you're adding new versus old. So that all goes into the math. But in our mind, if you are around in that 8% range, that's probably a good expectation, what you should expect from Long-Term Care projects development regardless of where they are in the province. And the funding reflects that.

We'll go next to Giuliano Thornhill at National Bank.

I just had a question on the guidance. Might not provide something more like tighten? And is this you being cautious? Or are you kind of more unsure of the improvements in the remainder of the same property portfolio that's unoccupied?

Giuliano, I wouldn't call it cautious. I mean this is beginning of the year, we expect 10% plus Retirement thing, which in our mind is realistic and low single digits for Long-Term Care. And without getting into, is it exactly $600 million and $200 million of development, our idea is that last year was not an anomaly, and we should expect a year of growth. So I wouldn't call it conservative or optimistic. I would call it realistic at this stage. And if numbers get better, we'll update our outlook at that point.

And would you describe the kind of unoccupied portfolio as similar quality as the already occupied kind of stuff? Or is it -- like is the pace of leasing going to be similar to what we've seen historically?

Yes, the pace of leasing would be similar. And case in point would be we had one property which we removed from optimization because it got fully optimized. And we put 2 new in. And there's a chance that something which is running at 95% plus in 4 years from now might go back into optimization portfolio. Case in point, we have a property in Ottawa -- sorry, in Kingston, which is doing well, but we realize there's a good amount of competition. We need to add more care. It needs a much intense renovation, which is hard to do without closing down the suites. So we put it back into optimization. And when it will come back, our goal is it will get to 95% plus. So some of it is continued occupancy gains in the homes, which are not 90%. Some of it might be of homes which are delivering at 95% plus. But we know all of them have a life cycle in especially Retirement homes. Similar to hotels, you need to go through renovations at a certain period of time, and we will continue to see that in our Retirement portfolio.

And yes, just going to the optimization portfolio. I'm just wondering, is that win that you had during the year, that 10% kind of occupancy uptick, is that like out of the normal? Can you expect that for the remainder that are in there? Or like over 12 months, that's a pretty big increase. So I'm just wondering if that's what we should expect for what's being moved into there.

Yes. I think that -- I mean, it was a significant increase over the last year. But that being said, I mean, we were working off of a relatively low base. So the fact that we increased our NOI by 22% year-over-year was off of a low base. We would expect that going forward, we would continue to have outsized growth relative to our same-property portfolio just because there's so much more opportunity in those properties.

Okay. And just the last one that I had is I'm just wondering for the GTA project that was announced, are any of the costs recognized for the land recognized on your balance sheet? And also, where did the incremental beds come from?

I can comment on the land, which the land is on existing land for the property that we own. So there is no incremental cost for that. We already own it. So that's just part of our inherent cost.

And this project, we put an application -- we have been working on this project for the last 4 years. So we put an application for 448 beds 4 years ago with the intention one day that things will work out and we will build, and that has happened now. So we had the additional licenses that were given to us to build this.

Next, we'll move to Sairam Srinivas at ATB Cormark Capital Markets.

Congrats on a good quarter. Most of my questions have already been answered over here, but I just want to ask a quick question on supply. There's a bit of a narrative that we are seeing -- starting to see some starts this year with hope that you'll probably see some buildup in supply towards '29, '30. Going with your experience on development and retirement, are you seeing economic trends finally pan up to a point where we could see supply take off? And are you seeing supply kind of build up in some of your markets here?

On the question of supply, there was quite a bit that is coming on supply. I would just maybe talk about 4 or 5 different things. One is, as numbers get better, there would be an opportunity to develop, and we just did one in Brantford, which is open, which is a campus of care. Given our demographics, knowing that Retirement homes at 95% occupancy, and there are quite a few Retirement homes which will get obsolete. We don't own any one of them. The reality is we do need more Retirement homes. So I think new supply is not a bad thing just from a community perspective because we need more Retirement space. We are not seeing massive builds of Retirement build.

These projects do take a long period of time. So if you and I put our money together and we buy land, I think it's probably 18 months from today to start construction and then 24 months after that for it to open. So even if there was a lot of supply, which we're not seeing at that moment, you are 3 years away from it impacting any part of the market. And again, we have to factor in the demographic change because we are now in a place where baby boomers are coming into senior living. And we also have to factor in the obsolete retirement homes, which would no longer be needed. So I think it's -- getting new supply is a good thing. It is not coming in fast. The other thing which has changed is we remember buying an 80-bed Retirement home for $16 million.

So it was a very different cost to build. It was a very different cost to buy. We are now buying properties close to $100 million a home. So it is not a development business for someone who sold something and now wants to get into Retirement business, these projects have become complex. They have become bigger. They have become a lot more expensive. So you will see a lot more sophisticated senior living providers started to build. And for them, they want to make sure the numbers pan out. So I think there will be a lot more discipline than you might have seen in the past.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Hello, ladies and gentlemen, welcome to Sienna Senior Living Inc.'s Q3 2025 Conference Call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer; and David Hung, Chief Financial Officer; and Executive Vice President, Investments of Sienna Senior Living Inc. Please be aware that certain statements or information discussed today are forward-looking and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to the forward-looking information and Risk Factors section in the company's public filings, including its most recent MD&A and AIF for more information. You will also find a more fulsome discussion of the company's results in its MD&A and financial statements for the period, which are posted on SEDAR and can be found on the company's website, siennaliving.ca. Today's call is being recorded, and a replay will be available. Instructions for accessing the call are posted on the company's website and the 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 and Presentations. With that, I will now turn the call to Mr. Jain. Please go ahead, Mr. Jain.

Thank you, Sarah. Good morning, everyone, and thank you for joining us today. The third quarter set the stage for a strong finish to this year. There's positive momentum across every part of our company. We achieved strong operational results in both lines of our business, successfully completed 2 development projects in Ontario and continue to grow through acquisitions. We're on track to make 2025 a year that marks the next stage of Sienna's growth journey. Both operating platforms delivered strong results in the third quarter. Same-property NOI increased by 13.2% in the Retirement segment and by 6.7% in long-term care. Key drivers of the double-digit increase in the Retirement segment were a strong occupancy increase and rental rate growth as well as higher care revenue. Average same-property occupancy was up 230 basis points year-over-year and has reached 94.1% in the third quarter. Following the quarter, monthly occupancy increased to 94.7% in October, putting us well on our way to achieve a 95% target by the end of this year.

Our results also reflect an increase in care revenue. We increasingly apply our expertise in clinical care at our retirement platform, which allows residents to stay with us longer as their care needs change. Additional key drivers behind the strong performance in our Retirement segment and a robust sales platform and focused marketing campaigns. Our call center leads remain high and the number of tours in our properties have significantly increased each quarter this year. Our Q3 leads have increased by 37% year-over-year compared to the same period last year. And we're also encouraged by the results of our recently hosted national open house in October. We generated a much stronger double-digit increase of new leads compared to our previous event in July. In addition, we maintain a robust focus on hospital outreach and excellent relationships with health care and business partners in the communities we operate in. All of these initiatives are expected to drive increasing lead generation and future movements.

Beyond the strong same property performance and Retirement segment, we are pleased with the results of our optimization efforts in 5 of our properties. Occupancy increased by 970 basis points year-over-year in Q3 and in the optimization portfolio and supported NOI growth of over 40%. Our initiatives to better position these assets within the local markets are clearly delivering results. With respect to our long-term care operations, our fully occupied homes with growing waitlists, high revenue from private accommodations and annual government funding increases all added to the strength of our results. Our government-funded long-term care operations add significant value to our business and as they provide stability and are largely insulated from market volatility or economic uncertainty. In the coming quarters, we will also start to see the contributions from our recently opened redevelopment projects.

Moving to Slide 6. In September, we opened our redeveloped long-term care community in North Bay, followed by a campus of care in Brantford in October. These large-scale projects are complex, require deep expertise and trusted partnerships. And we are especially proud to have delivered them on time and on budget. Once fully stabilized, each of our long-term care redevelopment is expected to grow Sienna's AFFO per share by about 3%. With long wait list, we expect to see the homes to be fully occupied within 60 days after they open. We're also on track to complete our next redevelopment project in Keswick in 2027. With respect to our development pipeline, we are encouraged by the funding improvements announced by the Ontario government this summer. Improvements for projects in the Greater Toronto area are especially important to us, given that over 80% of our remaining redevelopment pipeline is, in fact, in the GTA. As a result of these improvements, we expect to start construction of 1 to 2 projects next year.

Since the beginning of the year, we have also been very active on the acquisition front. The majority of the properties we acquired in 2025 are less than 10 years old and are strategically located in large urban centers. During the third quarter, we strengthened our footprint in the Greater Toronto area with the addition of our previously announced 133 suite retirement residents and 192 bed long-term care home. Since the end of the quarter, we also entered into 2 additional acquisition agreements in Ontario. Last week, we signed a purchase agreement for Hygate on Lexington, our 216 suite retirement residents in the city of Waterloo, we will acquire the property in the desirable market for approximately $93.3 million. Hygate also includes our 4.7-acre development site, which is zoned for a retirement residence or residential condominium. 2 days ago, we signed a purchase agreement for LaSalle Park a 123 suite retirement residents in Burlington.

A suburban GTA, we will initially acquire a 78.2% interest in the property for approximately $67.2 million followed by an additional 10.9% in January 2026 and the final 10.9% in 5 years. This is a third high-quality acquisition in the Greater Toronto area this year. where we already have a significant presence and continue to build scale. Collectively, we have added over $800 million of assets through acquisitions and developments to our platform in 2025 and our pipeline continues to stay very strong. Investing in our team members, as we grow and scale our operations, investing in our team members is fundamental to the success of Sienna.

With over 15,000 employees, we recognize the importance of programs focused on learning and development, leadership skills, recognition and rewards, all designed to attract and retain a highly engaged workforce. The positive impact of these initiatives is reflected in our most recent employee engagement survey, which was completed in September. The participation rate reached an all-time high of 86% and and the team member engagement score rose for the fifth consecutive time. We're extremely proud of this achievement, which is crucial for the continued success of Sienna. Our investment in our team members was also recognized by Time Magazine, who named Sienna one of Canada's best companies in 2025. With that, I'd turn it over to David for an update on our financial results.

Thank you, Nitin, and good morning, everyone. I will start on Slide 10 for financial results. In my commentary, in accordance with our MD&A disclosure, I will make reference to our operating results, excluding onetime items. In Q3 2025, revenue on a proportionate basis increased by 16.4% year-over-year to $261.7 million, this increase was largely due to occupancy and rental rate growth as well as increased care revenue in the Retirement segment. Adding to the increase were the contributions from our long-term care platform, including higher flow-through funding for direct care, higher private accommodation revenue and additional revenue from acquisitions completed in 2025. Same-property NOI increased by 9.7% to $46.4 million in Q3 2025, including by 13.2% in our Retirement segment and by 6.7% in the Long-Term Care segment. In the Retirement segment, same property NOI increased by $2.6 million in Q3 2025 compared to last year, largely as a result of improved occupancy and rate growth.

These improvements in addition to generating higher care revenue and maintaining a strict focus on operating expenses supported the year-over-year 220 basis point improvement of our same-property operating margin. In addition, we are making good progress with respect to our asset optimization initiatives, which includes 5 assets in the company's retirement portfolio. NOI in the optimization portfolio increased by over 40% year-over-year with an average margin increase of approximately 540 basis points compared to the same period in 2024. In the Long Term Care segment, NOI increased by $1.5 million, fully occupied homes with growing wait list and continued improvements in private occupancy supported the year-over-year growth. During Q3 2025, operating funds from operations increased by 33.3% to $31.8 million compared to last year, primarily due to higher NOI. Adjusted funds from operations increased by 36.1% to $27.7 million compared to last year.

The increase was mainly due to higher OFFO, offset by an increase in maintenance capital expenditures. On a per share basis, OFFO and AFFO increased by 9.6% and 12%, respectively, in Q3 2020. Our Q3 2025 AFFO payout ratio was 78.7% compared to 91.3% in Q3 2024. The significant improvement highlights Sienna's strong operating results and our successful initiatives of deploying capital we raised to fund our growth. In the coming quarters, we also expect to see contributions from our recently completed redevelopment projects reflected in our AFFO. Each redevelopment is expected to contribute on average an additional $4.7 million to Sienna's annual AFFO once it is fully operational. This represents an approximate a 3% increase in AFFO per share for each project. In addition, these projects will enhance our balance sheet and further elevate the quality of our asset pool. Throughout the third quarter, we maintained our strong financial position and balance sheet. We ended the quarter with $464 million of liquidity and $1.3 billion of unencumbered assets.

On August 21, we issued $175 million in unsecured debentures at an interest rate of 4.12% to finance our growth initiatives. The significant demand for the debenture resulted in the offering being multiple times oversubscribed. With respect to Sienna's upcoming debt maturities, including the maturity of our $175 million Series B unsecured debenture in Q1 2026, we have multiple attractive financing options available to us. With that, I will turn the call back to Nitin for his closing remarks.

Thank you, David. Our disciplined approach to enhancing our operations is clearly reflected in our results. Combined with our success in growing through acquisitions and developments, it reinforces our confidence and outlook for Sienna both in the near term and in the years ahead. We are on track to end the year with same property occupancy of 95% in the Retirement segment ahead of our original Q1 2026 target. In line with strong year-to-date performance, we also updated our same-property NOI growth targets. In our Retirement segment, we expect same-property NOI to increase between 13% to 14% year-over-year. And in Long-Term Care, we anticipate year-over-year NOI growth to 4% or 5% in our same-property portfolio.

Our company has at a beginning of an exceptional growth phase. Supply is expected to remain constrained in the foreseeable future, while demand and operating fundamentals continue to strengthen. With our growing scale and the support of our highly engaged team members, we believe that we have a tremendous opportunity to generate sustained growth for many, many years to come. On behalf of our entire team and our Board of Directors, I want to thank our shareholders and for all of you on this call for your continued support. Sarah, we are ready for questions.

[Operator Instructions] Your first question comes from Jonathan Kelcher with TD Cowen.

First question, just on the operations front looks on the retirement side. It looks like you are sort of hitting it out of the ballpark a little bit here at hitting the 5% what should we think about going forward in terms of rent growth once you sort of meet that target?

Thank you, Jonathan, and we expect our rental growth to be in the range of 4% to 5%, which is a combination of annual escalations plus there would be some opportunity to, in fact, look at market rents again when you're running at those high occupancy. And even though your question was not around margin, once we have said before that once we get to the higher margin, a lot of that revenue will continue to fall on the bottom line. So the NOI growth rental revenue will be a part of it, but there will be multiple other levers, which will drive the NOI growth.

Fair enough. And then just secondly, on the acquisitions, could you maybe give a little bit more color on a just in terms of like the remaining 22%, is that pricing set? Do you see a lot of runway for rent growth there? Like the 5.7% cap rate is a little bit on the low side for what you guys have been buying in retirement.

Yes. No, thanks for that question, Jonathan. So just in terms of the structure, we are buying 78% now. at $67.2 million. We're going to buy another 11% in Q1 of 2026. Also at the same price that we're buying now. So it would be at 100%, the value would be $86 million. And then 5 years from now, it would be at the fair market value at that time, and we'll have some predetermined metrics for how we calculate that. I think that in terms of rental rate growth, it's going to be similar to what Nitin said, we see opportunity in the range of 4% to 5% rental rate growth within that market. So -- and a lot of that will also fall to the bottom line and expand the margins within that property.

The next question comes from Himanshu Gupta with Scotiabank.

So first on Long-Term Care, what led to NOI growth here? I mean I know you have been guiding to around like 2% high growth, and we got like 4% to 5% in the year so far. So is there like a margin expansion story in DC as well the.

Yes. It's a couple of factors, Himanshu. One is higher funding from all 3 provinces in Ontario, Alberta and B.C. and that has run a little bit higher than our increase in expenses. The second is around preferred revenues. So we have been driving growth through filling in our bets with residents who pay private accommodation rates and then there's a little bit around the acquisition of Nicola. We did buy that earlier in the year. So that's contributing moderately to the growth in long-term care NOI.

Okay. Okay. Fair enough. And I mean sticking to LGC, but on the developments, Bradford and North Wales complete now. When do you start receiving construction funding? And when will you start reflecting that in the financials? And I guess it will be like a breakdown between like interest income and contribution.

That's right. So CFS funding starts when the building is open. And in the case of Northern Heights, we opened the building and had our first lessened our first residents on September 7. And so CFS started flowing on September 7. And then Oakwood comments, which is in Brantford opened up in October, and that's when the CFS would start flowing at that time. So we've actually already started seeing a little bit of the CFS flowing through we're going to see the full impact of that, at least for Northern Heights in Q4 and then Brantford would be -- in terms of the breakdown of the CFS, we've actually disclosed that in our MD&A. So out of the $3.3 million, around $2.2 million would be interest income and the other $1.1 million approximately would be an add back to our AFFO.

Got it. Okay. Very helpful. My last question is on the retirement home side. I mean, I think that then, obviously, you mentioned 4% to 5% kind of rental growth. And if I look on the expenses side in pole expenses, I think they were up like 3% to 4% in 2025. Is that a good run rate for expenses for Q4 and beyond?

Yes, I think that's a good assumption, what you just talked about, about the rental growth and expense growth. One of the things that we have -- 1 idea we have -- which most people talk about is how more of it falls to the bottom line. The second part is an homes are stabilized. First of all, we use very less incentives and incentives around to revenue, but our ability to remove those, that definitely helps. And from a -- and also from an expense perspective and you have consistency in the number of residents in the home, you can become a lot more consistent in scheduling and other things which also drive down cost. So as a starting point, the assumptions you have talked about Himanshu are not unreasonable, but we do expect an opportunity to, in fact, drive them lower from an expense perspective.

Okay. Very helpful. Maybe just the last question here. On the retirement home occupancy, I think you mentioned Q3 leads were up like double digits, if I heard it correctly doesn't look like occupancy is going to stop here at like 95%. Is that a fair assumption given how the leads are coming in and you still have more opportunity to wrap it up?

Yes. I mean that is a fair share out of our 44 homes, roughly, 25% of them up close to 100%, if not at 100%. And then the other are, call it, 95% to 98%. So we're not it is not unusual to see really high occupancy. At a portfolio basis, it remains to be seen what can be sustainable. And I think the idea that it should not stop at 95% is that's not unreasonable. I think what remains to be seen, while it will go to 98% or would it be over the next number will be 96%. But I think that remains to be seen as an industry.

The next question comes from Sairam Srinivas with Cormark Securities.

Just looking at the redevelopments you guys completed -- how should we be thinking about the stabilization time line here? And I know likes have been coming in. So when does the -- so should we look at probably 12 months when it's 98% on an.

Thank you. One of the things that -- which is not well understood is really how well the long-term period development works, especially after the government funding. So David mentioned on September 7, we opened our Northway properties. On day 1, you get fully funded. -- and expectations from the government is that you will be fully leased up within 60 days, and we are fully leased up in North Bay in 60 days. The Brantford opened in October and we get full funding on day 1, and it would be fully leased up in 60 days. So in fact, there is no lease-up in Long-Term Care. And Brantford, we also have a campus of care which has retirement home attached to it, and that is also leasing quite well.

And when it comes to bank for, it's a mix of both retirement and LTC were there. how does the funding work? I mean like are governments more incentivized to actually provide funding for these kind of projects?

So government's funding is dedicated just to long-term care, and there is a whole mechanism to ensure your expenses, capital expenses are properly allocated just to long-term care. Your operational expenses are properly allocated just to long-term care. So -- and we have many other campuses. So that is -- and there are a few others who have campuses. So this is well established based in the industry.

That makes sense. And maybe my last question around acquisitions. Obviously, you guys have been pretty active both in Bataan as well as LTC space. When you look at the headlines right now, we do see a lot of infrastructure funds as the private players looking into these kind of assets. So when you compete in the market right now, are you seeing a lot more of those save funds come in? Or like what's the competition like?

Absolutely. And the Senior Living has been a quite competitive space. One of the key factors for us is we know how to operate them. This is not just a pure rental business. Operations are complex. And the fact that we have 15,000 employees, I mean that might be all the real estate companies combined and just the nature of the work that we do. So 1 of the things that works not benefit is really understanding the complexity of operations and driving synergies out of it. And this is also a very relationship-focused business even though we all compete with each other. A lot of the sector has been around for a while. Relationships are important in this space.

Usually when someone is selling, whether it's generational or whether it's -- they built it and they want to sell, they want to make sure that they're selling it to people they know can close on a timely basis and because it has a high number of team members and residents involved, they want to make sure it gets to the right place. So all those things play. And I think our -- instead of me saying that we have been quite successful. You can just look at our numbers. We have been quite successful in closing -- getting these acquisitions and closing them.

So that makes sense. Sorry, I guess 1 last from me. You obviously mentioned these are operationally intense businesses. And on a huge part of that is labor cost. As you get into 2016, do you see any bottlenecks from that perspective? And what are the challenges that had come up on from the talent sourcing perspective?

You're talking about labor perspective, it's Sara. Yes. So I would say it's -- the industry as a whole has got better from a labor perspective. immigration helped significantly. Five years ago, we made a major pivot on the whole idea, if you take care of our team, they'll take care of your customer, residents and business will take care of itself. As simple as it sounds, that has had tremendous outcome for us. In the last 2 years, our turnover is down by 60%, 6-0. So we are hiring a lot many less people. People are staying much longer and that helps not only from a labor perspective in retirement homes how to drive occupancy residents get comfortable to refer us more. In long-term care, it's driving less compliance issues, less quality issues, residents are happy. So we are seeing massive improvements in labor front. And amend some very hard-to-fill areas. We, in fact, have no vacancies across our portfolio.

The next question comes from Giuliano Thornhill with National Bank Capital Markets.

I'm just wondering what led to the big occupancy uptick in your same-property portfolio in August.

So thank you, Julian. We have been working -- the strategy has been the same. We are very, very local the relationship with the hospitals, the relationship with other health care providers, water, all of those things are important. And -- it is not, frankly, rocket science. The idea is to ensure you have a set of processes, and you want to make sure you get done. So the approach we're taking is not to come up with new programs but be disciplined on the things that we have and to do them well on a regular basis. That applies to a call center that applies to how we follow it leads that applies to the sales cycle, and we are seeing good results with it the front and we do expect that to continue.

Okay. So just like on the retirement portion, is that like localized to geography at all or like specific to a couple of properties or is it more just broad based?

The occupancy gains is broad-based. So it's not that 1 home increased occupancy significantly and that moved the needle. Areas we are seeing a consistent increase across majority of our portfolio.

Okay. And then just another question was just on the capital funding program announced by the government last quarter. I'm wondering if that, I guess, revised funding program has led you to consider or improve the ability to pursue your GTA properties, your Class C GTA properties?

It is, Julian. So we've been studying the new program with great interest. 80% of our properties are within the K, and this program significantly improves the funding within the GTA. We're currently completing some of the analysis in terms of which projects would it make sense to proceed with. But our intention would be to proceed with 1 to 2 projects in 2026 within the GTA.

And how are you deciding on which ones to pursue within the GTA. Is it mostly based on like just how are you factoring, I guess, the land cost into that decision?

So one of the things which is quite unique about us is that we own quite a bit of land in GTA, which is usually the most difficult to find. And we have been working on these projects for 3 or 4 years because the planning process is quite long. So we have had Four projects roughly that we have been nudging along with the intent that 1 day, there would be an appropriate funding and that time has come. So these projects will be defined here where aren't in the planning cycle, what the returns are, which 1 are operationally have the biggest impact. So for example, we have couple of homes, which will not only solve and build capacity for that site, but in fact, would help us decant and other home so we can move all the residents there. So all of those things will go into play. These projects will be bigger than the 160 beds that we have seen in the past. So we would see a material impact of those projects once they are completed.

Okay. And then just my last question, just on the ATM. How are you guys thinking about that as a funding source? Are you going to anticipate to be quite active on that? Or are you going to be leaning more on our on the debt markets for liquidity going forward?

That's a good question, Julian. So in Q3, we did issue 1.3 million shares under our ATM at an average price of 183 13. We've been quite disciplined in terms of the use of our ATM. We'll consider all forms of capital when we are looking at acquisitions or redevelopment. So we did issue about $24 million on our ATM this quarter, but we also did $175 million in the unsecured debt market because of the attractiveness of the cost of capital there to fund our acquisitions. So really, we're looking at both. But as it relates to the ATM, we want to make sure that we have specific uses for it as we're issuing shares.

The next question comes from Pammi Bir with RBC Capital Markets.

Just coming back to the Sao acquisition, you're buying a nonmanaging interest at a lower cap rate than what you've done in the past. What made this deal attracted to you and versus maybe others in the market? And are there maybe more of that you expect to do with this vendor?

Thank you, Pam, and good morning. So Alisal Park is owned by Reitman Senior Housing. We have had a very successful partnership with them, Algen Falls. We built that home together, they manage for a period of time, and then we will buy that. The 5.75 cap rate is, in fact, not that unusual for really good properties. LaSalle Park is when I say it's fully occupied. I mean it's not 95%, it's closer to 100% occupied. They have strong rental growth. The home is built extremely well, so it will stand the time of competition. and we continue to see good occupancy growth over time. In this case, it was the interest of the seller to manage it and considering that we have a relationship, and we are comfortable with their management. that worked for us. But from a return perspective, we think we will do extremely well in this opportunity.

And then, I guess, okay, you mentioned Albin falls as well. So is there -- are there more of these within their perhaps pipeline that you might do in like as part of your acquisition part over the next year or so?

Yes. I hope if they ever decide to do more that they would think of us. Again, I do not know their strategy. Obviously, they have been in this space for a long period of time, and I don't think they are expecting to exit it. This is a one-off opportunity where there were other partners involved and they wanted to sell. And if they have another one, we are hoping that they will consider us first.

Okay. Then just lastly, on the additional care revenue, I think you mentioned that a few times in terms of as a source of some of the growth. Can you just expand on what new services are being offered? Or is it really just an increase in the volume of maybe the same services that are being offered just curious if you have a sense of what the growth rate in your service revenue growth has been maybe on a year-to-date basis relative to where it was versus last year?

Absolutely. I think this is -- frankly, would be one of the big difference maker for us at Sienna because we're not shy about providing care, and I would say we are quite good at it. So the expertise that we have in long-term care is how do we use that in retirement not only provide more care but also do it at a price where residents can afford it. So we recently made the change, Jennifer, who led our long-term care, we moved into retirement with the intention of how to add the right care services to our retirement living. So the one would be increasing our care services, and we are seeing more and more demand for assisted living and memory care. So that would be one. Second, we looked at pricing of a car. So from 2022 to 2024, our care hours went up significantly, but they were not adding much to the bottom line. We were not pricing it correctly. And we were also not having the -- we also didn't have the right structure to make sure we can be more efficient.

So we have fixed that this year. It is a multiyear strategy because you don't want a big shock to the system if someone is paying $100, you don't want to change the price to in so we will do that over time. So that would change. And then we continue to think about how do we bundle services which are in the best interest of us team members and residents, and we will do that. So I would say it will be a combination of all of those things. And that's why when Jonathan asked the question on just rental rate growth, I think that would be one part of our growth strategy. The other, frankly, is going to come from care services.

Is the care service revenue growing at a faster rate than that blended 4% to 5% that you mentioned?

Absolutely. I mean, the expenses are also a bit higher there. So those numbers go faster. The care revenue is growing significantly faster than anything else. I mean it started at a low base. high double digit is not is the number that it drove in the last few years, and we expect that to continue on. There is a shortage of long-term care beds in every province we are in residents need more care. Hospitals are full and the right place for residents who do not need long-term care should not be in a hospital, they should be in a retirement home. And the idea is how do we make that possible.

Right. Okay. So a lower margin but higher volume growth in that piece of the business?

Yes. Yes.

That's all I have.

The next question comes from [indiscernible] with CIBC.

I joined late. So if some of the stuff has been answered, please tell me to go look at the transcript. I'm just curious how you see acquisition pricing playing out over the next couple of years. I think the last 5 years, anytime we've talked about retirement assets, basically, the going in cap rate has been kind of plus or minus 6%. In with your stock prices rising with the sector occupancy tightening up, how do you think about the movement of deal pricing expectations goes over the next couple of years?

We would see increased competition in the deal space, which is a good thing because that keeps the values high and also, again, goes with the idea of that there is this sector is not going away anytime soon. There has been significant growth in this space. And as we talked about before, this is the beginning of next 25 years. There's -- it would always be competitive and this -- all the deals that we have closed this year, whether it was our Alberta portfolio at the properties in Ottawa or the property in Waterloo or the 1 in Mississauga on the 1 in Burlington. They were all heavily competed against. We don't always get all of them, but we get our fair share and it's just making sure the deal structure is right for the vendor, our ability to do other things being flexible with our approach.

So a lot of those things go into play. And you're right, it has been stuck at 6% for a while. And for Class A properties, 5.75 is not an unreasonable number. And I'll just -- our Hygate property, for example, in Waterloo, bought it for around $430,000 a door and the construction cost for our Brantford property was close to $500,000 a door. And even though it was a much bigger home with Long-term Care. So it's still significantly below replacement cost.

And in terms of your overall appetite, like is the constraining factor capital availability? Or are there some real operational management constraints like in terms of what you can take on in a given year?

I think it's a combination of all of those things, but we -- the fact we're sitting at $813 million of development acquisition is not by accident. This is our biggest year so far. And our view is this is not an anomaly. We should expect that going forward. And we spent a lot of time on our structure, beginning of this year, making sure the right people are working on the right things. because what we don't want to do is have acquisitions derail our operations, and we've seen that in the results that not only we're acquiring and developing, but our operational results continue to stay strong. So the structure work that we did in the beginning of this year has worked out extremely well for us, and we'll continue to tweak it. So we do that. work. So I would say we continue to see more and more opportunities that pipeline stays extremely strong, and I think we'll continue to find opportunities both in development and acquisitions.

And then just lastly, on the LaSalle Par transaction. I think if I do my math right, $700,000 a door, give or take. That's probably our most expensive transaction on a per dollar basis.

It is -- and this is again 1 of the things that you factored in is obviously the per door number the second is how much NOI is it generating and that home does extremely well. And per door number, for example, not all suites are the same. We have property we bought in Ottawa, where the price was close to $300,000 a door. Those suites around half the size of water LaSalle Parker, the suite mix is quite a bit different, and the location is quite a bit different. So the 700,000 is pretty close to replacement cost in some cases, but it comes fully leased up. and it's an incredible part of Burlington.

And I appreciate you've got the management contract in place like long term, are these the types of like sort of higher value assets, something you guys are interested in playing in more seriously?

Well, absolutely. We have those today. We've bought the 2 Waterford properties in Ottawa and Kingston many years ago. We just bought Hazelden which is an $85 million home 170 suite, around $500,000 a door. We have our properties in BC of high end. So we -- our model is we have 3 different kind of properties, called in the San Regis of the world. which have full services, a lot more amenity, the full service, call it the Sharon of the world, and I'm using these because I came with a hotel background, and then we would have some which are in smaller communities, which are limited services, and that's exactly what the residents' needs. So we -- I would say we have those 3 tiers, and we're very comfortable with operating all those 3 tiers, acquiring all those 3 tiers and building all those 3 tiers.

And do you have any particular view on like where the demand ultimately is going to lie as this market really starts to grow in terms of the population.

That is such an interesting question because you would think that all this demand would be in in the big cities such as Toronto and Vancouver and which is true. These markets continue to be very strong. But having said that, we see very strong demands in Waterloo market, we just bought Hygate as we talked about. We have 2 other properties there. They're running close to 100% full our market and BC is very, very strong. Even our properties in offshore. We have home that we did a strategic renovation, and that's running close to 100%. So I would say there is going to be demand all over. So the whole idea that there are not enough places for seniors to live we are seeing that play out. So other than some very, very specific markets or very, very specific locations. I think you will see occupancy gains all around.

The next question comes from Tom Callaghan with BMO Capital Markets..

Maybe just one for me on the balance sheet obviously, there's significant opportunity ahead on both the internal and external growth business. So just kind of curious to get your thinking on the balance sheet from a leverage perspective. Is there kind of a debt to EBITDA you have in mind and think about on kind of a run rate basis? And conversely, if the right external opportunity pops up and it's a bit chunkier where are you comfortable leverage-wise?

Yes. That's a great question, Tom. From a debt-to-EBITDA perspective, we've been talking about the last couple of years being under 8x debt to EBITDA. We realize that currently, our debt-to-EBITDA is at 8.8x. But I would point out the fact that that's at a moment in time because as the debt is as of September 30, whereas the EBITDA is a trailing 12 months. So if we look on a pro forma basis, we would find that our debt-to-EBITDA on a run rate basis would be under 8x. And that's where we would feel comfortable over the medium term. If something chunky came up and we really liked it, we might temporarily go up above that point. But over the medium term, we'd like to get back down under 8x.

Okay. That makes sense. Appreciate it. I'll hop back in.

Your next question is a follow-up from Giuliano Thornhill with National Bank Capital Markets.

I just had 1 follow-up. Of the acquisitions you've done year-to-date, how have they -- the integration, has that really met your expectations? Or is it tracking ahead? -- and I guess, like occupancy, margin and why?

Thank you. And I think that's when we talk about our ability to close and I think it is -- most people think doing the acquisition is the most difficult part, and I would just argue that I think competitively operating is a lot more difficult. And this is where we are really seeing great success in Alberta, for example, the 4 properties. They are, in fact, running ahead of schedule. We had some income support, which we've not drawn and expect to give it back to the owners, which is a win-win and the 2 properties we bought in Ottawa. One of them had an earnout structure for the seller. -- and we would be giving them on an out structure and we share that so that property is doing better than what we expected it to be. The home we just bought in Mississauga, which is a long-term care home. It's full. We know that extremely well. So on day we have synergies and it's going to perform better than what we underwrote. And Nicola Lard, the home we bought in BC that we already owned a majority of it. So that fit extremely well. And when the others close, we do expect them to do -- to perform because of the work that we do to make sure we underwrite it correctly and then how do we integrate it.

This concludes the question-and-answer session and does conclude today's conference call. We thank you for joining. You may now disconnect.

Ladies and gentlemen, welcome to Sienna Senior Living Inc.'s Q2 2025 Conference Call. Today's call is hosted by Nitin Jain, President and Chief Executive Officer; and David Hung, Chief Financial Officer and Executive Vice President, Investor of Sienna Senior Living Inc.

Please be aware that certain statements or information discussed in today are forward-looking statements, and actual results could differ materially. The company does not undertake to update any forward-looking statement or information. Please refer to the Forward-Looking Information and Risk Factors section in the company's public filings, including its most recent MD&A and AIF for more information. You will also find a more fulsome discussion of the company's results in its MD&A and financial statements for the period, which are posted on the SEDAR+ and can be found on the company's website, siennaliving.ca.

Today's call is being recorded, and a replay will be available. Instructions for accessing the call are posted on the company's website, and the details are provided in the company's news release. The company has posted slides, which accompany the host remarks on the company website under Events and Presentations.

With that, I will now turn the call to Mr. Jain. Please go ahead, Mr. Jain.

Thank you, and good morning, everyone, and thank you for joining us on the call today. During the second quarter, we had strong results. We maintained our growth momentum, which is reflected in our financial results and the closing of a number of significant transactions. We completed $315 million of acquisitions during the quarter, and we remain on track to add close to $100 million by the end of this quarter, with further potential for acquisitions during the remainder of this year.

In addition, we are preparing to open our long-term care community in North Bay in our campus of care in Brantford over the coming weeks. Together, these 2 developments are valued at over $220 million. Our increasing scale comes at a time and demand for senior housing is accelerating and supply remains highly constrained. These dynamics are not only making our assets more valuable, but they're also making Canadian senior living an increasingly attractive sector for long-term investments.

From an operational perspective, our key performance indicators in both business segments continue to trend in a positive direction in this quarter. Same property NOI increased by 12.3% in the Retirement segment and by 4.8% in the Long-Term Care segment. Key drivers of the double-digit increase in the Retirement segment were a year-over-year occupancy increase and rental rate growth.

Average same-property occupancy was up 150 basis points year-over-year and has reached 92.1% in the second quarter. Subsequent to the quarter, monthly occupancy increased to 93.1% in July, and we remain confident to reach our stabilized occupancy target of 95% by Q1 of next year. A robust sales platform and focused marketing campaigns continue to generate strong interest in residences. Our call center leads remain high and tours have increased by over 30% year-over-year.

In July, we hosted a 2-day national open house at our residences, the first time we extended our open house over a 2-day period, and we are encouraged by the results. We saw a 58% increase in attendance and 66% increase in deposits compared to our previous open house last year. In addition, we maintained a robust focus on hospital outreach and excellent relationships with health care and business partners in the communities we operate in. All of these initiatives are expected to drive increasing lead generation and future movements. Beyond the strong same property performance, we are pleased to see the results of our repositioning efforts and our optimization portfolio. Second quarter NOI increased by approximately 32% year-over-year in this portfolio with an average margin increase of approximately 400 basis points compared to the same period last year.

In Long-Term Care, our fully occupied homes with growing waitlists continue to add to the strength of our operating platform. Further supporting the Long-Term Care segment was an annual funding increase of 2.4% from the government of Ontario. This increase comes into effect as of April 1, 2025, and we expect similar announcements of funding increases in line with inflation from governments in Alberta and British Columbia.

In addition, our recently acquired portfolio in Alberta and the acquisition of the final 30% interest in Nicola Lodge in British Columbia have added to the increase in total NOI in the Long-Term Care segment.

Moving to Slide 6. Our strategy of maintaining a diversified portfolio of private pay retirement residences and government-funded long-term care communities is reflected in our recent acquisitions. During the second quarter, we added 6 properties to our platform in Ontario and Alberta. On April 1, we finalized the portfolio acquisition of 4 continuing care homes in key markets in Alberta and are excited about this expansion, adding 540 beds in a province where we expect to continue our growth as opportunities arise.

We've also closed the acquisition of 2 retirement residences in Ottawa, adding suites in a market that has seen a significant turnaround in the recent past. In addition, we are further strengthening the footprint in the Greater Toronto area with an acquisition of 133 suite high-quality retirement residence and 192 bed long-term care home, both properties are located in Mississauga and are expected to close in this quarter. Our highly engaged team and a structured approach to onboarding and integration allows us to grow at this accelerated pace. As we expand further, we will continue to enhance our transition processes to ensure a smooth and fast integration of the new properties, team members and residents into the Sienna's operating platform. This not only supports a positive experience for all involved, but will also further strengthen our operating results.

Moving to development. We completed Sienna's first Long-Term Care redevelopment project in North Bay, and we expect to welcome residents to the new home in the coming weeks. We couldn't be proud of the significant milestone, which highlights our commitment to modernizing our Long-Term Care portfolio in Ontario. We are also finalizing our $140 million campus of care in Brantford, Ontario. The campus comprises of 160 redeveloped long-term care beds and 147 retirement suites. We are looking forward to welcoming our first residents at our [ retirement ] residence at the end of this month and expect to open our long-term care home by the end of the third quarter.

Once fully operational, each of our redevelopment project is expected to grow Sienna's AFFO per share by about 3%. At the end of July, the Ontario government announced enhancements to its construction funding program for long-term care homes. The new program provides greater funding flexibility and addresses regional differences in construction costs in particular with respect to higher building costs in the GTA. While we continue to evaluate the revised funding and its implications on our development program, we feel optimistic about the significant improvement given that over 80% of our development pipeline is located in the Greater Toronto area.

Moving to Slide 8, investing in our team members and building a workforce that is fully aligned is fundamental to grow and scale our operations. An important aspect of our growth story is the ownership culture we are building at Sienna, and we are particularly proud of our share ownership program. Since launching the program in 2022, more than 10,000 team members have become shareholders. This year, we made further enhancements by awarding additional shares to team members celebrating service milestones. Many of the impactful initiatives that have helped us build highly engaged teams are also highlighted in our 2025 impact report, which we released yesterday. The report highlights a meaningful difference our 14,500 team members make every single day in the lives of our residents, families and the communities we operate in.

With that, I'll turn it over to David for an update on our financial results.

Thank you, Nitin, and good morning, everyone. I will start on Slide 10 for financial results. In my commentary, in accordance with our MD&A disclosure, I will make reference to our operating results, excluding onetime items. In Q2 2025, revenue on a proportionate basis increased by 17.4% year-over-year to $253.6 million. This increase was largely due to occupancy and rental rate growth as well as increased care revenue in the Retirement segment. Adding to the increase were the contributions from our Long-Term Care platform including higher flow-through funding for direct care, higher private accommodation revenue and additional revenue from acquisitions completed in 2025. Same-property NOI increased by 8.2% to $45.1 million in Q2 2025, including by 12.3% in our Retirement segment and by 4.8% in the Long-Term Care segment.

In the Retirement segment, same property NOI increased by $2.3 million in Q2 2025 compared to last year, largely as a result of improved occupancy and rate growth. These improvements in addition to generating higher care revenue and maintaining a strict focus on operating expenses supported the year-over-year 230 basis point improvement of our same-property operating margin. We expect the margin expansion to continue as we get closer to our 95% occupancy target and achieve additional efficiencies through scale.

In addition to strong same property growth, we are progressing well with respect to our asset optimization initiatives, which includes 5 assets in the company's retirement portfolio. These assets will benefit from a range of initiatives that target a better market fit, including renovations, the change in suite mix, additional services or the alternative use of a property.

Occupancy in our optimization portfolio increased by 740 basis points year-over-year in Q2, adding to the strength of our results in the Retirement segment. In the Long-Term Care segment, same property NOI increased by $1.1 million. Fully occupied homes with growing waitlist and continued improvements in private occupancy supported the year-over-year growth. During Q2 2025, operating funds from operations increased by 24.3% to $29.3 million compared to last year primarily due to higher same-property NOI as well as contributions from acquisitions that were completed in the quarter. Adjusted funds from operations increased by 21% to $24.1 million compared to last year. The increase was mainly due to a higher OFFO offset by an increase in maintenance capital expenditures and lower construction funding income. On a per share basis, OFFO and AFFO per share decreased by 1.5% and by 4.0%, respectively, in Q2 2025.

Our 2025 AFFO payout ratio was 89.5%, a 380 basis point increase compared to Q2 2024. The decrease in OFFO and FFO per share and the increase in the company's payout ratio are the result of the temporary dilution in connection with our equity issuances in August 2024 and February 2025, which made the significant expansion of our asset base possible. In total, we raised $288 million of equity by issuing 18.7 million shares to fund our acquisitions and developments, with a substantial amount of the capital invested in recent months and further capital being deployed during the remainder of Q3, we expect to realize the full benefit in the quarters ahead.

Moving to Slide 11. Throughout the second quarter, we maintained our strong financial position and balance sheet. We ended the quarter with $313 million in liquidity, $1.2 billion of unencumbered assets and no major debt maturities until Q1 2026. Further adding to the strong financial position was the confirmation of the company's Morningstar DBRS BBB rating with stable trends. This confirmation was announced by Morningstar DBRS on August 1 and was based on Sienna's robust operating performance.

With that, I will turn the call back to Nitin for his closing remarks.

Thank you, David. We are at the beginning of a major demographic shift, the leading edge of the baby boomer generation is turning 80 and entering a stage of life where retirement living becomes a real consideration. This powerful tailwind, combined with a strong balance sheet and a healthy pipeline of growth opportunities, puts us in a great position to take advantage of the positive momentum in Canadian Senior Living.

With respect to our growth targets, we expect same-property NOI in our Retirement segment to benefit from continued occupancy and rental rate increases, and we remain confident to reach a stabilized occupancy target of 95% by Q1 of 2026. Based on the strong results during the first 6 months of 2025 and our outlook for the balance of the year, we maintain our guidance for Sienna's 2025 same-property retirement NOI growth to exceed 10%. Sienna's Long-Term Care portfolio is expected to benefit from the continued stability of the segment, the 2025 target for same property NOI growth, excluding onetime items, is expected to be in low single digits.

In addition, we expect Sienna's growth through acquisitions and development to continue. So far, we are on track to add nearly $660 million of assets by Q3 of this year, and we see potential for additional growth during the balance of the year. In June of this year, we celebrated the 15th anniversary of Sienna being listed on the Toronto Stock Exchange. Our recent growth initiatives are built on the same diversified strategy that has driven our success over the past 15 years.

Since our IPO, we added $2.3 billion of assets and grew from a long-term care operator in Ontario to one of the largest and most diversified senior living companies in Canada. During this time, Sienna has delivered a total shareholder return of over 400% and has significantly outperformed the TSX, which increased by approximately 140% over the same period. Last month, Sienna was named one of Canada's best companies in 2025 by Time Magazine, a ranking based on continuous growth, high employee satisfaction and a purpose-driven culture.

We are particularly proud of this recognition, which highlights our achievements and was made possible by our 14,500 team members who are also shareholders in our company. On behalf of our entire team and our Board of Directors, I want to thank you for your support, and we are now ready to take your questions.

[Operator Instructions]

Your first question comes from the line of Lorne Kalmar of Desjardins.

Maybe just focusing in on the development to start off a little bit. You guys got the two, that are going to be completed this quarter, you'll have just one ongoing. Obviously, you've called out the fact that you're still evaluating the implications from the updated development team. But I was just wondering if you could give us a little bit of insight into how you're thinking about new initiations and how many projects you think you guys can get underway in maybe the next 12 to 18 months?

On development, the new funding change in GTA, we are very optimistic about the funding is nearly increasing by close to 100%, many of the projects, which were not viable before could potentially be made viable. It's always -- you always have to go through the details because the program was just recently launched. We have close to 1,000 beds in pipeline in GTA markets. So we do expect us to continue on with some projects. It's a bit too early to comment on which one will go first. But I would expect at least one project in the next 12 or 18 months, considering that some of the next projects would be bigger than 160 beds that we've done in the past.

Okay. That's very helpful. And then just like a bit more of a technical one, I guess, on the construction funding subsidy for North Bay and Brantford, when do you guys expect that to come on? Would that come on sort of right when they're completed and you get the full benefit in 4Q?

Thanks for that question, Lorne. We would start getting the construction funding when the first moves in. So that would be in several weeks from now when we start moving residents to the new building. We've already completed the building in July, and we've gotten $4 million of development grant from them already. We're currently just undergoing final ministry inspection. And so within the next few weeks when the first resident moves in, that's when we would get the construction funding subsidies.

Okay. And just to confirm, that $4 million development grant that doesn't hit FFO?

No, it does not. It would go against the cost of construction.

Your next question comes from the line of Jonathan Kelcher of TD Cowen.

Thanks. Just sticking on the development front. For Brantford, for the retirement home, how should we think about the cadence of lease-up for the property? Have you guys started leasing that yet?

Jonathan, we have started leasing up. We have deposits already and residents are ready to move in when the homes open, which probably is end of this month or first week of September. Usually, for a property that size, our regular lease-up is around 2.5 to 3 years. Our goal would be to do it faster. But again, we will provide more detail on it as it opens up, and we'll start to see more and more visibility. And again, for some of the services, such as assisted ligand memory care, there are both -- they're more in time where people don't really put deposits. It's a need-driven service. And the retirement home that we're building in Brantford has assisted living has memory care. So we do expect that once it opens, it will get fill out pretty fast at least those wings.

Okay. And how many deposits would you have? Is there a lot, a little?

I would say it's in line with what you would expect when a building opens.

Okay. Fair enough. On the -- on your same property NOI outlook for retirement, you guys kept it at 10% plus, but you did do 14%, give or take, in the first half. Should we maybe think about this as kind of 10% plus for the back half of the year?

Yes, I would say that's not an assumption like that would make sense. We see margin growth. We see occupancy change. We saw a little bit of dip in occupancy in the second quarter, which is more driven by where we ended the first quarter. And as you know, it's an average when you start low, it takes a bit of time to build it up. And the numbers we're seeing in July where occupancy is trending up, we do expect to deliver on the 10% plus target we have for this year.

Okay. And then just lastly, on the 95% that you expect to hit in Q1, is there any reason to think that you can't get to 96% or maybe even a little bit more as the year progresses next year? 95% is not just a magic stop number, is it?

I agree with you 100%. I think there was a time when 95% was really the end mark for retirement. We see many of our homes delivering much above 95%. And you always have in a portfolio of a few properties in a market which is a bit oversupplied for a year or 2. I would say there, the reality is the majority of the homes and an average of 95% would be much above 95% and you might have a few homes which are at 90% or in the high 80s just depending on market conditions or if it is going through some optimization or renovation. But your question around that 95% is not really the high watermark, we agree with it completely. I think there's a lot more potential after 95%.

What do you think the high watermark would be for a portfolio like yours?

Yes. It's just very difficult to predict. I mean we have homes which are running at 100% quarter after quarter for multiple quarters. So one could argue, can everything become like that, I think that would be very optimistic. But getting to 96%, 97% is not unreasonable. I just think we have to first get to 95% before we start talking about some of those other numbers.

Your next question comes from the line of Himanshu Gupta of Scotiabank.

So just sticking to the retirement occupancy. How is your occupancy performance in Q2? And does that make you on track to reach your 95% target?

Yes. I mean our occupancy target -- our occupancy for -- we started the quarter in Q2 was a bit late. And so we do a bit of catch up. We had significant more move-outs in Q1 than we saw in the past. So it takes a bit of time to catch that up. We are happy with our July results where we are tracking around 93% or so. So I would say we -- and we don't see much change in the trend. We had a very successful open house. Our leads are up, our deposits are up, tours are up. So again, that's what gives us the confidence of getting to that 95% in Q1.

Got it. And then assuming like a seasonal dip in February, March, I mean, so technically, you have to get to that 95% by December or January. So it's like months ahead of us and 200 basis points to cover, fair to say that.

Yes, that's correct. There is seasonality. There is also a combination where you might have markets where there's lot of -- as long-term care homes are opening up, you might have a dip when the new homes open up, but that it will get absorbed quickly, it might take a month or so. We are not seeing the level of seasonality we used to see in the past. This -- the move-outs in Q1 were more driven by additional long-term care homes opening so that people on the wait lists go up and it takes a month or so to backfill the retirement home. So it's hard to say, Himanshu, at this time that we've done by December. I would say we would stick to the target of by Q1, we'll get to 95%. And again, all things are trending towards that.

Fair enough. Turning attention to retirement home NOI margins. Good to see some expansion in Q2 on a year-over-year basis. I mean in the past, you guys have said like 70% to 75% of revenue from incremental occupancy should go to NOI, is that math still working? And that's how you see it going forward as well?

Yes, that's right, Himanshu. We have said before that between 75% to 80% of any occupancy increase would fall to the bottom line. still continue to believe that, particularly now that we're above 92% occupancy, that would be more true than ever.

Awesome. Okay. Maybe the last question is on North Bay. So that 3% AFFO accretion would you say that most of it or the bulk of it is coming from that annual construction subsidy and not much of incremental, fair to say that?

Yes. No. I mean it's going to come from a combination of incremental NOI. Remember that North Bay, it is a bigger building than the older building that we have currently. We're also going to get more NOI from higher preferred revenues. But there will also be, of course, the lift from the construction funding subsidy as well, of which it would be $3.3 million on an annual basis. So it really is the combination of the two.

With no further questions, that concludes our Q&A session, and it also concludes today's conference call. You may now disconnect.