Sabra, Sienna JV to Acquire Extendicare’s Senior Living Portfolio for $243 Million

Sienna Senior Living (TSX: SIA) is growing in Canada thanks to a new strategic joint-venture agreement with Sabra Health Care REIT (Nasdaq: SBRA).

Leaders with the Markham, Ontario-based operator announced Thursday an agreement to acquire from Extendicare (TSX: EXE.TO) a 50% ownership stake in a portfolio of 11 Esprit senior living communities located in Ontario and Saskatchewan. The communities are set to trade hands for $307.5 million Canadian dollars, or about $243 million.

Sienna, which will manage the communities, is acquiring the portfolio in partnership with Sabra, which is also getting a 50% ownership stake.

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Sienna’s share of the purchase price for the portfolio was nearly $154 million. Sienna and Sabra also plan to allocate a collective $5 million for further capital improvements following the closing of the deal.

On Sienna’s side, the deal was financed through the combination of a $150 million acquisition term loan, proceeds from the sale of Sienna’s Rideau Retirement and Camilla Care communities and draws on existing credit facilities.

For Sienna, the communities offer an “attractive expansion opportunity” in the province of Ontario, where it already has communities. The transaction also provides a “rare opportunity” to gain a foothold in the province of Saskatchewan, where Sienna sees room for further growth.

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“We are excited to enter into the Saskatchewan market and expand our Ontario footprint, welcome new team members and residents, and integrate high quality assets within the Sienna platform,” said Sienna CEO and President Nitin Jain in a press release on the deal. “In addition, our strategic joint venture with Sabra through this transaction is expected to be an additional source of future growth for the company.”

Sienna and Sabra have a longstanding relationship and the new JV builds upon it, according to Sabra CIO Talya Nevo-Hacohen.

“We are pleased to deepen our strategic relationship through the pending acquisition of a high-quality senior housing portfolio with substantial scale,” Nevo-Hacohen said.

With the sale, Extendicare is pivoting to focus on growing its long-term care and home health care segments, according to President and CEO, Dr. Michael Guerriere.

“Proceeds from the sale will provide the flexibility to allocate capital strategically, including priority investments in our people, technology and our long-term care redevelopment program,” he said.

TD Securities Inc. is acting as financial advisor to Sienna, while Torys LLP is acting as legal advisor to Sienna in conjunction with the acquisition. The operator expects the acquisition to close in the latter part of the second quarter of 2022.

As at Sept. 30, the company owned and operated 70 senior housing and care residences in addition to managing 13 others for third parties.

Portfolio details

Four of the 11 communities were in Saskatchewan, with the rest in “close proximity” to the Greater Toronto Area in Ontario.

The 11 properties also represent the entirety of Extendicare’s private-pay senior living operations in Canada. The company currently operates or provide contract services to 120 long-term care homes and retirement communities in Canada.

The portfolio averages about six years old and is made up of a little more than 1,000 units of predominantly independent living units, with some assisted living and memory care. Sabra and Sienna have also identified excess land at four of the properties for the potential development of 233 additional suites.

All of the communities were built or expanded in 2010 or later, and each has amenities such as movie theaters, fitness centers and spas.

Average occupancy of the portfolio in the first nine months of 2021 reached 90%, excluding one property that opened in 2019. Occupancy for the portfolio has overall trended upward since the second quarter of last year, and Sienna expects to see continued occupancy growth in the future when the pandemic wanes.

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