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Investor Presentation January Leisureworld

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Investor Presentation January Leisureworld Powered By Docstoc
					Investor Presentation
January 2012




                        Enduring Value, Emerging Opportunities
    Cautionary Note



    Certain information in this presentation and in oral answers to questions contains forward-looking
    information. Actual results could differ materially from conclusions, forecasts or projections in the
    forward-looking information, and certain material factors or assumptions were applied in drawing
    conclusions or making forecasts or projections as reflected in the forward-looking information.

    Additional information about the material factors and risks that could cause actual results to differ
    materially from the conclusions, forecasts or projections in the forward-looking information and the
    material factors or assumptions that were applied in drawing a conclusion or making a forecast or
    projection as reflected in the forward-looking information are disclosed in disclosure documents
    filed on SEDAR (www.sedar.com).




2
    Business Overview


    Long-Term Care (LTC):                    Non-LTC:

     Ontario’s third largest LTC provider    3 retirement residences: 323 suites
     26 LTC homes / ~ 4,300 residents        1 independent living residence: 53
                                               apartments
     Average age 86 years, 4 to 5
      medical conditions, cognitive           Subsidiaries:
      impairment, require 24/7 medical         • Ontario Long-Term Care
      care and assistance                      • Preferred Health Care Services
     ~ 91% of Q3 2011 total revenue




    Stable and predictable
    throughout economic cycles


3
          Factors Supporting Growth & Stability

           Favourable Demographics




    Source: Statistics Canada
4
         Factors Supporting Growth & Stability

         Increasing Life Expectancy
             Age (years)




    Source: Statistics Canada; Life expectancy at birth and at age 1, by sex, Canada (1920 – 1922 to 2005 – 2007)

5
     Factors Supporting Growth & Stability


    Increasing affluence
         Relative increases in net worth and household income allow seniors to afford
          higher quality housing and amenities

    Changing family dynamics
         Dual income families have less time to care for parents
         Increasing demand for home healthcare services

    Demand for cost-effective healthcare alternatives
                                                                  Strong
        •   Hospital care: ~$1,000/day acute; ~$600/day chronic
        •   LTC care: $152.94/day
                                                                  financial
                                                                  incentive




6
      Ontario Long-Term Care


    Highly Regulated Environment / High Barriers to Entry
     Essential service and vital part of community infrastructure
     Effectively 100% funded by government – funding based on need, not
      economy
     Stringent licensing requirements
     Additional laws and regulations: public health, safety, privacy



    77,500 LTC beds
    Wait List: ~20,000



7
    MOHLTC Funding


    Operating Funding Increases Exceed CPI Growth




8
      MOHLTC Funding Model


     Incentive to manage carefully within envelopes
     Larger, more professional operators advantaged
     Per diem base: $152.94 per day, per bed                         MOHLTC Funding


                                                                      Return of Surplus
     MOHLTC Funding Envelopes               Cost Categories
                                                                    Operator Profit Stream

            Nursing and
                                               NPC costs
        Personal Care (NPC)


            Programs and
        Support Services (PSS)
                                               PSS costs

          Accommodations
               Raw Food                         Raw Food
                                                                         Operator
       Other Accommodations (OA)         Room, Board and Services         Profits




9
                MOHLTC Funding Model


          ($ per bed, per day)
                                                                   A home                       B home                     C home
        NPC                                                         86.05                        86.05                      86.05
        PSS                                                          8.35                          8.35                      8.35
        Raw Food                                                     7.46                          7.46                      7.46
        OA                                                          51.08                         51.08                     51.08
        Base Operating Funding                                     152.94                       152.94                     152.94

        Accreditation                                                 0.33                          0.33                      0.33
        Pay Equity / Equalization Adjustment                          3.25                          5.25                      5.25

        Construction Funding                                        10.35
        Structural Compliance                                                                      2.50                       1.00

        Total Government Funding*                                   166.87                      161.02                      159.52

        Preferred Accommodation**                                    10.80


     * Excludes Property Tax Funding at 85% of taxes paid
     ** A home based on 60% of beds designated private accommodation; B and C home amount dependent on number of private and semi-private rooms



10
      Capital Cost Reimbursement


      Construction costs initially borne by LTC home owners
       • Contracted daily government funding provides substantial offset
       • Level of reimbursement tied to design and construction standards; not tied to
         occupancy

      Construction funding for “New” beds
       • Approximately 52% of Leisureworld portfolio
       • $10.35/per bed, per day
       • 15.2-year term, $96 million support for AFFO

      Structural compliance premium; life of license
       • B beds: $2.50 per day, C beds: $1.00 per day

      Capital Renewal for B & C homes
       • Awaiting government announcement on revised program – expected in H2 2012


11
     Additional LTC Revenue Drivers


      Occupancy
      • Incentive payment for occupancy 97%
      • Government funds at 100%

      Preferred accommodations
      • Up to 60%
      • Private: $18 per day; Semi-private: $8 per day
      • Fees charged directly to residents
      • ~25% of NOI




12
                           Competitive Strengths


                          LTC: Maximizing Occupancy & Preferred Accommodation

                           Daily review of occupancy across all LTC homes
                              • Overall > 97%; Preferred @ maximum allowable level (60% in new homes)

                           Branding and defined marketing strategies
                           Survey residents, families and staff
                                                                                                                                 Private Occupancy
                 5,000
                 4,500
                                               Total Occupancy                                            1,600

                                                                                                          1,400
                 4,000
                 3,500                                                                                    1,200
     # of beds




                 3,000                                                                        # of beds   1,000

                 2,500                                                                                     800
                 2,000
                                                                                                           600
                 1,500
                                                                                                           400
                 1,000
                                                                                                           200
                  500
                     -                                                                                        -
                         1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011                         2005      2006         2007     2008       2009     2010        2011

                             Average Residents per Day      Total Leisureworld LTC Capacity                   Average Private Residents per Day    Total Private Leisureworld LTC Capacity




13
      Competitive Strengths


     High Quality Care and Services

      Culture of quality
      Train, benchmark, establish best practices
      Continuously monitor care and service delivery
      Leisureworld homes are accredited through
       Accreditation Canada




14
      Competitive Strengths


     Professional On-Site Administration

      Administrator on site ensures close
       oversight, timely response
      Support at regional, corporate levels
       and in other LTC homes

                                               Leisureworld’s ON LTC locations




                                               Leisureworld’s GTA LTC locations


15
     Competitive Strengths


     Continued Maintenance & Upgrade of Properties

      Effective, as >50% of LTC homes built post-1998
       • Classified “New”

      Proactive approach seeks to prevent problems, rather than fix later




16
      Competitive Strengths


     Continuous Cost Control

      Daily operating expense analysis/control
      Centralized purchasing, high volumes for best pricing




17
       Competitive Strengths


     Access to Low-Cost Capital Financing

      Current debt structure efficient
      Industry-leading credit ratings*
        • A (Stable) DBRS
        • A-(Stable) S&P

      CMHC-insured mortgages
        • Refinancings
                                 Significant cost
        • Acquisitions             advantages




     * 2015 Notes

18
     Non-LTC Operations


     Retirement residences (3)
      Gravenhurst, Muskoka
      The Royale, Kanata
      The Royale, Kingston

     Independent living residence (1)
      Midland Gardens, Scarborough

     Ontario Long Term Care
      Central purchasing agent, registered
       dieticians, social workers, consultants

     Preferred Health Care Services
      Homecare, nursing, education and training




19
      Financial Review


     Revenue and Net Operating Income
     (YTD: nine months ended Sept. 30; C$ millions)



                      Revenue                                                     Net Operating Income




       FY2010: LSCLP’s results until March 22, corporation’s results thereafter
       FY2009: LSCLP’s results


20
               Financial Review

            Adjusted Funds From Operations (AFFO)
            (Three and nine-month periods ended Sept. 30)
     (C$ thousands, except per share and % amounts)                              Q3 2011   Q3 2010   YTD 2011   YTD 2010¹
     Net Operating Income (NOI)                                              $   12,358    10,505      33,872     31,158
     Construction funding (interest)                                                781       830       2,358      2,607
     Interest expense (net)                                                      (4,403)   (3,835)   (12,255)     (12,056)
     Income tax recovery (expense)                                                 (527)     (601)      (481)      (1,295)
     Administrative expenses                                                     (3,307)   (2,379)    (9,507)     (7,760)
     After-tax transaction costs                                                    131        26        833          26
     Funds From Operations (FFO)                                             $    5,033     4,546      14,820     12,680
     Income tax book to filing adjustment                                             --        --      (739)          --
     HRIS recovery (expense)                                                         65       (23)        29         (24)
     Income support                                                               1,299         --      2,204          --
     Construction funding (principal)                                             1,352     1,303       4,041      3,792
     Maintenance Capex                                                              (93)     (293)      (530)       (898)
     Adjusted Funds From Operations (AFFO)                                   $    7,656     5,533      19,825     15,550
     AFFO per share                                                              0.3135    0.2765      0.8790        N/A
     Dividends declared per share                                                0.2124    0.2124      0.6372        N/A
     AFFO payout ratio                                                           67.8%     76.8%      72.5%          N/A
      1   LSCLP’s results until March 22, corporation’s results thereafter
21
              Financial Review


            Solid Balance Sheet and Strong Credit Ratings

             $25.4 M in cash & cash equivalents at Sept. 30, 2011
             51.5% Debt to Gross Book Value at Sept. 30, 20111
             12 month Adjusted EBITDA / Interest Expense2: 2.8 X
             Committed to maintaining investment grade credit rating
             Enables sustainable payout ratio of ~ 80% of AFFO
             Industry-leading credit ratings3
                 • DBRS:                            A (Stable)
                 • S&P:                             A- (Stable)



     1.   Debt to gross book value ratio is defined as mortgages and other debt payable
          over total consolidated assets plus the amount of accumulated amortization.
     2.   Pro forma trailing 12 months
     3.   2015 Notes

22
     Acquisition of Madonna LTC Residence


      160 bed, Class “A” LTC home in Orleans, ON
      99.4% current occupancy
      $20.1 million purchase price: $13.4 million for
       business / $6.7 million for construction funding
      Funded by cash / working capital and $15.9
       million in debt @ 5.2%
      $1.1 million in operating income in 2010
      8.41% cap rate, accretive to AFFO
      Subject to approval of MOHLTC and LHIN




23
      Acquisition of ‘The Royale’ Retirement Residences


      Two properties: Kingston and Kanata, ON, comprising 288,500 sq. ft., with a total of
       294 luxury suites
      Cap rate 8%; AFFO accretion in first year
      $94.5 million purchase price; includes 3-year, $5.5 million escrow for income
       guarantee during lease-up period
      Financing: $46 million equity @ $10.50/share, $55 million debt @ 4%
      Properties re-branded: “The Royale”
      Kingston 57.4% leased; Kanata 52.5% leased (as at Sept. 30, 2011)
          • Target net average move-in rate: 2.5 per property / month; ~ 90% occupancy by 2013




24
     Strength in Diversification Across Continuum of Care



     Advantages of Scale
      Purchasing power
      Access to low cost capital financing
      Expertise in real estate management
      In-depth knowledge of seniors care
      Experience in regulatory issues and government relations
      Employee opportunities
      Ability to extend client relationships




25
     Growth Strategy


     Enduring Value: Maintain Strong LTC Operating Model

     Funding
       Fully funded by government at ≥97% average annual occupancy

     Occupancy
       Leisureworld’s 2011 (YTD) average total LTC occupancy rate = 98.5%
       Waiting list for LTC in Ontario

     Cost Control
       Cost discipline ensures consistency of NOI


             Generating Reliable Cash Flow for Shareholder Dividends



26
     Growth Strategy


     Emerging Opportunities: Across the Continuum of Care

     Continued focus on LTC market
       Capital renewal program
       Accretive acquisitions
        • Fragmented market: top 10 LTC operators in Ontario own ~ 40% of beds

     Opportunities in Non-LTC market
       Organic growth
        • Increase occupancy at Royale residences
        • Ontario’s “Ageing at Home” initiative

       Accretive acquisitions
        • Independent living residences, retirement homes, assisted living centers
        • Home healthcare services



27
     Strong Leadership


     Experienced senior management
     David Cutler, CEO      20 years with Leisureworld and predecessors; responsible for business growth; senior
                            executive of industry association
     Manny DiFilippo, CFO   Expertise in M&A, internal audit, financial controls, risk management and financial
                            reporting; 19 year financial career with the Weston/Loblaw organizations
     Paul Rushforth, COO    More than 15 years of senior healthcare management experience, incl: Extendicare,
                            Calgary Regional Health Authority

     Strong governance
     Dino Chiesa            Chair, CMHC, Vice-Chair CAP REIT, formerly chair of RES REIT; served as Ontario
                            ADM
     John McLaughlin        Director, Futuremed Healthcare Income Fund, AIM Health Group; formerly senior
                            executive with Extendicare, American Medical Int’l
     Janet Graham           Managing Director, IQ Alliance Inc.; provides real estate advisory services to corporate
                            clients; former senior executive with a Canadian chartered bank
     Jack Macdonald         CEO Compass Group Canada and ESS North America, a leading food service and
                            facilities management company, formerly President, Communicare Division, MDS
                            Health Group




28
      Investment Highlights


     Attractive dividend yield and stability
        Strong business fundamentals and government funding

     Favourable industry fundamentals
        Aging population, increasing life expectancy, changing family dynamics
        Growing demand for cost-effective alternatives to hospital care
        Ontario wait list for LTC

     Large, quality portfolio
        More than 50% of LTC homes classified “New”
        Economies-of-scale

     Growth potential across continuum of seniors living
        Strong platform to support expansion



29

				
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