Annual & Special Meeting
April 24, 2013
Investor Presentation
June 2013
Cautionary Note
Certain information in this presentation and oral answers to
questions may contain 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).
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Business Overview
Canada’s fifth largest operator of seniors housing / ~6,000 employees
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Long-Term Care (LTC)
Non-LTC
Ontario’s third largest LTC provider
2 retirement residences in ON: 294 suites
27 LTC homes / 4,498 beds
3 retirement residences in BC: 392 suites
Average age 86, 4 / 5 medical conditions,
cognitive impairment, require 24/7 care
1 independent living residence:
53 apartments
~ 90% of 2012 total revenue
Subsidiaries: Ontario Long-Term Care,
Preferred Health Care Services
Ontario Long-Term Care (LTC)
Highly Regulated Environment / High Barriers to Entry
• Stringent licensing requirements
• Additional regulations: public health, safety, privacy, LTC Act, and LHIN’s
LTC Wait list in Ontario:
77,500
Wait list
4
LTC beds
>20,000
Leisureworld LTC Portfolio
LHIN
A
Central
North Simcoe
Muskoka
B
C
Total
544
170
714
366
152
518
148
148
North East
5
Waterloo
Wellington
96
Hamilton Niagara
Haldimand Brant
32
90
122
Central West
704
159
863
Toronto Central
318
238
556
Central East
224
363
886
Mississauga
Halton
355
355
South West
80
80
Champlain
160
Total
2,444
96
299
160
299
1,755
4,498
Retirement Homes
Active Living with Peace of Mind
• Private Pay – no government funding, market driven rates
for rent and services
• Regulated and licensed in Ontario by the Retirement Home
Authority
• Ontario Retirement Communities Association –
• British Columbia Seniors Living Association – accreditation
as part of membership
• Assisted Living and Independent Living – aging in place
• Residents enjoy amenities, dining, leisure programs,
security, lifestyle and staff 24/7
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Retirement Homes / IL Residents
Home
Royale Kanata
158
Royale Kingston
136
Royale Pacifica – South Surrey, BC
130
Royale Peninsula – South Surrey, BC
127
Royale Astoria – Port Coquitlam, BC
135
Total RH Suites
715
Independent Living
Scarborough
7
Number of RH Units
Number of IL Units
53
Preferred Health Care Services
Community Home Care Services
• Leisureworld’s subsidiary, Preferred Health Care Services (PHCS) offers
professional home care, education, training and relief staffing services
• Services support and complement Leisureworld’s core LTC resident care operations
• Employees include registered nurses, personal support workers and companions
• In 2012, PHCS contributed $16 million to revenues and $2.7 million to NOI
• 5% increase in home care funding in 2013 Ontario budget
• Provides ~430,000 of contracted hours across three CCAC contracts with a revenue
base of ~$28/ per hour equating to ~75% of PHCS revenue
• Remaining sources of revenue generated from private volumes, foot care services
as well as education and training services
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Specialty Care Portfolio
• Announced April 4, 2013
LTC Home – Bobcaygeon
• Pending regulatory approval
• Portfolio comprising:
• 6 LTC homes
• 2 retirement residences
• 2 combined LTC / RR
• Management services
business
• 80% LTC beds (1,235 beds)
• 20% retirement suites (326
suites)
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Retirement Living – Campbellford & Grimsby
Acquired and Managed LTC Homes
Number of LTC Beds Acquired
LHIN
A
B
C
Total
Central
327
60
31
418
Central East
96
96
Champlain
224
224
Mississauga /
Halton
160
160
South East
96
Central West
147
Total LTC
Beds
1,050
Managed Homes
7 managed homes
10
94
190
147
154
31
1,235
Number of LTC Beds
1,010
Acquired and Managed Retirement Homes
11
Acquired Homes
Number of RH Units
Cedarvale Lodge
(Combined with 60 LTC)
130
(39 AL + 91 IL)
Island Park
85
Lincoln Park
70
Trillium Ridge
(Combined with 190 LTC)
41
Total RH Suites
326
Managed Homes
Number of RH Units
6 managed homes
428
Specialty Care Portfolio
$254M
purchase price*
$218M
Properties & Seniors Living
Management business
$35.5M
Construction
funding receivable
8.1% Cap Rate on $17.7 MM of NOI (excluding construction funding receivable)
$78.7 M Subscription Receipt Offering / $46.0 M Convertible debentures offering
Leverage with convertible debentures increases from 52% to 57%
Transaction expected to close in Q4 2013
* $254 million purchase price excludes estimated $10 million mark-to-market adjustment on assumed debt.
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Combined Leisureworld and
Specialty Care Portfolios
Combined LTC Portfolios
by Class
Class A
3,494 beds
(61%)
Class C
1,786 beds
(31%)
Basic: 892
Preferred: 894
Combined LTC and
Retirement Portfolios
1,065 RR/IL suites
(16%)
Basic: 1,430
Preferred:
2,064
Basic: 290
Preferred: 163
Class B
453 beds
(8%)
5,733 LTC beds
(84%)
Total Beds: 5,733
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Total Units: 6,798
Specialty Care Acquisition Benefits
• LTC bed count
• Retirement suites
28%
44%
• 85% of Specialty Care’s LTC beds are Class A / Average age of 12 years
• Specialty Care’s LTC homes have 99.3% average occupancy
• Increases Leisureworld’s percentage of Class A LTC beds to 61% overall
• Combined LTC occupancy: 98.9%
• Expected to be 14% accretive to basic AFFO per share in year one
• Enhanced employee opportunities – builds value across the enterprise
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Strong Leadership
Experienced senior management
Lois Cormack, President
and CEO
Former President, Specialty Care. Extensive experience in Ontario retirement living
and long-term care. Board Member: Ontario Long-Term Care Association - served as
Association President for two years
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, including:
Extendicare, Calgary Regional Health Authority
Strong governance
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Dino Chiesa
Former Chair, CMHC; former Vice-Chair CAP REIT; former CEO of RES REIT; served
as Ontario ADM
David Cutler
CEO of Centric Health / Former CEO of Leisureworld. More than 20 years with
Leisureworld and predecessors; senior executive of industry association
John McLaughlin
Former 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
Chair and former CEO of Compass Group Canada and ESS North America, a leading
food service and facilities management company, former President, Communicare
Division, MDS Health Group
Capital Market Profile
TSX: LW
IPO: March, 2010
Indices: TSX / S&P SmallCap Index,
MSCI IMI Canada
Dividend: $0.075 / month ($0.90 / year)
Current yield: ~ 7.0%
Shares outstanding: 29,282,324
2012 Payout ratio: 68%
Market capitalization: ~ $370 million
Recent close: $12.63 (June 3, 2013)
52-week high / low: $13.19 / $11.35
Analyst Coverage:
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LW Shareholder Returns
(from IPO to Dec 31, 2012)
¹
54.8%
1 TSX
17
Composite index
Total Return, including dividends
Environmental Factors Supporting
Growth and Stability
Favourable Demographics
Canadians over the age of 75
30%
27%
27%
30%
30%
31%
70%
69%
Source: Statistics Canada
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73%
73%
70%
70%
Environmental Factors Supporting
Growth and Stability
Increasing seniors’ affluence
•
Relative increases in net worth and household income allow seniors to afford higher
quality housing and amenities
Changing family dynamics
•
•
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Dual income families have less time to care for parents
Increasing demand for home healthcare services
Health Care Sector
Provincial governments focused on controlling healthcare costs
Ontario Long-Term Care (LTC) bed
Ontario Hospital (alternative level of
care)
$155.19 / day
Acute care bed: ~ $1,000 / day
Chronic care bed: ~ $ 650 / day
Healthcare spending currently accounts for $0.46 of every $1.00 collected by the Ontario
government in taxes or received from the federal government in transfer payments.
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Ontario Long-Term Care (LTC)
Provincial LTC Beds
Basic: 892
Preferred: 894
Basic: 290
Preferred: 163
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Basic: 1,430
Preferred: 2,064
Provincial LTC Homes
Ontario Long-Term Care (LTC)
Leisureworld is the third largest LTC provider in the province
Operator
LTC Beds
% of Total
LTC Homes
% of Total
Revera Inc.
6,747
8.7%
58
9.3%
Extendicare Canada Inc. 1
4,989
6.4%
34
5.5%
Leisureworld Senior Care Corporation 1, 2
4,498
5.8%
27
4.3%
Chartwell Seniors Housing REIT 1
3,001
3.9%
23
3.7%
Top 4 total
19,235
24.8%
142
22.8%
Estimated provincial total
77,500
622
Source: Care Planning Partners Inc., as at March 2013
Notes
1 Publicly traded,
2 One
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listed on the TSX
LTC home is operated on behalf of Spencer House Inc., a non-profit charitable organization
MOHLTC Funding Model
• Incentive to manage carefully within envelopes
• Per diem base: $155.19 per day, per bed
MOHLTC Funding Envelopes
Cost Categories
$86.91
Nursing and
Personal Care (NPC)
NPC costs
$8.43
Programs and
Support Services (PSS)
Accommodations
PSS costs
$7.68
Raw Food
Raw Food
$52.17
Other Accommodations (OA)
MOHLTC Funding
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Room, Board and Services
Return of Surplus
Contributes to Operating Margin
Operator
Margin
LTC 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 occupancy
Construction funding for “New” (Class A) beds
• Approximately 54% of Leisureworld portfolio
• $10.35 per bed / per day
• 14-year term, $93 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
• Government announcement on complete program revisions expected in 2013
• Recent preferred accommodation increase provides enhanced incentive
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Additional LTC Revenue Drivers
Occupancy
• 100% government funding for occupancy ≥ 97%
• LW currently at 98.7%
Preferred accommodation
• Up to 60% of operator capacity
• LW currently at maximum allowable level
• Private Pay Per Day: $18.00 / $19.75* / $21.50**
• Semi-private Per Day: $8.00 / 9.00* / $10.00**
• Fees charged directly to residents
• ~ 22 % of Leisureworld’s LTC NOI
*Effective July 1, 2012 for new residents in Class A Homes
** *Effective July 1, 2013 for new residents in Class A Homes
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Growth from Capital Renewal
Redevelopment of Class B and C Beds
• With the acquisition of Specialty Care, Leisureworld has an opportunity to redevelop approximately
2,300 Class B and C beds into Class A beds
• The B and C beds represent approximately 40% of Leisureworld’s LTC portfolio, including the
Specialty Care acquisition
Financial Merits
• Redeveloped beds would qualify for Construction Funding at minimum rate of $14.30 (LEED standard)
per diem for the life of the 25 year license
• Up to 60% of the A beds would be eligible for the private pay per diem, currently set at $19.75 and
increasing to $21.50 effective July1, 2013
• Expected Net Operating Income lift from an increase in the beds attracting preferred premiums
relative to the current C beds
Identified Opportunities
• Leisureworld has identified current potential retrofit and green field redevelopment opportunities
• Ability to unlock prime land values from select properties and redevelop within their respective LHIN
• Opportunity to leverage existing owned vacant land
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Operating Focus
High Quality Care and Services
• Culture of quality: train, benchmark, establish best practices
• Continuously monitor care and service delivery
• Homes assessed by Accreditation Canada / CARF*
Professional On-Site Administration
• Administrator on site ensures close oversight, timely response
• Support at regional, corporate levels and in other LTC homes
Continuous Maintenance & Upgrades
• Effective, as >50% of LTC homes built post-1998 (“New”)
• Proactive approach; Dedicated resource for asset management
Disciplined Cost Control
• Daily operating expense analysis/control
• Centralized purchasing, high volumes for best pricing
*Commission on Accreditation of Rehabilitation Facilities
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Financial Review
& Growth Strategy
Financial Review
& Growth Strategy
28
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1
LSCLP’s results until March 22, corporation’s results thereafter
2
EBITDA is defined as income from operations, before unusual items
3
Represents cash distributions post-IPO
$1.25 per share
$1.15 per share
N/A
2012 Financial Review
2012 Revenue and NOI Contribution
30
Financial Review
Adjusted Funds From Operations (AFFO)
Q1 2013
Q1 2012
FY 2012
FY 2011
13,970
11,911
56,337
45,939
757
761
3,060
3,111
(4,882)
(4,300)
(19,997)
(16,615)
--
--
1,095
--
(455)
(405)
(1,826)
(1,185)
(4,163)
(3,321)
(13,861)
(14,134)
999
303
1,448
2,465
6,226
4,949
26,256
19,581
Income tax to book filing adjustment
--
--
--
(739)
HRIS expense
--
(11)
52
76
Deferred share unit plan compensation
428
--
506
--
Income support
338
997
3,188
3,105
Construction funding (principal)
1,527
1,395
5,696
5,421
Maintenance Capex
(339)
(189)
(1,416)
(864)
8,180
7,141
34,282
26,580
Basic AFFO per share
0.2795
0.2923
1.2534
1.1544
Dividends declared per share
0.2250
0.2124
0.8538
0.8496
Basic AFFO payout ratio
80.5%
72.7%
68.1%
73.6%
(C$ thousands, except per share and % amounts)
Net Operating Income (NOI)
$
Construction funding (interest)
Net finance charges
One-time bond redemption premium
Current income taxes
Administrative expenses
After-tax transaction costs
Funds From Operations (FFO)
Adjusted Funds From Operations (AFFO)
31
$
$
Financial Review
Cash distribution & AFFO per share/Payout ratio
*Q2 2010 included a partial dividend payment for March, 2010, as LW completed its IPO and public listing on March 23, 2010
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Financial Review
Strong Balance Sheet
• 52% Debt to Gross Book Value as at March 31, 2013¹
• $18.8 million in cash & cash equivalents as at March 31, 2013
• $10 million undrawn, committed credit facility
• $61.5 million revolving credit facility ($46 million drawn as at March 31, 2013)
Senior Secured Notes (4.81% -- due 2015)
• Notes rated A (Stable) by DBRS and A- (Negative) by S&P
• $15.7 million buy-back in 2012 – initial step towards re-financing notes prior to
maturity; Re-financing options expected to be accretive to AFFO per share
• Bridge financing available if necessary
• Final decision on re-financing Notes to occur prior to November, 2014
1 Debt
33
to gross book value ratio is defined as mortgages and other debt payable over total consolidated assets plus the amount of accumulated amortization.
Debt Composition
Pro forma Debt Structure
• Debt structure would allow for staggered and balanced debt maturities
• Borrowing rates are at an all time low, presenting immediate accretion opportunities
upon refinancing the $294.3mm, 4.81% Senior A Secured Notes
• Recent CMHC financing of $17.3 MM at 3.04% for 10 years
Current Debt Structure
Pro-Forma Debt Structure
10
Mortgage
10
~ 4.15%
Converts
7
Years to Maturity
Years to Maturity
7
6
5
Converts
3
Senior A Secured Notes
1
Floating Facility
-
4.65%
50
4.81%
~3.05%
100
150
$ mm
ATM: 3.9 years
Avg. Rate: ~4.50%
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Converts
200
250
300
6
Mortgage
5
Converts
3
Senior A Secured Notes
1
Floating Facility
-
~ 3.77%
4.65%
50
4.81%
~3.05%
100
150
$ mm
ATM: 3.8 years
Avg. Rate: ~4.25%
200
250
300
Short-term priorities
• Integrate Specialty Care
• Enhance the back office infrastructure framework
• Focus on organic growth
• Lease-up retirement portfolio through strengthen the retirement platform and back office
support
• Continue to expand home care volumes through PHCS
• Redevelopment of C class homes and use of existing land
• Growth and expansion of management and consulting business
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Growth Strategy -- Long-term focus
• Disciplined and accretive high quality assets
• Retirement acquisition opportunities within Ontario and other provinces
• LTC in Ontario that fits with our redevelopment plan – to maximize building size
and use of land
• Home care expansion
• Management services in senior’s care
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