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Investor PresentationDecember 6, 2012
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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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Long-Term Care (LTC) Non-LTC
Ontario’s third largest LTC provider 3 retirement residences in ON*: 323 suites
27 LTC homes / 4,474 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 Q3 2012 total revenue Subsidiaries: Ontario Long-Term Care, Preferred Health Care Services
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Business Overview
Canada’s fifth largest operator of seniors housing / ~6,000 employees
* Muskoka residence (29 suites) currently being converted to a short stay healthcare and convalescent care facility
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TSX: LW IPO: March, 2010
Indices: TSX / S&P SmallCap Index, MSCI IMI Canada
Dividend: $0.075 / month ($0.90 / year)*Current yield: 6.9%
Shares outstanding: 29,272,889 Recent close: $12.35 (Dec. 4, 2012)
Market capitalization: ~ $360 million 52-week high / low: $13.00 / $10.75
Analyst Coverage:
Capital Market Profile
* Monthly dividend increased to $0.075 per share from $0.0708 per share, effective Dec. 2012
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Experienced senior managementDino Chiesa, Interim CEO Former Chair, CMHC; former Vice-Chair CAP REIT; former CEO of RES REIT; served
as Ontario ADM
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 governanceDino 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
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Strong Leadership
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Source: Statistics Canada
Favourable DemographicsCanadians over the age of 75
Factors Supporting Growth & Stability
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Increasing Life Expectancy
Factors Supporting Growth & Stability
Source: Statistics Canada; Life expectancy at birth and at age 1, by sex, Canada (1920 – 1922 to 2005 – 2007)
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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
Provincial governments focused on controlling healthcare costs
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Factors Supporting Growth & Stability
Ontario Long-Term Care (LTC) Ontario Hospital
$155.19 / day Acute care bed: ~ $1,000 / dayChronic care bed: ~ $ 650 / day
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Long-Term CareOntario’s 3rd largest LTC Operator
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• Essential service and vital part of community infrastructure
• Effectively 100% funded by Ontario government (MOHLTC)̶K Funding based on need, not economic conditions
• Stringent licensing requirements
• Additional laws and regulations: public health, safety, privacy
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77,500 LTC bedsWait List: ~20,000
Highly Regulated Environment / High Barriers to Entry
Ontario Long-Term Care (LTC)
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MOHLTC Base Operating Funding Increases Exceed CPI Growth
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MOHLTC Funding
(funding per bed, per day)
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• Incentive to manage carefully within envelopes
• Larger, more professional operators advantaged
• Per diem base: $155.19 per day, per bed
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OperatorProfits
MOHLTC Funding Envelopes Cost Categories
MOHLTC Funding Return of Surplus Operator Profit Stream
Accommodations
NPC costs
PSS costs
Raw FoodRaw Food
Nursing and Personal Care (NPC)
Programs andSupport Services (PSS)
Room, Board and ServicesOther Accommodations (OA)
MOHLTC Funding Model
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* Excludes Property Tax Funding at 85% of taxes paid** A home based on 60% of beds designated private accommodation; new admissions after July 1, 2012 pay higher rate. B and C home amount dependent on number of private and semi-private rooms
MOHLTC Funding Model
Funding ($ per bed / per day) A home B home C home
NPC 86.91 86.91 86.91
PSS 8.43 8.43 8.43
Raw Food 7.68 7.68 7.68
OA 52.17 52.17 52.17
Base Operating Funding 155.19 155.19 155.19
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* 169.12 163.27 161.77
Preferred accommodation** 11.85 / 10.80 Variable Variable
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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
• 15-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
• Government announcement on complete program revisions expected in 2013
• Recent preferred accommodation increase provides enhanced incentive
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LTC Capital Cost Reimbursement
*Reflects recent acquisition of Madonna LTC home
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Occupancy
• 100% government funding for occupancy ≥ 97%
• Government funds at actual plus up to 2% for occupancy between 90% 96%
• Government funds at actual for occupancy < 90%
Preferred accommodation
• Up to 60% of operator capacity
• Private: $18.00 per day / $19.75* per day
• Semi-private: $8.00 per day / 9.00* per day
• Fees charged directly to residents
• ~ 22 % of Leisureworld’s LTC NOI
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Additional LTC Revenue Drivers
*Effective July 1, 2012 for new residents
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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
(Classified “New”)• Dedicated resource for asset management• Proactive approach
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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Maximizing Total & Private LTC Occupancy Rates
Daily review of occupancy across all LTC homes
• LTC average total occupancy: 98.7% (YTD 2012)
• Private LTC occupancy: @ maximum allowable level (60% in new homes)
Branding and marketing strategies / Survey residents, families and staff
Total LTC Occupancy Private LTC Occupancy
Operating Focus
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Retirement Expanding our presence across the continuum of seniors living in Canada
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Ontario Retirement Residences
• New (2009), five-storey, 148,500 sq. ft. luxury retirement residence • 158 suites, currently in lease-up • Sept. 30, 2012 occupancy: 68.4% • Target net average move-in rate: 2.5 residents per property / month;
~ 90% occupancy by H2 2013
• New (2009), five-storey, 140,000 sq. ft. luxury retirement residence• 136 suites, currently in lease-up• Sept. 30, 2012 occupancy: 71.3%• Target net average move-in rate: 2.5 residents per property / month;
~ 90% occupancy by H2 2013
• Midland Gardens: 53 independent living apartments in Scarborough for self-reliant seniors (adjacent to LW’s Scarborough LTC home)
• Muskoka retirement residence (29 suites) currently being converted to a short-stay healthcare and convalescent care facility to serve local community
Kanata
Kingston
Midland Gardens / Muskoka
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• New (2008), two four-storey buildings• 175 suites (130 suites owned by LW); 90 independent /
40 assisted• Sept. 30, 2012 occupancy: 89%
• New (2006), six-storey building• 127 suites: 92 independent / 35 assisted • Sept. 30, 2012 occupancy: 91%
• New (2010), four-storey building, currently in lease-up• 135 suites: 110 independent / 25 assisted • Sept. 30, 2012 occupancy: 60%
BC Retirement Residences
Pacifica – South Surrey
Peninsula – South Surrey
Astoria – Port Coquitlam
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• Five-star accommodations and amenities including: lounges, dining rooms, fireplaces, indoor pools, theatres, exercise facilities, landscaped gardens, chauffeured town cars
• Current portfolio occupancy (incl. Midland Gardens) has improved to 74.8% on a consolidated basis, up from 59.5% in Q3 a year ago
• New VP for portfolio recently appointed to drive marketing and increase occupancy
Ontario and BC Portfolios
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Financial Review & Growth Strategy
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Net Operating Income
FY2010: LSCLP’s results until March 22, public company results thereafterFY2009: LSCLP’s results
Revenue(Years ended Dec. 31; Q1 ended March 31, 2012;Q2 ended June 30, 2012; Q3 ended Sept. 30, 2012)
Financial Review
(Years ended Dec. 31; Q1 ended March 31, 2012; Q2 ended June 30, 2012; Q3 ended Sept. 30, 2012)
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Adjusted Funds From Operations (AFFO)
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(C$ thousands, except per share and % amounts) Q3 2012 Q3 2011 YTD 2012 YTD 2011
Net Operating Income (NOI) $ 15,393 12,358 41,365 33,872
Construction funding (interest) 791 781 2,282 2,358
Net finance charges (5,016) (4,403) (13,865) (12,255)
Current income taxes (682) (527) (1,401) (481)
Administrative expenses (3,851) (3,307) (10,419) (9,507)
After-tax transaction costs 529 131 1,412 833
Funds From Operations (FFO) $ 7,164 5,033 19,374 14,820
Income tax to book filing adjustment -- -- -- (739)
HRIS expense -- 65 52 29
Income support 928 1,299 2,872 2,204
Construction funding (principal) 1,468 1,352 4,266 4,041
Maintenance Capex (465) (93) (833) (530)
Adjusted Funds From Operations (AFFO) $ 9,095 7,656 25,731 19,825
Basic AFFO per share 0.3111 0.3135 0.9631 0.8790
Dividends declared per share 0.2124 0.2124 0.6372 0.6372
Basic AFFO payout ratio 68.3% 67.8% 66.2% 72.5%
Three months ended Sept. 30
Financial Review
Nine months ended Sept. 30
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Financial Review
*Q2 2010 included a partial dividend payment for March, 2010, as LW completed its IPO and public listing on March 23, 2010
Cash distributions AFFO
Cash distribution & AFFO per share/Payout ratio
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Strong Balance Sheet & Credit Ratings
• 52.1% Debt to Gross Book Value at Sept. 30, 2012¹
• $20.1 million in cash & cash equivalents at Sept. 30, 2012
• 12-month Adjusted EBITDA / Interest Expense²: ~ 2.32 X
• $10 million undrawn, committed credit facility / $61.5 million revolving credit facility ($35.0 million drawn as at Sept. 30, 2012)
• Committed to maintaining investment grade rating
• Ensures sustainable payout ratio of ~ 80% of AFFO
• Industry-leading credit ratings³
− DBRS: A (Stable)
− S&P: A- (Stable)
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Financial Review
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 Trailing 12 months (DSCR for $310 million bond is 3.05 X)3 2015 notes
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Stable government funding for LTC operations
• LTC operations fully funded by government at ≥97% average annual occupancy
• Government funding for LTC: ~ NOI margin 15.3%
Occupancy rates
• Average total LTC occupancy rate: 98.7%
• Private LTC occupancy: 98.2%
• Waiting list for LTC in Ontario
• Increasing occupancy in non-LTC portfolio
Cost controls
• Financial discipline supports consistency of NOI
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Reliable cash flow for shareholder dividends
Enduring Value
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• Purchasing power
• Access to low cost of 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
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Advantages of scale and sector expertise
Leveraging Strengths
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• Aging population
• Changing family dynamics
• Increasing life expectancies
• Increasing seniors affluence
• Gov’t focus on controlling costs (LTC)
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Market Opportunities
• Long-Term Care
• Home Care
• Retirement Residences
• Independent / Assisted Living Residences
Demand Drivers
Leisureworld Strategic Focus:To be a leading provider of seniors’ living facilities
and services in Canada
Growing Opportunities