Dallas-based Sonida Senior Living has optimized its balance sheet “through the comprehensive restructuring and modification of our debt,” culminating in a $47.75 million equity private placement that closed in the first quarter of 2024, CEO Brandon Ribar said Wednesday during a fourth-quarter and full-year 2023 earnings call.
The effort was among the “significant performance milestones” achieved in 2023, according to the company.
“The operational developments and greatly strengthened balance sheet established Sonida, as a differentiated operator, owner, and investor in senior living, and positioned the company to capitalize on near-term dislocation, which will drive the next chapter of value creation, for our shareholders,” Ribar added.
Resident revenue in the fourth quarter was $59.3 million compared with $53.4 million for the fourth quarter of 2022, representing an increase of $5.9 million, or 11.2%, from one year to the next.
“The increase in revenue was primarily due to increased occupancy and increased average rent rates,” the company said in a press release issued in conjunction with the call.
Chief Financial Officer Kevin Detz said Wednesday that Sonida experienced a year-over-year occupancy increase of 160 basis points and is “encouraged by achieving an average occupancy of nearly 86%, for the last quarter of the year.”
Sonida has been “aggressive, but responsible” in rate optimization, Detz said. He added that revenue per occupied room increased 10% year over year and is expected to increase this year with a resident-wide March 1 rate renewal.
Year over year, the company expanded its net operating margin by 520 basis points, or 460 basis points on an adjusted net operating income margin basis, which excludes the one-time effect from state grant receipts, according to the CFO.
For the fourth quarter, annualized NOI and margin were $66.8 million and 27.4%, respectively.
“These figures include non-recurring credits recognized in connection, with one-time real estate tax settlements and workers comp true-ups as a result of the most recent actuarial reports. Excluding these non-recurring credits, effective NOI margin for the quarter, was 25.7%,” Detz said.
Operating expenses
Operating expenses for the full year were $177.3 million compared with $171.6 million for 2022, representing a year-over-year increase of $5.7 million.
The increase in Sonida’s operating expenses primarily was due to increases of $7.2 million in labor and employee-related expenses, including premium labor, and $1 million in information technology-related costs.
Labor costs
The use of contract labor decreased by almost $6 million year over year and now is limited to a few communities where market-specific labor constraints persist, according to the company.
“In 2024, the company is focused on optimizing labor hours to meet the real-time needs of our residents amidst higher occupancy levels, which should support a lower incremental cost per resident,” Detz said.
Sonida controlled labor costs last year, he said, adding that total labor costs, excluding benefits, moved from a high mark of 47.5% of revenues in 2023 to just under 46% last year.
“The expected continuation of revenue and margin growth, combined with the company’s modified debt structure, has Sonida firmly positioned to take advantage of both organic and inorganic opportunities in the marketplace to drive shareholder value in 2024,” Detz said.
For additional coverage of the earnings call, see McKnight’s Senior Living.
