Sonida Senior Living is approaching the end of an “exceptional” year in its recovery, with increased occupancy and rate growth, along with stabilizing operating expenses.
During a third-quarter earnings call Tuesday, President and CEO Brandon Ribar said that the leadership team remains focused on three goals as it closes out 2023: maximizing portfolio performance, strengthening the balance sheet, and expanding the business through acquisitions and third-party management activities.
“Our teams across the business continue to deliver on our 2023 operating plan,” he said. “Results this year have shown significant progress, with the third quarter delivering the highest level of occupancy revenue and operating margins since 2019.”
Investing in resident experience
The 2021 launch of the company’s Magnolia Trials memory care program has delivered “exceptional” outcomes for residents and improved operations, Ribar said. Memory care occupancy reached 88% at the end of October, part of the fourth quarter.
In the first quarter of 2024, he said, Sonida plans to launch an enhanced independent living offering, Joyful Living, in 14 communities, with all of its independent living communities offering it by mid-year.
“Joyful LIving encapsulate’s Sonida’s person-centric approach to wellness and life enrichment, emphasizing well-rounded programming to support physical and emotional health, intellectual stimulation, individual purpose, social engagement and spirituality,” Ribar said. “Our goal is to provide residents with a variety of opportunities to achieve their desired potential and enjoy full, meaningful lives.”
On the quality front, Ribar said the hiring of a chief clinical officer reflects its commitment to further expanding its clinical offerings and tailoring services to resident needs.
“The ongoing retention and development of our leadership teams, and the effective rollout of new resident programming and technology, remain paramount to continuing the growth trends achieved in 2023,” he said.
Elevated occupancy, rate growth
Since the second quarter, the Dallas-based senior living operator’s portfolio improved occupancy 100 basis points sequentially and 150 basis points year over year to 84.9% for the third quarter. Ribar said that the trend continued into October, with occupancy reaching 86.2% and closing the month with spot occupancy of 87.4%, the highest level in more than four years.
Sonida continues to see the benefits from its rate growth initiative, with both in-place rate increase and positive market rate adjustments continuing to overall rate elevation, he said. Resident rent rates increased 10.4% year over year, with third-quarter rent rates 3.3% higher than rates in the second quarter, resulting in positive rate growth in seven of the past eight quarters.
A simplified level of care program facilitated more accurate resident assessments with new monitoring tools reinforcing timely care reviews, he said. The changes led to 97% of current residents converted to new care levels and a 16% year-over-year increase in care level-related revenue.
Ribar said that the combination of leadership and occupancy levels in its communities will contribute to further rate growth in 2024.
The company also continues to identify expense management opportunities and efficiencies, along with investments in technology to support labor management practices at the local level, he said. Those initiatives, combined with the continued rollout of its market-specific talent sharing program, “remains paramount” to controlling total cost of labor, Ribar said.
Expanded labor pools and the implementation of technology to staff communities based on resident needs contributed to 80% of year-over-year contract labor declines while limiting direct labor increases to 3.5%, the company reported.
Restructuring continues
In the third quarter, Sonida completed its debt restructuring, covering 49 properties financed by Fannie Mae and Ally Bank.
Under the Fannie Mae forbearance agreement, all maturities were extended to December 2026 or beyond, principal payments under the 37 Fannie Mae loans were deferred for three years or waived until maturity, and Sonida received near-term interest rate reductions on all 37 properties.
Under the Ally Bank terms, Sonida was granted a waiver of its minimum liquidity requirement of $13 million for a year. The company also received a $13.5 million equity commitment from Conversant Capital, the company’s largest shareholder.
Chief Financial Officer Kevin Detz thanked Fannie Mae, Ally Bank and Conversant Capital for their “collaborative roles” in a “holistic process” that addresses more than 80% of the company’s mortgage debt.
Detz said that the company continues to be encouraged by consistent improvement across all business lines over the past year.
“This operating trajectory, 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,” he said.
