Three months ago, Sonida Senior Living announced a comprehensive loan forbearance agreement with Fannie Mae covering 37 mortgaged communities. Part two occurred last week, which was the signing of loan modifications for these loans. It appears that the terms from three months ago remained in place.
All maturities under the 37 loans have been extended to December 2026 or later. Principal payments have been deferred for three years or waived until maturity, resulting in $33 million in deferred payments. A near-term interest rate reduction for all 37 loans will result in $6.1 million in cash interest rate savings from June 2023 to May 2024. As part of the agreement, Sonida paid down $5 million in principal last June, and another $5 million will be paid down in June 2024.
Controlling shareholder Conversant Capital also has committed to purchase up to $13.5 million of Sonida’s equity at $10 per share over an 18-month period (which was previously disclosed). The current share price is $9.00. Sonida can use the equity drawdown when it wants to, and in July took $6 million, partly to help fund that first principal repayment to Fannie Mae. Finally, Ally Bank has agreed to temporarily reduce the minimum liquidity requirement under its $88.1 million credit facility with Sonida for 18 months. All of these agreements provide more breathing room for Sonida as it increases census and works to increase margins and cash flow.
Speaking of census, weighted average third quarter occupancy increased by 100 basis points from the second quarter, to about 84.9%, and spot occupancy at the end of September was 86.8% for Sonida’s owned communities. When this is combined with the increase in operating margin of 9.8% in the first nine months of this year compared with the nine months in the prior period, we can expect to see increased cash flow in the third quarter, and hopefully beyond. We will find out soon enough when the company releases its third quarter earnings report.
