As Col. Hannibal Smith of the A-Team was fond of saying, “I love it when a plan comes together.” For Sonida Senior Living, it has been a long struggle, and while it may be taking longer than management wanted, the plan is slowly coming together.
Everything is moving in the right direction, with occupancy up 150 basis points year over year to 84.9% in the third quarter, higher than industry averages, resident revenue increased 12.6% year over year, adjusted EBITDA more than doubled in the third quarter compared with the year-ago quarter, and RevPOR increased by 11.7% year over year. October’s census increased by 40 basis points from September to over 86%.
The third quarter also saw increases compared with the second quarter, with RevPOR rising by 3.3% sequentially (not too shabby), community net operating income increasing and the operating margin increasing by 100 basis points sequentially to 24.8%.
After the quarter ended, the company did draw down another $4.0 million on its equity line of credit with Conversant Capital, its controlling shareholder, bringing it to $10 million out of a total of $13.5 million available. The remaining balance may not be enough to tide the company over, but all parties are aware of this.
As we have previously written, Sonida concluded its loan modifications with Fannie Mae, extending the maturities on some of the loans so that nothing comes due until December 2026, providing some breathing room, together with an interest rate reduction of 1.5 percentage points for 12 months. They also adjusted some covenants with Ally Bank and continue to work with the Protective Life debt, where we heard progress is being made.
By later next year, we believe Sonida will be ready to start growing again, perhaps taking advantage of a robust supply of communities for sale. They also may be cash flow positive by then as well. Sonida has the in-place infrastructure to maybe double in size without adding too much overhead. Time will tell, but they are heading in the right direction.
