We have been impressed by Sonida Senior Living management’s ability to get out of its census, cash flow and balance sheet difficulties over the past year. After some acquisitions this year, the company now operates 93 senior living communities, most of them owned.
In the third quarter, same-community occupancy for 61 communities increased by 210 basis points year over year to 87.0%. That is well ahead of many other operators, as well as higher than the NIC MAP census averages. They are well on their way to hitting the elusive goal of 90% occupancy.
Speaking of 90% occupancy, management believes that when they reach it for their same-community portfolio, the NOI margin for these communities will hit 30% and will yield an additional $11 million of annual NOI. When adding in the additional 19 communities that were acquired this year, the total incremental increase in NOI will reach $22 million. Talk about adding value.
While the same-community operating margin did increase year over year to 26.7%, up 190 basis points, on a sequential basis it actually decreased by 150 basis points, primarily because lower rate IL residents replaced higher rate AL residents. This should begin to balance out over time. RevPOR increased to $4,244 per month.
On the balance sheet side of things, Sonida extended $220.1 million of Fannie Mae debt by two years, in exchange for a $10 million debt paydown. This allowed the company to keep the interest rate at 4.7%, which would be unattainable in today’s market. In addition, Sonida exercised its option to make a discounted loan payoff of $18.3 million, or 36% lower than the outstanding balance, on two communities in Texas. They have now restructured the debt on 58 of the 60 legacy loans over the past 12 months. CFO Kevin Detz has been busy.
The company has been busy acquiring properties now that they have their capital structure figured out. Subsequent to the close of the third quarter, Sonida purchased two communities in the Atlanta, Georgia MSA for $29.0 million, or about $163,000 per unit. The average age is about five years, and they have 106 AL units and 72 MC units. RevPOR is $5,700, higher than the company’s current average, and occupancy is 86%, close to the current average. Looks like a good deal to us.
All in all, a good quarter and ready for future growth. The company’s market cap now sits at $432 million.
