Sonida Sees Path To 90% Occupancy, More Growth On The Horizon In 2025

Sonida Senior Living (NYSE: SNDA) has grown its operating portfolio by almost one-third over the last six months, and the company has more expansion planned ahead.

The Dallas-based senior living operator closed its sixth transaction of the year in early November, bringing its total of newly added communities to 22 this year. And there is potentially more growth on the horizon next year, executives said during the company’s third-quarter 2024 earnings call Wednesday.

Although the company’s consolidated net operating income (NOI) margins registered at 26.7% in the third quarter of 2024, representing a gain over the company’s NOI margins of 24.8% in 3Q23; it fell short of the company’s 2Q24 NOI margins of 28.2% in the second quarter of 2024.

Weighted average occupancy also hit 85.1% in 3Q24, representing a gain over the same period in 2023 but a slight decline sequentially versus 2Q24. Sonida management noted that the total included four newly acquired communities.

Looking ahead, Sonida’s leadership sees a path to achieving occupancy rates in excess of 90% across its entire 61-community portfolio in the future, with higher revenue and margins to boot.

“We are seeing continued positive momentum in the second half of the year, and are optimistic about the tailwinds supporting continued NOI growth,” CEO Brandon Ribar told investors and analysts Wednesday during the company’s third-quarter 2024 earnings call.

Sonida’s stock closed at $22.59, down 5.3% from the previous close.

Acquisition strategy continues after expansion in Q3

Sonida spent the third quarter of the year growing its portfolio, including by acquiring eight communities in Florida and South Carolina for $103 million. That deal was finalized in October.

The senior living operator also in October acquired two communities in Atlanta.

Looking ahead, Ribar said the operator’s strategy of growing through acquisitions will continue given its available credit facility and access to equity markets.

Sonida in October also extended the maturities on loans covering 18 communities and totaling $220 million from the end of 2026 to the start of 2029.

Ribar told Senior Housing News the extension allows Sonida to remain locked in at a rate around 4.75%. If the company had to refinance, it would likely be closer to 7%.

“To extend that an additional two years to the beginning of 2029 means that the company can be very focused on growth and operations, and that we don’t have any near term maturities that we have to work on at all,” he told SHN.

And Sonida has more planned on the growth front, at least if its pipeline is any indication.

“The transaction environment remains compelling, and our growing acquisitions team has line of sight on a robust 2025 pipeline of attractive growth opportunities,”

Sonida sees path to 90% average occupancy

Not counting its recent acquisitions, Sonida’s occupancy hit a new weighted average quarterly high of 87% in the third quarter of 2024, reflecting 210 basis points of growth compared to the same period in 2023 and 80 basis points of growth compared to the second quarter of 2024.

The company’s next milestone is achieving a 90% occupancy rate, and Ribar said he is optimistic given the company’s positive momentum in the second half of the year and future demand.

Ribar said Sonida has invested in local leadership teams, which has been a driving force in occupancy gains.

“Occupancy follows when you’ve got a really strong executive director, sales director and leadership team within the communities, and when you’ve chosen good markets to operate in,” he said.

Additionally, Sonida has shifted its marketing strategy to focus on giving the sales and marketing teams more tools to aid direct conversions from the company’s website rather than third-party referral services like Caring.com and A Place for Mom.

“We’re not intentionally disregarding those leads or saying that they’re not as important,” Ribar said. “If we can increase our own generated traffic, we’re not intentionally disregarding those avenues.”

Ribar noted the sales and marketing teams see a higher conversion opportunity with potential residents who discovered a community through the company’s website. Referrals through Sonida’s website and local referrals now make up 56% of the company’s leads, up from 52% in 2023 and 41% in 2022.

Ribar also noted the company’s NOI margins have increased 18% compared to the prior year. Ribar said that the company has made technology investments that have allowed it to become more efficient with staffing, for example.

One of the substantial programs that Sonida has implemented is a virtual nurse system where staff receive requests in real time, which helps bolster efficiency and planning, he added.

“We’ve got a very real blueprint of how our resident needs are matching up with staffing,” Ribar said.

The system also allows Sonida to justify increasing levels of care, as family members can more accurately see the increased amount of care a resident needs.

The investments as a whole have allowed Sonida to have a labor model that is “tailored to help control labor costs.” According to Ribar, the labor market as a whole has been stable with more consistent wage increases, allowing the company to see better margin expansion as rate increases offset the expenses.

As a whole, Ribar believes there is potential in the communities it has acquired over the past year.

“We know that there’s quite a bit of growth in those 22 communities,” Ribar said. “Not only do we want to continue to show the steady improvement in those communities that we own when the year started, but if we see the rapid recovery in the ones that we’ve purchased this year, it’s going to show on an even broader basis that we know what we’re doing.”

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