Sonida Senior Residing (NYSE: SNDA) is on observe to achieve pre-pandemic occupancy ranges in 2022 — however the firm’s internet working margin continues to be lagging behind.
With occupancy charges rising and different gross sales metrics trending constructive and a significant rebranding effort behind the corporate, Sonida CEO Kimberly Lody mentioned 2021 was a transformational 12 months.
After elevating $154.8 million in transactions with Conversant Capital, Dallas-based Sonida can also be on firmer monetary footing than in earlier quarters, giving the corporate’s executives confidence “that there isn’t any longer substantial doubt concerning the firm’s capability to proceed as a going concern.”
Now, they’re targeted on three fundamental priorities for the 12 months forward: conserving residents and employees wholesome and effectively, totally recovering occupancy misplaced in the course of the pandemic and increasing NOI.
Sonida Senior Residing’s share value grew practically 1%, touchdown at $32.97 by the point the markets closed Monday.
Occupancy up, execs ‘not glad’ with margin
A vivid spot in Sonida’s fourth-quarter report was the corporate’s common occupancy fee, which is now simply 140 foundation level away from its 1Q20 fee of 83.7%.
Specifically, short-term incentives helped push occupancy at or above 80% in additional than three quarters of the corporate’s 77 communities, with an general common fee of 82.6% as of the top of March.
Trying forward for the remainder of the 12 months, Lody and the remainder of the corporate’s executives are assured that pre-pandemic occupancy is inside attain.
“Our aim is to be at pre-pandemic occupancy at or earlier than the top of 2022, and we really feel actually good concerning the momentum that we now have to get there,” Lody mentioned Monday throughout a name with traders and analysts.
What hasn’t elevated to pre-pandemic ranges is the corporate’s internet working margin for the 60 communities it owns. In 4Q21, Sonida’s common internet working earnings margin shrunk to 18.2%, down from 23.6% throughout the identical interval final 12 months, largely as a result of impact that ballooning staffing budgets have had on the corporate’s backside line.
“We aren’t glad in any respect with this working margin and are targeted on bettering it as shortly as attainable,” Lody mentioned.
In contrast with the fourth quarter of 2020, whole labor prices for Sonida elevated $2.6 million, primarily as a result of a $1.7 million enhance in contract labor prices, COO Brandon Ribar mentioned. However Sonida has additionally seen constructive internet hires within the final two quarters, and contract labor utilization and prices have dropped between January and March of this 12 months.
“All through 2021, we launched staffing and scheduling expertise to help a extra versatile and employee-friendly work atmosphere,” Ribar mentioned, who additionally touted the corporate’s expanded recruitment efforts and wage will increase to alleviate labor points.
Lody mentioned Sonida intends to drastically cut back or eradicate contract labor — one thing the corporate had already achieved on the finish of 2019 earlier than the pandemic hit.
“We will do it once more,” she added.
With occupancy on the upswing, Sonida’s leaders in 2022 are turning their consideration to margin progress. By means of “accountable will increase” in charges, the corporate was in a position to develop income per accessible unit (REVPAR) by 5.3% in 4Q21.
And though margins will not be the place administration needs them to be, the corporate’s leaders are optimistic concerning the 12 months forward, given the constructive traits in census and its efforts slashing company staffing prices.
“Whereas loads of work stays to proceed occupancy and margin restoration throughout all of our communities, lots of our native groups have already exceeded their pre-pandemic working metrics,” Ribar famous.
The corporate can also be placing that constructive momentum to work in rising its portfolio with its main actual property funding belief (REIT) companions. Final December, Sonida expanded its relationship with Chicago-based Ventas (NYSE: VTR) by taking over three senior dwelling communities in Arkansas.
Past that, the corporate additionally acquired two senior dwelling communities in Indiana in February. Sonida will search for future alternatives to amass communities and execute their working mannequin to show them round, in response to Lody.
The corporate’s capital increase of $154.8 million final November allowed it to refinance all of its 2022 and 2023 debt maturities, giving it extra flexibility within the coming quarters.
“The operational efficiency of the corporate has improved considerably as we’ve seen RevPAR enhance and RevPOR, occupancy progress — all of these issues contribute to feeling good concerning the trajectory that the corporate is on and the momentum that’s behind us,” Lody mentioned.