Purchased $77.4 million of mortgage indebtedness across seven
Sonida communities for $40.2 million, representing a 48%
discount
Company to invest in high-returning capital projects within the
existing portfolio
$25 million of equity capital will be available for potential
acquisitions and working capital
Sonida Senior Living, Inc. (“Sonida” or the “Company”) (NYSE:
SNDA), a leading owner-operator of communities and services for
seniors, announced the execution of a $47.75 million equity private
placement, including an investment from Conversant Capital, the
Company’s largest shareholder. The Company plans to use this new
capital for the completion of its balance sheet repositioning,
continued investments in value-enhancing community improvements,
broader community programming and identified bolt-on acquisition
opportunities from its robust pipeline.
The shares were issued at $9.50 per share, a 5% premium to the
30-day volume weighted average price prior to closing. The equity
private placement will close in two tranches. The first tranche of
$32 million closed on February 1, 2024, and the second tranche of
$16 million will close on or around March 31, 2024, subject to
shareholder approval of an increase to the Company’s authorized
shares of common stock. The holders of a majority of the Company’s
voting securities have agreed to vote in favor of such an
increase.
“In an economic environment characterized by limited capital and
available financing for senior living assets, we believe this
transaction reflects our investors’ confidence in Sonida as a
premium long-term investment and operating platform with
significant upside potential. We could not be more pleased with the
ongoing partnership between the Sonida team and our investor base
and look forward to completing accretive investments in the near
term,” said Brandon Ribar, President and Chief Executive
Officer.
“Since Conversant made its original investment in Sonida in
November 2021, we’ve been working diligently with the management
team along three key initiatives – improving operations,
strengthening the balance sheet and growing the business. Today’s
transaction allows us to shift the Company’s focus towards the
third initiative: accelerating the growth of the business,” said
Michael Simanovsky, Founder and Managing Partner of Conversant
Capital. “As counter-cyclical investors, we are very excited about
the Company’s increasingly active pipeline of acquisitions and look
forward to partnering with banks and other asset owners as we
continue to grow Sonida’s operating platform.”
Sonida has used a portion of the proceeds to purchase all seven
of the remaining loans held by Protective Life, which was completed
on February 2, 2024. The $40.2 million purchase price represents
52% of the outstanding Protective Life indebtedness of $77.4
million. The debt purchase has been financed with $24.8 million of
mortgage debt provided by Ally Bank, currently Sonida’s
second-largest lending partner, through an expansion of the
Company’s existing Ally Bank term loan. This transaction
significantly strengthens the Company’s balance sheet, reducing
total indebtedness by $52.6 million, or 9%, and annual debt service
costs by approximately $3.2 million. After completing these
transactions, the Company’s indebtedness was $580.7 million as of
February 2, 2024. The Company’s debt has a weighted-average
remaining term of 3.7 years, with only $31.8 million maturing prior
to December 2026. Finally, 92% of the Company’s outstanding debt is
interest only through 2026.
“This capital infusion, coupled with the steady, foundational
margin improvements achieved over the past 12 months, allows the
Company to further focus on revenue-driving and margin-enhancing
efforts and laying the groundwork for operational scalability as we
look to grow the portfolio,” said Kevin Detz, Chief Financial
Officer.
Specific planned capital expenditure projects include high-value
conversions of existing apartments to Magnolia TrailsTM memory care
units and the opening of additional wings within highly occupied
communities. The Company has also budgeted to accelerate the
deployment of recently introduced technology that has improved
operating efficiencies, quality of care and resident
experience.
After considering the equity capital for the Protective Life
debt purchase and the planned capital expenditure projects
described above, the Company will have approximately $25 million of
equity capital available for acquisitions and working capital
purposes, including near-term opportunities in the Company’s
pipeline.
The Company is engaged in advanced discussions with a private
equity sponsor to acquire a majority interest in a four-asset
portfolio, with three of the assets reinforcing Sonida’s Texas
footprint. The Company believes such an acquisition would result in
a double-digit stabilized cap rate with minimal incremental general
and administrative expenses required to manage the communities.
This acquisition opportunity remains subject to confirmatory due
diligence and final documentation. Sonida is actively pursuing
additional accretive growth opportunities varying in size,
geography and structure. The capital earmarked for growth is
expected to provide certainty and speed in executing on near-term,
bolt-on investment opportunities as they arise.
Safe Harbor
The forward-looking statements in this Current Report on Form
8-K, including, but not limited to, statements relating to the
timing and completion of the second closing of the private
placement and potential acquisition opportunities, are subject to
certain risks and uncertainties that could cause the Company’s
actual results and financial condition to differ materially,
including, but not limited to, the Company’s ability to obtain
stockholder approval of an increase in the number of authorized
shares of common stock; the satisfaction of all conditions to the
second closing of the private placement; other risks related to the
consummation of the private placement, including the risk that the
second closing of the private placement will not be consummated
within the expected time period or at all; the costs related to the
private placement; the impact of the private placement on the
Company’s business; any legal proceedings that may be brought
related to the private placement; and the other risks and factors
identified from time to time in the Company’s reports filed with
the Securities and Exchange Commission, including the impact of
COVID-19, including the actions taken to prevent or contain the
spread of COVID-19, the transmission of its highly contagious
variants and sub-lineages and the development and availability of
vaccinations and other related treatments, or another epidemic,
pandemic or other health crisis; the Company’s ability to generate
sufficient cash flows from operations, additional proceeds from
debt financings or refinancings, and proceeds from the sale of
assets to satisfy its short- and long-term debt obligations and to
make capital improvements to the Company’s communities; increases
in market interest rates that increase the cost of certain of the
Company’s debt obligations; increased competition for, or a
shortage of, skilled workers, including due to the COVID-19
pandemic or general labor market conditions, along with wage
pressures resulting from such increased competition, low
unemployment levels, use of contract labor, minimum wage increases
and/or changes in overtime laws; the Company’s ability to obtain
additional capital on terms acceptable to it; the Company’s ability
to extend or refinance its existing debt as such debt matures,
including the Company’s ability to complete the modifications to
its loan agreements; the Company’s compliance with its debt
agreements, including certain financial covenants and the risk of
cross-default in the event such non-compliance occurs; the
Company’s ability to complete acquisitions and dispositions upon
favorable terms or at all; the risk of oversupply and increased
competition in the markets which the Company operates; the
Company’s ability to improve and maintain controls over financial
reporting and remediate the identified material weakness discussed
in its recent Quarterly and Annual Reports filed with the SEC; the
departure of the Company’s key officers and personnel; the cost and
difficulty of complying with applicable licensure, legislative
oversight, or regulatory changes; risks associated with current
global economic conditions and general economic factors such as
inflation, the consumer price index, commodity costs, fuel and
other energy costs, competition in the labor market, costs of
salaries, wages, benefits, and insurance, interest rates, and tax
rates; and changes in accounting principles and
interpretations.
About Sonida
Dallas-based Sonida Senior Living, Inc. is a leading
owner-operator of independent living, assisted living and memory
care communities and services for senior adults. The Company
provides compassionate, resident-centric services and care as well
as engaging programming operating 71 senior housing communities in
18 states with an aggregate capacity of approximately 8,000
residents, including 61 communities which the Company owns and 10
communities that the Company manages on behalf of third parties.
For more information, visit www.sonidaseniorliving.com or connect
with the Company on Facebook, Twitter or LinkedIn.
About Conversant Capital
Conversant Capital LLC is a private investment firm founded in
2020. The firm pursues credit and equity investments in the real
estate, digital infrastructure and hospitality sectors in both the
public and private markets. Further information is available at
www.conversantcap.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240206459854/en/
Sonida Investor and Media Contact: Kevin Detz
kdetz@sonidaliving.com
Conversant Media Contact: Prosek Partners Josh Clarkson / Devin
Shorey jclarkson@prosek.com / dshorey@prosek.com
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