Sonida Senior Living (SNDA) Announces $47.75M Equity Raise

Sonida Senior Living, Inc. (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.

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