The senior living operating environment continues to be challenged, but Sonida Senior Living executives attribute the company’s sixth consecutive quarter of occupancy and revenue growth to an increased operational focus on labor management practices, rate initiatives and projects to refresh communities.
Occupancy in the Dallas-based senior living operator’s same-store portfolio (including communities also owned a year ago) was up 270 basis points year over year, at 83.7%. Weighted average occupancy was up 820 basis points from pandemic lows in the first quarter of 2021.
President and CEO Brandon Ribar, who succeeded Kimberly Lody in the third quarter after she stepped down from her CEO and board roles in September, said that the portfolio achieved pre-pandemic occupancy in September, and as of that month, 19 of its 76 communities had occupancy greater than 94%. Nine communities had occupancy below 72% in the third quarter, but Chief Financial Officer Kevin Detz said recent capital investments, focused sales efforts and tailored initiatives should continue to move occupancy up.
Resident revenue increased 7.2% year over year, primarily due to increased occupancy, higher average rent rates, and the acquisition of two Indiana senior living communities in the first quarter, the company said. Third-quarter revenues increased 1% , mainly due to increased occupancy and increased average rent rates.
Operating expenses increased $2.4 million year over year, primarily due to increases in labor and employee-related expenses, utility costs and food expenses. Operating expenses for the third quarter were up $1.6 million compared with the second quarter, primarily due to increased labor and utility costs.
Community refresh projects help with recovery
The company has spent $6 million of a planned $9.5 million on community refresh projects, which are expected to be completed by early next year. Ribar said that capital investments to date have resulted in “significant” occupancy and margin recovery in recent months and represent a key component of the company’s 2023 growth.
The performance of its Magnolia Trails memory care program produced 13.5% in year-over-year revenue growth, driven by 850 basis points in occupancy improvement. The company implemented the program in 31 communities, with rate increases exceeding 5%.
“High-quality resident programming, capital improvements to refresh the physical plants and occupancy rates exceeding 80% across three-quarters of the portfolio will support accelerated growth in 2023,” Ribar said.
Workforce challenges persist but are improving
Contract labor played a significant role in flat operating margins in the third quarter, with a $400,000 increase from the previous quarter, Detz said. The use of contract labor, he said, was largely driven by 10 communities that struggled with nursing shortages along with local wage wars.
Detz said that targeted action plans in those communities should lead to a decrease in contract labor in the fourth quarter. Net hires have increased 7.9% since the end of 2021 and 3.6% since the second quarter. Ribar said that Sonida’s leadership retention “has never been stronger,” with only 14 open positions existing across its more than 330 local and regional leadership roles.
And although average wages continued to increase, the percentage of those increases flattened in the third quarter compared with the previous 12 months, Detz said.
“Workplace stability is foundational to executing on our recently deployed strategic operating initiatives,” he said.