Capital Senior Living President and CEO Kimberly Lody
The third quarter was pivotal for Capital Senior Living, which completed a strategic investment with Conversant Capital and launched a rebranding initiative.
During Thursday’s third-quarter earnings call, President and CEO Kimberly Lody highlighted Capital’s investment agreement with Conversant Capital and its rebranding as Sonida Senior Living, which will become effective Monday, as well as its pandemic recovery efforts.
Capital saw continued occupancy gains, with third-quarter average occupancy at 81%, up 2.9% from the second quarter, and a 5.5% increase from first-quarter pandemic lows of 75.3%. Lody said that more than 60% of its communities have occupancy of 80% or more.
Compared with the third quarter of 2020, total labor costs increased by $1.1 million, and they increased $1.3 million compared with the second quarter of 2021. The hike primarily was due to a $1 million increase in contract labor, which accounted for 8.2% of labor costs for the third quarter.
Chief Operating Officer Brandon Ribar said that the contract labor expenses are concentrated in a small subset of communities and that those costs are declining in the fourth quarter due to detailed mitigation plans and employee recruiting efforts.
Good lead time
The company’s pandemic recovery strategy of offering short-term incentives to increase move-ins in the early part of the recovery has subsided, Lody said. Third-quarter leads increased by 19%, whereas tour volume increased 16% from the second quarter, which Ribar attributed to ongoing outreach and digital marketing efforts.
Lody said that progress on the company’s three-year strategic plan, adopted in 2019, has been both challenging and rewarding.
“We exited expensive leases and divested underperforming assets to reduce negative cash flow and improve liquidity, we stabilized operations and enhanced the care engagement and experiences we provide to residents, and we improved our ability to execute with excellence in spite of the challenges of the global pandemic and its lingering impact,” she said. “We look forward to being on the other side of this transitionary period of pandemic recovery, where the labor issues and inflationary pressures subside.”
Ribar said that Capital is making investments in improving community common areas, expanding its Magnolia Trails memory care program and adding available units in highly occupied communities to generate occupancy growth in 2022. The company will spend $7 million on common area refurbishments in 12 communities beginning in the fourth quarter, he said.
Rent concessions also decreased by more than 50% on a sequential basis. Ribar said investments in resident programming and experiences, community technology infrastructure and employee wages will drive support for rent increases, which are expected to be at or above 5%.
Lightening the load
Vice President of Accounting and Financial Reporting Tiffany Dutton said that Capital had 53 fewer communities in its portfolio for all or part of the third quarter compared with the same quarter 2020.
Capital reshaped its portfolio by completing the offloading of its remaining Healthpeak Properties communities to another operator in the third quarter. Capital also announced the expansion of its relationship with Ventas by agreeing to take on the management of three additional managed communities in Arkansas effective Dec. 1.
The company also continues to make progress on its transfer of ownership of 18 underperforming communities to Fannie Mae. During the third quarter, it transferred legal ownership of an additional four communities and after the quarter ended transferred one additional community, bringing the total dispositions to 14. Those transfers will continue into the first quarter of 2022.
