Sonida signals $1.8B CNL Healthcare Properties merger and record occupancy high while advancing accretive growth

Earnings Call Insights: Sonida Senior Living, Inc. (SNDA) Q3 2025

MANAGEMENT VIEW

* Brandon Ribar, President, CEO & Director, announced, "Last week, we announced a significant step in the Sonida journey with the signing of a merger agreement to acquire CNL Healthcare Properties, or CHP, for a total consideration of $1.8 billion." Management expects the transaction, scheduled to close in late Q1 or early Q2 of 2026, to be accretive to the quality and age of Sonida’s real estate and to materially reduce leverage, with a clear path to 6x leverage. Ribar further indicated the deal will "immediately increase the free float of the stock to approximately $1 billion following closing of the transaction." He highlighted that the addition of high-quality real estate in strong growth markets will enhance both near- and long-term earnings power, and noted plans to recycle out of select lower-growth assets into higher return acquisitions.
* Ribar reported, "Our portfolio top line continued to deliver sequential growth and year-over-year improvement driven by both occupancy and rate, highlighted by an accelerated recovery in our acquisition communities." He emphasized a 21% year-over-year growth in total portfolio NOI, and more than 30% improvement in Adjusted EBITDA, with same-store occupancy increasing 90 basis points sequentially to 87.7% and reaching an average of 88% in October.
* Kevin Detz, Executive VP & CFO, stated, "We are happy to report occupancy of 87.7% for Q3, which is our highest quarter post COVID. This represents an increase of nearly a full point over the previous quarter's occupancy of 86.8%." Detz also noted, "This momentum in occupancy carried into Q4 with a spot occupancy of 89.0% as of October 31."
* Detz explained, "Our acquisition portfolio NOI increased by $900,000 or 22% on a sequential quarter basis. When removing the combined NOI loss from the recently opened North Bend Crossing Vista acquisition and the September Mansfield acquisition, this increase jumps to $1.1 million, or 28%."

OUTLOOK

* Management did not provide explicit EPS or revenue guidance in the transcript. Ribar described the company's focus on achieving "margin expansion as occupancy levels approach 90%." He added that the company is targeting continued internal ROI projects and bolt-on acquisitions, with the support of a new upsized $300 million revolver to be available at the close of the CHP transaction.
* Ribar stated, "Once we close and integrate the CHP portfolio, we hope to return to this pace of acquisitive growth." Management expects post-transaction free cash flow to provide significant capital for reinvestment.

FINANCIAL RESULTS

* Detz highlighted a year-over-year total portfolio NOI growth of 20%. The company’s acquisition portfolio saw an annualized revenue increase of $10 million for the period, with a 22% sequential increase in portfolio NOI.
* Same-store occupancy reached 87.7% for Q3, up from 86.8% in Q2, and spot occupancy hit 89.0% as of October 31. The average annual rent renewal rate on March 1 was 6.9%, applicable to 71% of the same-store residents. RevPOR increased 4.7% year-over-year.
* Labor as a percentage of revenue increased 70 basis points from Q2, attributed to a "rapid spike in occupancy in several communities during the front part of the quarter, where labor was not flexed timely and appropriately." Nonlabor expenses rose by $600,000 from Q2 to Q3, half due to one extra expense day and half from increased utilities.
* G&A levels for the year remained slightly below normalized run rate Q4 levels, with all three 2025 acquisitions onboarded without adding FTEs at the above-community level.

Q&A

* Derrick Metzler, Morgan Stanley, Research Division: Questioned same-store occupancy trends and move-in/move-out dynamics. Ribar responded, "We've been pleased with the accelerated same-store occupancy improvement up to that kind of 89% spot level and 88% in October... move-in trends have picked up significantly."
* Metzler asked about the recurring nature of merger transaction costs. Detz answered, "The total transaction costs were $75 million that were in the merger deck... we should continue to see each month and then with the end of the quarter, at the end of the year and into next year, those transaction costs being incurred as part of the cost to do the deal."
* Benjamin Hendrix, RBC Capital Markets: Asked about RevPOR and labor cost trends. Ribar explained, "We've recognized that it's the higher occupancy levels... that continuing to push rate consistent with what we've achieved... we know there is more upside and work to do on that front."
* Hendrix followed up on agency labor in the acquired portfolio. Detz responded, "We have hardly any contract labor to speak of in the acquisition portfolio... we're seeing the initial challenges from the first year that we think we've largely pushed past."

SENTIMENT ANALYSIS

* Analysts took a neutral to slightly positive tone, focusing on operational metrics and the merger’s impact, with questions highlighting interest in occupancy, merger costs, and labor trends.
* Management maintained a confident and positive tone, emphasizing operational improvements, acquisition integration, and future growth, with remarks such as, "We are extremely excited about the opportunity ahead and thankful for the consistent support from our investors."
* Compared to the previous quarter, analysts remained focused on occupancy and labor, but showed greater interest in the merger. Management’s tone was more upbeat, driven by the transformative size of the CHP deal.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter introduced the $1.8 billion CHP acquisition, a major strategic shift from the previous quarter’s focus on organic growth and smaller acquisitions.
* Management’s confidence increased, with more emphasis on scale and integration capabilities, compared to a prior focus on incremental operational improvements.
* Analysts shifted focus from technology and sales channel investments to the merger’s strategic implications and associated costs.
* Key metrics—such as occupancy and NOI—continued to improve, with accelerated acquisition portfolio performance and a record high in same-store occupancy.

RISKS AND CONCERNS

* Management cited ongoing focus on managing outlier community performance, labor management, and integration planning for the CHP deal.
* Transaction costs related to the merger, totaling $75 million, are expected to recur through closing.
* Analyst concerns centered on the sustainability of occupancy growth and the impact of labor costs on margins.

FINAL TAKEAWAY

Sonida Senior Living’s third quarter was marked by the announcement of a transformative $1.8 billion acquisition of CNL Healthcare Properties, which management expects to accelerate growth, enhance portfolio quality, and expand financial flexibility. Operationally, the company achieved record occupancy, robust same-store and acquisition portfolio NOI growth, and continued improvement in labor management, while positioning itself for further scale and margin expansion as integration efforts and strategic reinvestment progress into 2026.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/snda/earnings/transcripts]

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