Sonida Senior Living (NYSE: SNDA) has announced the completion of new debt modifications with Fannie Mae that, coupled with recent positive growth, reflect a new “inflection point” for the operator.

The debt restructuring and equity infusion, announced back in June, helped stabilize the company’s short-term cash flow. Finalized on Oct. 2, the loan modification agreements cover the 37 Fannie Mae mortgaged communities in Sonida’s portfolio, according to a press release.

The restructuring is an achievement that Sonida President and CEO Brandon Ribar told Senior Housing News is “important long term stability” on the company’s balance sheet. More specifically, it extends the company’s Fannie Mae loan maturities out to 2026.

“Right now, the availability and cost of financing is at a significantly higher and less certain level than it’s been in a number of years,” Ribar said. “To not have any maturities until 2026 … is in our mind a differentiator.”

All the while, the Dallas, Texas-based company has maintained and grown occupancy at the communities it owns, with occupancy for the portfolio registering at 86.8% at the end of September. Average occupancy increased by 100 basis points in comparison to the second quarter of the year.

Debt and occupancy

As part of the modifications with Sonida, Fannie Mae agreed to defer contractually required principal payments for three years, freeing up $33 million in cash flow savings in the process. Additionally, Sonida received near-term interest rate reductions, which resulted in $6.1 million in savings from June 2023 until May 2024.

In conjunction with its Fannie Mae loan modifications Sonida also announced it had negotiated with Ally Bank to “temporarily reduce the minimum liquidity requirement” for its $88.1 million facility with Sonida for 18 months starting June 1.

Conversant Capital, which invested more than $154 million in Sonida in 2021, committed to purchasing $13.5 million of common equity at a price of $10 per share over 18 months, according to the operator. The press release states Sonida has the “right but not the obligation” to utilize Conversant Capital’s equity investment. Sonida drew $6 million in July “in conjunction with the first $5 million principal payment to Fannie Mae.”

The company also is in dialogue with significant lending partner Protective Life regarding new restructuring and other similar moves.

In March, Sonida management issued a going-concern warning regarding the company’s future, with debt maturities playing an outsized role in its difficulties. By pushing its loan maturities out to 2026, the company has gained more financial flexibility to pursue its long-term goals.

“Any concerns that may have been associated with the original announcement have been alleviated,” Ribar said.

The finalized restructuring terms remain similar to those presented in June. The contractually required principal payments on the 37 loans have been “deferred for three years or waived until maturity,” according to the press release,

Outside of financial savings, receiving the restructuring has helped the external view of Sonida and resulted in strong Q3 growth, Ribar said. The company’s nearly 87% average occupancy rate represents an increase of around two percentage points year over year for Q3. And it is the best-performing quarter for the current portfolio of communities in “many years,” Ribar said.

Moving forward, Ribar said he wants to see continued momentum on rates for the 71 communities that Sonida operates. The company’s average resident rate increase has totaled about 10% year to date, and Sonida management is looking at the rate closely to “see what the right numbers are” for 2024 to drive margin improvement, he added. Sonida is also looking at a target of around 90% for occupancy rates for 2024.

Sonida is “working with a number of its existing relationships” for potential expansions to grow its portfolio in the coming year, Ribar said.

Ribar hopes this announcement will hopefully show that approaching lenders with transparency, strong operating improvement and a supportive investor base can lead to positive outcomes regarding negotiating loans.

“A very stable financing profile of our assets, as well as a highly supportive group of investors and shareholders, in combination with … strong operating recovery over the last year-plus puts us in an excellent position to be differentiated from a growth perspective,” Ribar said.