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What changed in SONIDA SENIOR LIVING, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SONIDA SENIOR LIVING, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+270 added−325 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-30)

Top changes in SONIDA SENIOR LIVING, INC.'s 2023 10-K

270 paragraphs added · 325 removed · 173 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

41 edited+25 added−33 removed140 unchanged
Biggest changeJoseph, MO 103 22 71 10 103 100 % 05/13 Waterford at Baytown Baytown, TX 127 22 75 42 139 100 % 03/15 Waterford at Carpenter’s Creek Pensacola, FL 94 — 94 — 94 100 % 02/16 Waterford at Colby Colby, TX 44 — 52 5 57 100 % 01/16 Waterford at College Station College Station, TX 53 — 39 17 56 100 % 03/12 Waterford at Corpus Christi Corpus Christi, TX 52 — 52 — 52 100 % 10/12 Waterford at Creekside Pensacola, FL 84 — — 97 97 100 % 02/16 Waterford at Fairfield Fairfield, OH 120 144 — — 144 100 % 11/00 Waterford at Fitchburg Fitchburg, WI 82 42 42 — 84 100 % 10/13 Waterford at Fort Worth Fort Worth, TX 154 154 — — 154 100 % 06/00 Waterford at Hartford Hartford, WI 39 — 34 22 56 100 % 05/15 Waterford at Highland Colony Jackson, MS 120 120 — — 120 100 % 11/00 Waterford at Ironbridge Springfield, MO 119 119 — — 119 100 % 06/01 Waterford at Levis Commons Toledo, OH 146 64 113 — 177 100 % 04/09 Waterford at Mansfield Mansfield, OH 117 — 115 25 140 100 % 10/00 Waterford at Mesquite Mesquite, TX 154 154 — — 154 100 % 09/99 Waterford at Park Falls Park Falls, WI 36 — 25 12 37 100 % 01/16 Waterford at Plano Plano, TX 136 91 45 — 136 100 % 12/00 Waterford at Plymouth Plymouth, WI 69 15 41 22 78 100 % 08/14 9 Table of Contents Resident Capacity Commencement Community Location Units IL AL MC Total Ownership of Operations 1 Waterford at Thousand Oaks San Antonio, TX 121 138 — — 138 100 % 05/00 Waterford at Virginia Beach Virginia Beach, VA 110 — 85 35 120 100 % 10/15 Waterford at West Bend West Bend, WI 40 — 20 20 40 100 % 05/15 Waterford at Wisconsin Rapids Wisconsin Rapids, WI 58 — 40 18 58 100 % 01/16 Waterford on Cooper Arlington, TX 98 — 81 28 109 100 % 03/12 Waterford on Huebner San Antonio, TX 119 119 — — 119 100 % 04/99 Wellington at Arapaho Richardson, TX 141 97 45 — 142 100 % 05/02 Wellington at Conroe Conroe, TX 43 34 20 — 54 100 % 03/12 Wellington at Dayton Dayton, OH 156 100 38 18 156 100 % 08/08 Wellington at North Bend Crossing Cincinnati, OH 122 54 70 15 139 100 % 11/16 Wellington at North Richland Hills North Richland Hills, TX 119 119 — — 119 100 % 01/02 Wellington at Southport Indianapolis, IN 64 — 51 14 65 100 % 10/12 Wellington at Springfield Springfield, MA 189 97 144 38 279 100 % 09/16 Whispering Pines Village Columbiana, OH 73 28 57 — 85 100 % 07/15 Woodlands of Columbus Columbus, OH 111 — 114 — 114 100 % 10/12 Woodlands of Hamilton Hamilton, OH 77 — 57 28 85 100 % 10/12 Woodlands of Shaker Heights Shaker Heights, OH 59 — 37 25 62 100 % 10/12 Wynnfield Crossing Rochester, IN 51 — 51 — 51 100 % 07/11 Total owned (62 Communities) 5,863 2,485 3,190 934 6,609 Managed: Amberleigh Buffalo, NY 267 201 49 17 267 N/A 01/92 Crown Pointe Omaha, NE 138 49 70 20 139 N/A 08/00 Independence Village of East Lansing East Lansing, MI 146 146 — — 146 N/A 08/00 Independence Village of Olde Raleigh Raleigh, NC 170 181 — — 181 N/A 08/00 Villa Santa Barbara Santa Barbara, CA 125 — 125 — 125 N/A 08/00 West Shores Hot Springs, AR 135 43 93 — 136 N/A 08/00 Whitley Place Keller, TX 47 — 27 20 47 N/A 02/08 Willow Grove Maumelle Maumelle, AR 54 — 37 17 54 N/A 12/21 Southern Meadows Senior Living Mountain Home, AR 57 — 57 — 57 N/A 12/21 Willow Grove Sherwood Sherwood, AR 57 — 57 — 57 N/A 12/21 Total managed (10 Communities) 1,196 620 515 74 1,209 Total 7,059 3,105 3,705 1,008 7,818 _____________________________________________ (1) Indicates the date on which we acquired or commenced operating the community.
Biggest changeJoseph, MO 103 22 71 10 103 100 % 05/13 Waterford at Baytown Baytown, TX 127 25 72 42 139 100 % 03/15 Waterford at Carpenter’s Creek Pensacola, FL 94 — 94 — 94 100 % 02/16 Waterford at Colby Colby, TX 44 — 40 17 57 100 % 01/16 Waterford at College Station College Station, TX 53 — 39 17 56 100 % 03/12 Waterford at Corpus Christi Corpus Christi, TX 52 — 52 — 52 100 % 10/12 Waterford at Creekside Pensacola, FL 84 — — 97 97 100 % 02/16 Waterford at Fairfield Fairfield, OH 120 144 — — 144 100 % 11/00 Waterford at Fitchburg Fitchburg, WI 82 44 39 — 83 100 % 10/13 Waterford at Fort Worth Fort Worth, TX 154 154 — — 154 100 % 06/00 Waterford at Hartford Hartford, WI 39 — 34 21 55 100 % 05/15 Waterford at Highland Colony Jackson, MS 120 120 — — 120 100 % 11/00 Waterford at Ironbridge Springfield, MO 120 120 — — 120 100 % 06/01 Waterford at Levis Commons Toledo, OH 146 83 92 — 175 100 % 04/09 Waterford at Mansfield Mansfield, OH 120 — 117 26 143 100 % 10/00 Waterford at Mesquite Mesquite, TX 154 154 — — 154 100 % 09/99 Waterford at Park Falls Park Falls, WI 36 — 25 12 37 100 % 01/16 Waterford at Plano Plano, TX 136 91 45 — 136 100 % 12/00 Waterford at Plymouth Plymouth, WI 69 15 41 22 78 100 % 08/14 Waterford at Thousand Oaks San Antonio, TX 121 138 — — 138 100 % 05/00 Waterford at Virginia Beach Virginia Beach, VA 110 — 85 35 120 100 % 10/15 Waterford at West Bend West Bend, WI 40 — 20 20 40 100 % 05/15 Waterford at Wisconsin Rapids Wisconsin Rapids, WI 58 — 40 18 58 100 % 01/16 Waterford on Cooper Arlington, TX 98 — 81 28 109 100 % 03/12 9 Table of Contents Resident Capacity Commencement Community Location Units IL AL MC Total Ownership of Operations 1 Waterford on Huebner San Antonio, TX 120 121 — — 121 100 % 04/99 Wellington at Arapaho Richardson, TX 142 99 45 — 144 100 % 05/02 Wellington at Conroe Conroe, TX 44 36 20 — 56 100 % 03/12 Wellington at Dayton Dayton, OH 156 101 37 18 156 100 % 08/08 Wellington at North Bend Crossing Cincinnati, OH 122 54 70 15 139 100 % 11/16 Wellington at North Richland Hills North Richland Hills, TX 119 119 — — 119 100 % 01/02 Wellington at Southport Indianapolis, IN 64 — 51 14 65 100 % 10/12 Wellington at Springfield Springfield, MA 189 97 144 38 279 100 % 09/16 Whispering Pines Village Columbiana, OH 69 24 57 — 81 100 % 07/15 Woodlands of Columbus Columbus, OH 111 — 80 34 114 100 % 10/12 Woodlands of Hamilton Hamilton, OH 77 — 57 28 85 100 % 10/12 Wynnfield Crossing Rochester, IN 51 — 51 — 51 100 % 07/11 Total owned (61 Communities) 5,815 2,497 3,089 964 6,550 Managed: Amberleigh Buffalo, NY 267 201 49 17 267 N/A 01/92 Crown Pointe Omaha, NE 138 41 78 22 141 N/A 08/00 Independence Village of East Lansing East Lansing, MI 146 146 — — 146 N/A 08/00 Independence Village of Olde Raleigh Raleigh, NC 170 181 — — 181 N/A 08/00 Villa Santa Barbara Santa Barbara, CA 125 — 125 — 125 N/A 08/00 West Shores Hot Springs, AR 135 45 91 — 136 N/A 08/00 Whitley Place Keller, TX 47 — 27 20 47 N/A 02/08 Willow Grove Maumelle Maumelle, AR 54 — 37 17 54 N/A 12/21 Southern Meadows Senior Living Mountain Home, AR 57 — 57 — 57 N/A 12/21 Willow Grove Sherwood Sherwood, AR 57 — 57 — 57 N/A 12/21 Total managed (10 Communities) 1,196 614 521 76 1,211 Total 7,011 3,111 3,610 1,040 7,761 _____________________________________________ (1) Indicates the date on which we acquired or commenced operating the community.
We have established a Corporate Quality Assurance Committee, which consists of the Executive Vice President and Chief Executive Officer, Vice Presidents of Operations, Vice President and Chief People Officer, Quality and Clinical Directors, and Senior Vice President- General Counsel.
We have established a Corporate Quality Assurance Committee, which consists of the President and Chief Executive Officer, Vice Presidents of Operations, Vice President and Chief People Officer, Vice President and Chief Clinical Officer, Quality and Clinical Directors, and Senior Vice President- General Counsel.
We seek to control operational expenses for each of our communities through proprietary expense management systems, standardized management reporting and centralized controls of capital expenditures, asset replacement tracking and purchasing larger and more frequently used supplies and food inventories through group purchasing programs.
We seek to control operational expenses for each of our communities through proprietary expense management systems, standardized management reporting, centralized controls of capital expenditures, asset replacement tracking, and purchasing larger orders of more frequently used supplies and food inventories through group purchasing programs.
Centralized Management We aim to centralize our corporate and other administrative functions so that the community-based management and staff can focus their efforts on resident care. We maintain centralized accounting, finance, legal, human resources, information technology, operational and capital procurement, training and other operational functions at our support center located in Addison, Texas (the "Dallas Support Center”).
Centralized Management We aim to centralize our corporate and other administrative functions so that the community-based management and staff can focus their efforts on resident care. We maintain centralized accounting, finance, legal, human resources, information technology, operational and capital procurement, training and other operational functions at our support center located in Dallas, Texas (the “Dallas Support Center”).
Management Services As of December 31, 2022, we managed 10 communities on behalf of a third party. Under our existing management arrangements, we receive management fees that are determined by an agreed-upon percentage of gross revenues, incentive management fees (as provided for in the management arrangement), and reimbursement of certain expenses we incur on behalf of the third-party.
Management Services As of December 31, 2023, we managed 10 communities on behalf of a third party. Under our existing management arrangements, we receive management fees that are determined by an agreed-upon percentage of gross revenues, incentive management fees (as provided for in the management arrangement), and reimbursement of certain expenses we incur on behalf of the third-party.
With our robust focus on talent acquisition, we continued to see our average time to fill an open role shorten significantly in 2022. We are proud of our development programs that sponsor our current employees in achieving new levels of education, licensure, and credentials.
With our robust focus on talent acquisition, we continued to see our average time to fill an open role shorten significantly in 2023. We are proud of our development programs that sponsor our current employees in achieving new levels of education, licensure, and credentials.
The following strategic priorities are intended to complement and enhance our core operational efforts while addressing the Company's financial position and increasing margin penetration against the backdrop of rapidly evolving demographic, economic and regulatory environments. Operational Excellence.
The following strategic priorities are intended to complement and enhance our core operational efforts while addressing the Company's financial position and increasing margin penetration against the backdrop of rapidly evolving demographic, economic and regulatory environments. Team.
Independent living residents typically are not reliant on assistance with activities of daily living (“ADLs”), although some residents may utilize outside vendors for those services. 5 Table of Contents As a senior’s need for assistance increases, care in an assisted living residence is often preferable and more cost-effective than home-based care or nursing home care.
Independent living residents typically are not reliant on assistance with activities of daily living (“ADLs”), although some residents may utilize outside vendors for those services. As a senior’s need for assistance increases, care in an assisted living residence is often preferable and more cost-effective than home-based care or nursing home care.
In addition, health care providers are experiencing heightened scrutiny under anti-trust laws in the United States as integration and consolidation of health care delivery increases and affects competition. Moreover, robust state and federal enforcement of fraud 13 Table of Contents and abuse laws continues. Some of our communities receive a portion of their funds from Medicaid.
In addition, health care providers are experiencing heightened scrutiny under anti-trust laws in the United States as integration and consolidation of health care delivery increases and affects competition. Moreover, robust state and federal enforcement of fraud and abuse laws continues. Some of our communities receive a portion of their funds from Medicaid.
For example, we incurred substantial costs for procurement of additional PPE, cleaning and disposable food service supplies, enhanced cleaning, infection control, environmental sanitation costs, and increased labor expenses for hazard pay and contract labor at certain communities with COVID-19 positive residents. We a lso incurred costs related to COVID-19 testing of our residents and our employees.
For example, we incurred substantial costs for procurement of additional property and equipment, cleaning and disposable food service supplies, enhanced cleaning, infection control, environmental sanitation costs, and increased labor expenses for hazard pay and contract labor at certain communities with COVID-19 positive residents. We a lso incurred costs related to COVID-19 testing of our residents and our employees.
In conjunction with the deferral and payment plan applications, the Company accrued penalties and interest of $0.7 million and $0.4 million, respectively, which were included in accrued expenses on the Company’s Consolidated Balance Sheets.
In conjunction with the deferral and payment plan applications, the Company accrued penalties and interest of $0.7 million and $0.8 million, respectively, which were included in accrued expenses on the Company’s Consolidated Balance Sheets.
Others may offer higher levels of personal assistance for residents with chronic diseases and conditions or memory care services for residents with Alzheimer’s disease or other cognitive frailties. Generally, assisted living residents require higher levels of care than residents of independent living residences but require lower levels of care than residents in skilled nursing facilities.
Others may offer higher levels of personal assistance for residents with chronic diseases and conditions or memory care services for residents with Alzheimer’s disease or other cognitive frailties. Generally, assisted living residents require higher levels of care than residents of independent living residences but require lower levels of care than 5 Table of Contents residents in skilled nursing facilities.
Our living environment and team members deliver value to our residents and strive to exceed their expectations by improving: • Resident satisfaction • Reputation score • Services and programming • Health and safety Team.
Our living environment and team members deliver value to our residents and strive to exceed their expectations by improving: • Resident satisfaction • Reputation score • Services and programming • Health and safety Operational Excellence.
On a routine basis, residents and their family members provide us with valuable input regarding the day-to-day delivery of services. On-site management at each community has fostered and encouraged active resident councils and resident committees who meet independently.
On a routine basis, residents and their family members provide us with valuable input regarding the day-to-day delivery of services. On-site management at each community has fostered and 12 Table of Contents encouraged active resident councils and resident committees who meet independently.
These resident bodies meet with on-site management on a monthly basis to offer input and suggestions as to the quality and delivery of services. 12 Table of Contents In 2022, we implemented a resident and family satisfaction survey in each of our communities.
These resident bodies meet with on-site management on a monthly basis to offer input and suggestions as to the quality and delivery of services. In 2022, we implemented a resident and family satisfaction survey in each of our communities.
In addition, we make certain customized physician, dentistry, podiatry and other health-related rehabilitation and therapy services available to our residents through third-party providers. 8 Table of Contents Operating Communities The table below sets forth certain information with respect to the senior housing communities we operated as of December 31, 2022.
In addition, we make certain customized physician, dentistry, podiatry and other health-related rehabilitation and therapy services available to our residents through third-party providers. Operating Communities The table below sets forth certain information with respect to the senior housing communities we operated as of December 31, 2023.
At the same time, nursing facility operators are continuing to focus on improving occupancy and expanding services to sub-acute patients generally of a 6 Table of Contents younger age and requiring significantly higher levels of nursing care.
At the same time, nursing facility operators are continuing to focus on improving occupancy and expanding services to sub-acute patients generally of a younger age and requiring significantly higher levels of nursing care.
Resident Capacity Commencement Community Location Units IL AL MC Total Ownership of Operations 1 Owned: Aspen Grove Lambertville, MI 79 — 59 27 86 100 % 03/14 Autumn Glen Greencastle, IN 49 — 58 — 58 100 % 06/13 Brookview Meadows Green Bay, WI 79 42 38 — 80 100 % 01/15 Chateau of Batesville Batesville, IN 41 — 43 — 43 100 % 10/12 Cottonwood Village Cottonwood, AZ 160 87 52 21 160 100 % 03/91 Country Charm Greenwood, IN 89 — 166 — 166 100 % 10/12 Courtyards at Lake Granbury Granbury, TX 82 — 73 18 91 100 % 03/12 Georgetowne Place Fort Wayne, IN 166 15 138 14 167 100 % 10/05 Good Tree Retirement and Memories Stephenville, TX 59 40 31 8 79 100 % 03/12 Greenbriar Village Indianapolis, IN 105 — 82 44 126 100 % 08/15 Harrison at Eagle Valley Indianapolis, IN 119 — 105 14 119 100 % 03/91 Heritage at the Plains Oneonta, NY 108 94 28 16 138 100 % 05/15 Keystone Woods Assisted Living Anderson, IN 59 — 61 — 61 100 % 07/11 Laurel Hurst Laurel Woods Columbus, NC 80 70 48 32 150 100 % 10/11 Marquis Place of Elkhorn Elkhorn, NE 63 — 43 23 66 100 % 03/13 North Pointe Anderson, SC 41 — 58 28 86 100 % 10/11 Oaks at Brownsburg Brownsburg, IN 97 98 — — 98 100 % 02/22 Oaks at Plainfield Plainfield, IN 60 61 — — 61 100 % 02/22 Riverbend Jeffersonville, IN 97 — 65 48 113 100 % 03/12 Remington at Valley Ranch Irving, TX 128 128 — — 128 100 % 04/12 Residence of Chardon Chardon, OH 42 — 42 — 42 100 % 10/12 Rose Arbor Maple Grove, MN 137 32 70 42 144 100 % 06/06 Rosemont Humble, TX 96 — 79 48 127 100 % 09/16 Summit Place Anderson, SC 76 17 72 48 137 100 % 10/11 Summit Point Living Macedonia, OH 151 68 71 12 151 100 % 08/11 Vintage Gardens St.
Resident Capacity Commencement Community Location Units IL AL MC Total Ownership of Operations 1 Owned: Aspen Grove Lambertville, MI 79 — 44 41 85 100 % 03/14 8 Table of Contents Resident Capacity Commencement Community Location Units IL AL MC Total Ownership of Operations 1 Autumn Glen Greencastle, IN 50 — 58 — 58 100 % 06/13 Brookview Meadows Green Bay, WI 79 43 37 — 80 100 % 01/15 Chateau of Batesville Batesville, IN 41 — 43 — 43 100 % 10/12 Cottonwood Village Cottonwood, AZ 160 75 64 21 160 100 % 03/91 Country Charm Greenwood, IN 89 — 166 — 166 100 % 10/12 Courtyards at Lake Granbury Granbury, TX 82 — 73 18 91 100 % 03/12 Georgetowne Place Fort Wayne, IN 172 15 144 14 173 100 % 10/05 Good Tree Retirement and Memories Stephenville, TX 59 40 31 8 79 100 % 03/12 Greenbriar Village Indianapolis, IN 105 — 82 43 125 100 % 08/15 Harrison at Eagle Valley Indianapolis, IN 119 — 105 14 119 100 % 03/91 Heritage at the Plains Oneonta, NY 108 94 28 16 138 100 % 05/15 Keystone Woods Assisted Living Anderson, IN 59 — 61 — 61 100 % 07/11 Laurel Hurst Laurel Woods Columbus, NC 80 70 48 32 150 100 % 10/11 Marquis Place of Elkhorn Elkhorn, NE 63 — 43 23 66 100 % 03/13 North Pointe Anderson, SC 41 — 58 24 82 100 % 10/11 Oaks at Brownsburg Brownsburg, IN 97 98 — — 98 100 % 02/22 Oaks at Plainfield Plainfield, IN 60 61 — — 61 100 % 02/22 Riverbend Jeffersonville, IN 97 — 65 48 113 100 % 03/12 Remington at Valley Ranch Irving, TX 128 128 — — 128 100 % 04/12 Residence of Chardon Chardon, OH 42 — 42 — 42 100 % 10/12 Rose Arbor Maple Grove, MN 138 27 76 42 145 100 % 06/06 Rosemont Humble, TX 96 — 79 48 127 100 % 09/16 Summit Place Anderson, SC 76 17 72 48 137 100 % 10/11 Summit Point Living Macedonia, OH 151 68 71 12 151 100 % 08/11 Vintage Gardens St.
While such requirements vary from state to state, they typically relate to staffing, training, physical design, patient privacy, required services and the quality thereof, and resident characteristics. We believe that such regulation will increase in the future.
While such requirements vary from state to state, they typically relate to staffing, training, physical design, patient privacy, required 13 Table of Contents services and the quality thereof, and resident characteristics. We believe that such regulation will increase in the future.
Our strategic priorities are designed to enhance our performance and position our portfolio for near- and long-term growth. During the year ended December 31, 2022, we introduced a new management plan focused on a number of strategic priorities that are core to the Company's refreshed mission.
Our strategic priorities are designed to enhance our performance and position our portfolio for near- and long-term growth. During our prior year, we introduced a new management plan focused on a number of strategic priorities that are core to the Company's refreshed mission.
Supplemental Services. These services include extra transportation services, personal maintenance, extra laundry services and special care services, such as services for residents with certain forms of dementia. Certain of these services require extra charges.
These services include extra transportation services, personal maintenance, extra laundry services and special care services, such as services for residents with certain forms of dementia.
In April 2022 and January 2021, the Company accepted $9.1 million and $8.7 million of cash, respectively, through grants from the Public Health and Social Services Emergency Fund’s (the “Provider Relief Fund”) Phases 4 and 3 General Distribution, respectively, which was expanded by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”) to provide grants or other funding mechanisms to eligible healthcare providers for healthcare-related expenses or lost revenues attributable to COVID-19.
In April 2022, the Company accepted $9.1 million through grants from the Public Health and Social Services Emergency Fund’s (the “Provider Relief Fund”) Phase 4 General Distribution, which was expanded by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”) to provide grants or other funding mechanisms to eligible healthcare providers for healthcare-related expenses or lost revenues attributable to COVID-19.
In January 2021, we announced our new memory care program, Magnolia Trails, which was developed to meet the growing need for individualized programming for residents receiving memory care services. The program is designed to engage the five senses to create calming yet stimulating spaces and tailored care plans that seek to address our residents’ changing and evolving needs.
We have a memory care program, Magnolia Trails, which was developed to meet the growing need for individualized programming for residents receiving memory care services. The program is designed to engage the five senses to create calming yet stimulating spaces and tailored care plans that seek to address our residents’ changing and evolving needs.
Both the Phase 4 and Phase 3 Provider Relief Funds were recorded as other income in the years ended December 31, 2022 and 2021, respectively. The CARES Act Provider Relief Funds are grants that do not have to be repaid provided we satisfy the terms and conditions of the CARES Act.
The Phase 4 Provider Relief Funds were recorded as other income in the year ended December 31, 2022. The CARES Act Provider Relief Funds are grants that do not have to be repaid provided we satisfy the terms and conditions of the CARES Act.
Memory Care Services We maintain programs and special living accommodations at some of our communities for residents with certain forms of dementia, which provide the attention, care and services needed to help these residents maintain a higher quality of life.
Certain of these services require extra charges. 7 Table of Contents Memory Care Services We maintain programs and special living accommodations at some of our communities for residents with certain forms of dementia, which provide the attention, care and services needed to help these residents maintain a higher quality of life.
ITEM 1. BUSINESS. Overview Sonida Senior Living, Inc., (formerly known as Capital Senior Living Corporation), a Delaware corporation (together with its subsidiaries, "we," "us," "our," or "the Company"), is one of the leading owner-operators of senior housing communities in the United States in terms of resident capacity. The Company and its predecessors have provided senior housing since 1990.
ITEM 1. BUSINESS. Overview Sonida Senior Living, Inc. (formerly known as Capital Senior Living Corporation), a Delaware corporation (together with its subsidiaries, “we,” “us,” “our,” or the “Company”), is one of the leading owner-operators of senior housing communities in the United States in terms of resident capacity. The Company and its predecessors have provided senior housing since 1990.
We have adopted a philosophy of assisted living care that allows a resident to maintain a dignified independent lifestyle. Residents and their families are encouraged to be partners in the residents’ care and to take as much responsibility for their well-being as possible.
We have adopted a philosophy of assisted living care that allows a resident to maintain a dignified independent lifestyle. Residents and their families are encouraged to be partners in the residents’ care and to take as much responsibility for their well-being as possible. The basic types of assisted living services offered by us include: Personal Care Services.
In addition, during the years ended December 31, 2022 and 2021 the Company received approximately $1.2 million and $0.6 million, respectively, in relief from various state agencies.
In addition, during the years ended December 31, 2023 and 2022 the Company received approximately $2.9 million and $1.2 million, respectively, in relief from various state agencies.
We are proud to be an equal opportunity employer. Our diversity is exhibited by the composition of our workforce with 83% female and 47% non-white employees. We will continue to strive each day to maintain our inclusive culture through our efforts in recruiting, education, development, and talent progression.
We are proud to be an equal opportunity employer. Our diversity is exhibited by the composition of our workforce with 82% female and 50% with a diverse background. We will continue to strive each day to maintain our inclusive culture through our efforts in recruiting, education, development, and talent progression.
They work individually and collectively each day to provide safety, wellness, care and service to our residents. As of December 31, 2022, we employed 3,497 persons (88 of whom are employed at our Dallas Support Center), of which 2,420 were full-time employees and 1,077 were part-time employees. Additionally, we had 17 unfilled community leadership positions as of December 31, 2022.
They work individually and collectively each day to provide safety, wellness, care and service to our residents. As of December 31, 2023, we employed 3,955 persons (102 of whom are employed at our Dallas Support Center), of which 2,617 were full-time employees and 1,338 were part-time employees. Additionally, we had 18 unfilled community leadership positions as of December 31, 2023.
As of December 31, 2022, the Company operated 72 senior housing communities in 18 states with an aggregate capacity of approximately 8,000 residents, including 62 senior housing communities that the Company owned and 10 communities that the Company third-party managed.
As of December 31, 2023, the Company operated 71 senior housing communities in 18 states with an aggregate capacity of approximately 8,000 residents, including 61 senior housing communities that the Company owned and 10 communities that the Company managed on behalf of third parties.
The basic types of assisted living services offered by us include: 7 Table of Contents Personal Care Services. These services include assistance with ADLs such as ambulation, bathing, dressing, eating, grooming, personal hygiene, and monitoring or assistance with medications. Support Services. These services include meals, assistance with social and recreational activities, laundry services, general housekeeping, maintenance services and transportation services.
These services include assistance with ADLs such as ambulation, bathing, dressing, eating, grooming, personal hygiene, and monitoring or assistance with medications. Support Services. These services include meals, assistance with social and recreational activities, laundry services, general housekeeping, maintenance services and transportation services. Supplemental Services.
Private insurers have begun to limit reimbursement for medical services in general to predetermined charges, and managed care organizations (such as health maintenance organizations) are attempting to limit hospitalization costs by negotiating for discounted rates for hospital and acute care services and by monitoring and reducing hospital use.
Cost-Containment Pressures In response to rapidly rising health care costs, governmental and private pay sources have adopted cost containment measures that have reduced admissions and encouraged reduced lengths of stays in hospitals and other acute care settings. 6 Table of Contents Private insurers have begun to limit reimbursement for medical services in general to predetermined charges, and managed care organizations (such as health maintenance organizations) are attempting to limit hospitalization costs by negotiating for discounted rates for hospital and acute care services and by monitoring and reducing hospital use.
We have completed Phase I environmental audits of substantially all of the communities in which we own interests, typically at the time of acquisition or refinancing, and such audits have not revealed as of the date of this Annual Report on Form 10-K any material environmental liabilities that exist with respect to these communities. 14 Table of Contents Under various U.S. federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at or migrating from such property and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs.
Under various U.S. federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at or migrating from such property and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs.
In total, we incurred approximately $0.4 million and $1.9 million in incremental COVID-19 costs in fiscal years 2022 and 2021, respectively. We expect to continue to incur such incremental co sts until the COVID-19 pandemic significantly subsides.
In total, we i ncurred approximately $0.1 million and $0.4 million in incremental COVID-19 costs in fiscal years 2023 and 2022, respectively.
As of December 31, 2022 and December 31, 2021, the Company had $4.8 million and $3.7 million, respectively, in d eferred payroll taxes, which is included in accrued expenses in the Company’s Consolidated Balance Sheets.
As of December 31, 2023 and December 31, 2022, the Company had $5.1 million and $4.8 million, respectively, in deferred payroll taxes, which is included in accrued expenses in the Company’s Consolidated Balance Sheets. On September 14, 2023, amid concerns about aggressive employee retention credit (“ERC”) marketing, the IRS announced a moratorium on processing new claims.
If we become insolvent or fail to continue as a going concern, our common stock may become worthless. Industry Background The senior living industry encompasses a broad and diverse range of living accommodations and supportive services that are provided primarily to persons 75 years of age or older.
The ERC is a federal payroll tax credit for businesses that had employees and were affected during the COVID-19 pandemic. Industry Background The senior living industry encompasses a broad and diverse range of living accommodations and supportive services that are provided primarily to persons 75 years of age or older.
Strong local leadership teams develop engaged, loyal and caring team members by focusing on: • Employee engagement • Community leadership team retention • Labor management and cost control • Contract labor reduction As discussed below, in November 2021, we raised approximately $154.8 million from investors, which allowed us to make strategic investments in our portfolio and to position us for further growth.
Strong local leadership teams develop engaged, loyal and caring team members by focusing on: • Employee engagement • Community leadership team retention • Labor management and cost control • Contract labor reduction Value.
We responded with real-time operational adjustments to support a consistent resident service model, despite the rapidly changing and challenging senior living environment. 4 Table of Contents During 2022 and 2021, we incurred significant additional operating costs and expenses in order to implement enhanced infection control protocols and enhanced care for our residents.
During 2022, we incurred additional operating costs and expenses in order to implement enhanced infection control protocols and enhanced care for our residents.
We strive to remove inefficiencies and improve quality in our operations to reinvest in the Company by focusing on: • Rate optimization • Marketing initiatives to maintain post-COVID occupancy recovery • Group Purchasing Program ("GPO") enhancements and co mpliance • Improving liquidity through better collections and cash management Value.
We strive to remove inefficiencies and improve quality in our operations to reinvest in the Company by focusing on: • Rate optimization • Sales and Marketing platform drives continued occupancy growth • Group Purchasing Organization (“GPO”) programs enhance purchasing options, pricing, and co mpliance • Improving liquidity through better collections and cash management As discussed below, during 2023 we modified the terms on a significant portion of our debt, which we believe will provide the Company with additional financial flexibility and position us for further growth.
See “Note 10- Stock-Based Compensation” in the Notes to Consolidated Financial Statements. COVID-19 Pandemic Update The United States broadly continues to recover from the pandemic caused by COVID-19, which significantly disrupted the nation’s economy, the senior living industry and the Company’s business.
We obtained additional debt proceeds through our existing finance facility with Ally Bank for the remaining portion of the purchase price for the Protective Life Loan Purchase. 4 Table of Contents COVID-19 Pandemic Update The United States broadly continues to recover from the pandemic caused by COVID-19, which significantly disrupted the nation’s economy, the senior living industry and the Company’s business.
Removed
Recent Developments 2022 Mortgage Refinance In March 2022, the Company completed the refinancing of certain existing mortgage debt with Ally Bank (the “Refinance Facility”) for ten of its communities. The Refinance Facility includes an initial term loan of $80 million.
Added
Recent Developments Fannie Mae Loan Modification On June 29, 2023, we entered into a forbearance agreement (“ Fannie Forbearance ” and “Fannie Forbearance Agreement”) with the Federal National Mortgage Association (“ Fannie Mae ” ) for all 37 of its encumbered communities, effective as of June 1, 2023 (“Fannie Forbearance Effective Date”).
Removed
In addition, $10 million is available as delayed loans that can be borrowed upon achieving and maintaining certain financial covenant requirements, and up to an additional uncommitted $40 million may be available in the lender's discretion to fund future growth initiatives.
Added
Under the Fannie Forbearance, Fannie Mae agreed to forbear on its remedies otherwise available under the community mortgages and Master Credit Facility (“MCF”) in connection with reduced debt service payments made by us during the forbearance period. In connection with the Fannie Forbearance, we made a $5.0 million principal payment in July 2023.
Removed
On December 13, 2022, the Company entered into an agreement with Ally Bank to amend the Refinance Facility by adding two additional subsidiaries of the Company (which own the two Indiana properties acquired during the first quarter of 2022) as borrowers.
Added
The Fannie Forbearance was the first of a two-step process to modify all existing mortgage loan agreements with Fannie Mae by October 2023 under proposed loan modification agreements, as defined in the Fannie Forbearance (“Loan Modification Agreements”). We entered into Loan Modification Agreements with Fannie Mae on October 2, 2023.
Removed
The amendment increased the principal by $8.1 million to $88.1 million, with an additional $10 million still available as delayed loans that can be borrowed upon achieving and maintaining certain financial covenant requirements. See "Note 8 - Notes Payable" in the Notes to Consolidated Financial Statements.
Added
Some of the material terms of the Loan Modification Agreements are as follows: • Maturities on 18 community mortgages, ranging from July 2024 to December 2026, have been extended to December 2026.
Removed
Management Transition As previously announced in the Form 8-K filed by the Company on August 5, 2022, Kimberly S. Lody notified the Company on August 2, 2022 that she was resigning as the Company’s President and Chief Executive Officer and as a member of the Board of Directors (the “Board”), effective September 2, 2022.
Added
The remaining 19 communities under the MCF have existing maturities in January 2029. • We are not required to make scheduled principal payments due under the 18 community mortgages and 19 communities under the MCF through the revised maturity date of December 2026 or 36 months from the Fannie Forbearance Effective Date, respectively. • The monthly interest rate will be reduced by a 1.5% weighted average on all 37 communities for 12 months from the Fannie Forbearance Effective Date and deferred until it is contractually waived in June 2024 so long as there is no event of default (the “Fannie Interest Abatement Period”). • We are required to make a second principal payment of $5.0 million with respect to the Fannie Mae debt which is due on June 1, 2024, the one-year anniversary of the Fannie Forbearance Effective Date. 2023 Ally Loan Amendment On June 29, 2023, and concurrent with the Fannie Forbearance, we executed a second amendment (“2023 Ally Amendment”) to our Refinance Facility (“Ally Term Loan” or “Ally Term Loan Agreement”) and an amended guaranty (“Second Amended Ally Guaranty”) with Ally Bank with terms as follows: • With respect to the Second Amended Ally Guaranty, Ally will grant the Company, as Guarantor, a waiver (“Limited Payment Guaranty Waiver” or “Waiver”) of the liquid assets minimum requirement of $13.0 million for a 12-month period.
Removed
In accordance with the Company’s succession plan, on August 2, 2022, the Board appointed Brandon M. Ribar, the Company’s Executive Vice President and Chief Operating Officer, as President and Chief Executive Officer of the Company and as a member of the Board, effective September 2, 2022.
Added
On July 1, 2024, a new Liquid Assets Threshold of $7.0 million will be effective, with such threshold increasing $1.0 million per month through the earlier of the release of the waiver period or December 31, 2024. • During the Waiver period, a new and temporary liquid assets minimum threshold (“Limited Payment Guaranty Waiver Minimum Threshold”) will be established.
Removed
Indiana Acquisition On February 1, 2022, the Company completed the acquisition of two senior living communities located in Indiana for a combined purchase price of $12.3 million. The communities consist of a total of 157 independent living units.
Added
The Limited Payment Guaranty Waiver Minimum Threshold is $6.0 million and is measured weekly. If breached, the “Excess Cash Flow Sweep” is triggered and all excess cash from the communities collateralizing the Ally Term Loan will be swept into an “Equity Cure Fund”, as defined in the Ally Term Loan Agreement.
Removed
The purchase price for these communities was funded at the time of acquisition with cash on hand and subsequently financed in December 2022, as described in the "2022 Mortgage Refinance" paragraph above.
Added
As provided for in the Ally Amendment, the Excess Cash Flow Sweep, if triggered, will cease upon the achievement of meeting or exceeding the Limited Payment Guaranty Waiver Minimum Threshold for four consecutive weeks.
Removed
Corporate Name Change On November 9, 2021, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, with the Delaware Secretary of State to effect the change of the Company’s name from "Capital Senior Living Corporation" to “Sonida Senior Living, Inc.” effective as of November 15, 2021 (the “Name Change”).
Added
Consistent with the Ally Term Loan, all amounts held in escrow (i.e., Debt Service Escrow and interest rate cap reserve (“IRC Reserve”)) will be included and combined with the Company’s unrestricted cash for purposes of measurement against the Limited Payment Guaranty Waiver Minimum Threshold. 3 Table of Contents • In July 2023, we were required to fund $2.3 million to an IRC Reserve held by Ally, which represented the quoted cost of a one-year interest rate cap on the full $88.1 million notional value of the Ally Term Loan at a 2.25% SOFR strike rate.
Removed
In addition, the Company’s board of directors adopted an amendment to the Company’s Second Amended and Restated Bylaws to reflect the Company’s new legal name, effective as of November 15, 2021.
Added
On December 1, 2023, the Company entered into a new SOFR-based interest rate cap transaction for an aggregate notional amount of $88.1 million at a cost of $2.4 million. The interest rate cap agreement has a 12-month term and caps the floating interest rate portion or our indebtedness with Ally Bank at 2.25%.
Removed
In conjunction with the Name Change, the ticker symbol of the Company’s common stock on the New York Stock Exchange changed from "CSU" to “SNDA.” The CUSIP number for the Company’s common stock following the effectiveness of the Name Change remained unchanged.
Added
Until the terms of the Limited Payment Guaranty Waiver have expired or have been met and elected at the Company’s discretion, the IRC Reserve is required to be replenished to its replacement cost.
Removed
Investment Agreement On October 1, 2021, the Company entered into an Amended and Restated Investment Agreement (the "A&R Investment Agreement") with Conversant Dallas Parkway (A) LP (“Conversant Fund A”) and Conversant Dallas Parkway (B) LP ("Conversant Fund B" and, together with Conversant Fund A, the “Conversant Investors”), affiliates of Conversant Capital LLC, which amended and restated in its entirety the Investment Agreement that the Company entered into with the Conversant Investors on July 22, 2021 (the “Original Investment Agreement”).
Added
Conversant Equity Commitment In connection with the Fannie Forbearance and the June 2023 Ally Amendment signed on June 29, 2023, we entered into a $13.5 million equity commitment agreement (“Equity Commitment”) with Conversant Dallas Parkway (A) LP (“Conversant Fund A”) and Conversant Dallas Parkway (B) LP (“Conversant Fund B” and, together with Conversant Fund A, the “Conversant Investors” or “Conversant”) for a term of 18 months.
Removed
Pursuant to the A&R Investment Agreement, (i) the Conversant Investors purchased from the Company, and the Company sold to the Conversant Investors, in a private placement (the “Private Placement”) pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), 41,250 shares of newly designated Series A convertible preferred stock, par value $0.01 per share (the “Series A Preferred Stock”), at a 3 Table of Contents price per share equal to $1,000; and 1,650,000 shares of common stock, par value $0.01 per share, at a price per share equal to $25; (ii) the Conversant Investors received 1,031,250 warrants, each evidencing the right to purchase one share of common stock at a price per share of $40 and with an exercise expiration date of five years after the Closing Date; (iii) the Company amended the terms of its previously announced rights offering under the Original Investment Agreement to allow the holders of record of its outstanding shares of common stock at the close of business on September 10, 2021 the right to purchase at $30 per share, 1.1 shares of common stock for each share of common stock held (the “Rights Offering”), in each case as more fully described in the A&R Investment Agreement.
Added
The Equity Commitment had a commitment fee of $675,000, which was paid through the issuance of 67,500 shares of common stock of the Company. Subject to certain conditions, the Company has the right, but not the obligation, to utilize Conversant’s equity commitment and may draw on the commitment in whole or in part.
Removed
On or after the closing date under the A&R Investment Agreement, the Company may from time to time request additional investments from the Conversant Investors in shares of Series A Preferred Stock for investment in accretive capital expenditures and acquisitions post-closing up to an aggregate amount equal to $25.0 million, subject to certain conditions.
Added
We made total equity draws of $10.0 million during 2023 and issued 1,000,000 shares of common stock to Conversant. We used a portion of the equity draws to make $5.0 million principal payments towards our Fannie Mae loan balances. As of December 31, 2023, $3.5 million remains available under the Equity Commitment.
Removed
In addition, pursuant to the A&R Investment Agreement, the Conversant Investors agreed to partially backstop the Amended Rights Offering up to $50.5 million through the purchase of additional shares of the Company's common stock at $30 per share.
Added
Shaker Heights Disposition In August 2023, we completed the sale of one property located in Shaker Heights, Ohio (“Shaker Heights”), for $1.0 million. The Shaker Heights property was unencumbered.
Removed
In consideration for the backstop commitments of the Conversant Investors, the Company paid the Conversant Investors, as a premium, 174,675 shares of common stock.
Added
Subsequent Events 2024 Private Placement Transaction On February 1, 2024, we entered into a securities purchase agreement with certain of our largest shareholders, including the Conversant Investors (the “Investors”), pursuant to which the Investors agreed to purchase from us, and we agreed to sell to the Investors, in a private placement transaction (the “2024 Private Placement”) pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), an aggregate of 5,026,318 shares (the “Shares”) of our common stock at a price of $9.50 per share.
Removed
Simultaneously with the entry into the Original Investment Agreement, the Company and the Conversant Investors entered into a $17.3 million secured promissory note (the “Promissory Note”) to provide interim debt financing which was scheduled to mature in July 2022.
Added
The 2024 Private Placement occurred in two tranches. The first tranche occurred on February 1, 2024, in which 3,350,878 Shares were issued and sold to the Investors for a total of approximately $31.8 million. The second tranche occurred on March 22, 2024, in which 1,675,440 Shares were issued and sold to the Investors for a total of approximately $15.9 million.
Removed
The Promissory Note was amended to reduce the aggregate indebtedness outstanding by $1.3 million, resulting in an amended secured promissory note in the amount of $16.0 million. The Promissory Note was fully repaid upon closing of the transactions contemplated by the A&R Investment Agreement and the Company recognized a $1.0 million loss on extinguishment of the Promissory Note.
Added
In addition to our aggregate deposits of $1.5 million made in December 2023 and January 2024, we funded the remaining cash portion of the purchase price (including one-time closing costs) for the Protective Life Loan Purchase (as defined below) with $15.4 million of net proceeds from the sale of the Shares at the first tranche of the 2024 Private Placement.
Removed
See "Note 8- Notes Payable" in the Notes to Consolidated Financial Statements. The transactions contemplated by the A&R Investment Agreement were subject to stockholder approval, which was received on October 22, 2021. The Rights Offering expired on October 27, 2021 with subscription rights to purchase 1,133,941 shares exercised.
Added
We obtained additional debt proceeds through our existing finance facility with Ally Bank for the remaining portion of the purchase price for the Protective Life Loan Purchase.
Removed
The transactions contemplated by the A&R Investment Agreement closed (the “Closing”) on November 3, 2021 and resulted in net proceeds to the Company of $141.4 million after paying customary transaction and closing costs of approximately $13.4 million.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

62 edited+15 added−36 removed121 unchanged
Biggest changeRisks Related to Our Corporate Organization and Structure • Anti-takeover provisions in our governing documents, governing law and material agreements may discourage, delay or prevent a merger or acquisition that our stockholders may consider favorable or prevent the removal of our current board of directors and management. • A substantial majority of the voting power of our issued and outstanding securities is held by a small group of stockholders. • The issuance of shares of our Series A Preferred Stock reduced the relative voting power of holders of our common stock, and the conversion of those shares into shares of our common stock would dilute the ownership of common stockholders and may adversely affect the market price of our common stock. • Our Series A Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to the rights of, holders of our common stock, which could adversely affect our liquidity and financial condition. • We are a holding company with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations.
Biggest changeRisks Related to Regulatory, Compliance, and/or Legal Matters • We are subject to governmental regulations and compliance, some of which are burdensome and some of which may change to our detriment in the future. • Changes in federal, state and local employment-related laws and regulations, or our failure to comply with these laws and regulations, could have an adverse effect on our financial condition, results of operations, and cash flow. • We may be subject to liability for environmental damages. 17 Table of Contents Risks Related to Our Corporate Organization and Structure • Anti-takeover provisions in our governing documents, governing law, and material agreements may discourage, delay or prevent a merger or acquisition that our stockholders may consider favorable or prevent the removal of our current board of directors and management. • A substantial majority of the voting power of our issued and outstanding securities is held by a small group of stockholders. • The issuance of shares of our Series A Preferred Stock reduced the relative voting power of holders of our common stock, and the conversion of those shares into shares of our common stock would dilute the ownership of common stockholders and may adversely affect the market price of our common stock. • Our Series A Preferred Stock has rights, preferences, and privileges that are not held by, and are preferential to the rights of, holders of our common stock, which could adversely affect our liquidity and financial condition. • We are a holding company with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations.
Risks Related to Our Business, Operations and Strategy • We have incurred losses from operations in each of the last two fiscal years and may do so in the future. • We largely rely on private pay residents and circumstances that adversely affect the ability of the seniors to pay for our services could have a material adverse effect on us. • The senior living services industry is very competitive and some competitors may have substantially greater financial resources than us. • Termination of resident agreements and resident attrition could affect adversely our revenues and earnings. • We have identified a material weakness in our internal control over financial reporting as of December 31, 2022.
Risks Related to Our Business, Operations and Strategy • We have incurred losses from operations in each of the last two fiscal years and may do so in the future. • We largely rely on private pay residents and circumstances that adversely affect the ability of the seniors to pay for our services could have a material adverse effect on us. • The senior living services industry is very competitive and some competitors may have substantially greater financial resources than us. • Termination of resident agreements and resident attrition could affect adversely our revenues and earnings. • We have identified a material weakness in our internal control over financial reporting as of December 31, 2023.
Further, any decreases in the appraised values of our communities, including due to adverse changes in real estate market conditions, or their performance, may result in available mortgage refinancing amounts that are less than the communities' maturing indebtedness.
Further, any decreases in the appraised values of our communities, including due to adverse changes in real estate market conditions, or their performance, may result in available mortgage refinancing amounts that are less than the communities maturing indebtedness.
We have a number of anti-takeover devices in place that will hinder takeover attempts, including: a staggered board of directors consisting of three classes of directors, each of whom serve three-year terms; removal of directors only for cause, and only with the affirmative vote of at least a majority of the voting interest of stockholders entitled to vote; right of our directors to issue preferred stock from time to time with voting, economic and other rights superior to those of our common stock without the consent of our stockholders; provisions in our amended and restated certificate of incorporation and amended and restated by-laws limiting the right of our stockholders to call special meetings of stockholders; advance notice requirements for stockholders with respect to director nominations and actions to be taken at annual meetings; requirement for two-thirds stockholder approval for amendment of our by-laws and certain provisions of our Certificate of Incorporation; and no provision in our Amended and Restated Certificate of Incorporation for cumulative voting 27 Table of Contents in the election of directors, which means that the holders of a majority of the outstanding shares of our common stock can elect all the directors standing for election.
We have a number of anti-takeover devices in place that will hinder takeover attempts, including: a staggered board of directors consisting of three classes of directors, each of whom serve three-year terms; removal of directors only for cause, and only with the affirmative vote of at least a majority of the voting interest of stockholders entitled to vote; right of our directors to issue preferred stock from time to time with voting, economic and other rights superior to those of our common stock without the consent of our stockholders; provisions in our amended and restated certificate of incorporation and amended and restated by-laws limiting the right of our stockholders to call special meetings of stockholders; advance notice requirements for stockholders with respect to director nominations and actions to be taken at annual meetings; requirement for two-thirds stockholder approval for amendment of our by-laws and certain provisions of our Certificate of Incorporation; and no provision in our Amended and Restated Certificate of Incorporation for cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of our common stock can elect all the directors standing for election.
Failure to maintain the security and functionality of our information systems, or to prevent a cybersecurity attack or other unauthorized access to our information systems, could expose us to a number of adverse consequences, including: (i) interruptions to our business and operations; (ii) the theft, destruction, loss, misappropriation or release of sensitive information, including proprietary business information and personally identifiable information of our residents, patients, and employees; (iii) significant remediation costs; (iv) negative publicity that could damage our reputation and our relationships with our residents, patients, employees, and referral sources; (v) litigation and potential liability under privacy, security and consumer protection laws, including HIPAA, or other applicable laws, rules or regulations; and (vi) government inquiries that may result in sanctions and other criminal or civil fines or penalties.
Failure to maintain the security and functionality of our information systems, or to prevent a cybersecurity attack or other unauthorized access to our information systems, could expose us to a number of adverse consequences, including: (i) interruptions to our business and operations; (ii) the theft, destruction, loss, misappropriation or release of sensitive information, including proprietary business information and personally identifiable information of our residents, patients, and employees; (iii) significant remediation costs; (iv) negative publicity that could damage our reputation and our relationships with our 22 Table of Contents residents, patients, employees, and referral sources; (v) litigation and potential liability under privacy, security and consumer protection laws, including HIPAA, or other applicable laws, rules or regulations; and (vi) government inquiries that may result in sanctions and other criminal or civil fines or penalties.
We will continue to monitor the effectiveness of our remediation measures in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures. 21 Table of Contents There is an inherent risk of liability in the provision of personal and health care services, not all of which may be covered by insurance.
We will continue to monitor the effectiveness of our remediation measures in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures. There is an inherent risk of liability in the provision of personal and health care services, not all of which may be covered by insurance.
HIPAA is a complex set of regulations and many unanswered questions remain with respect to the manner in which HIPAA applies to businesses such as those operated by us. 26 Table of Contents In addition, some states have begun to enact more comprehensive privacy laws and regulations addressing consumer rights to data protection or transparency.
HIPAA is a complex set of regulations and many unanswered questions remain with respect to the manner in which HIPAA applies to businesses such as those operated by us. In addition, some states have begun to enact more comprehensive privacy laws and regulations addressing consumer rights to data protection or transparency.
For 2023, we expect to continue to experience labor cost pressure as a result of the continuing labor conditions previously described and an anticipated increase in hours worked as our occupancy levels grow.
For 2024, we expect to continue to experience labor cost pressure as a result of the continuing labor conditions previously described and an anticipated increase in hours worked as our occupancy levels grow.
Furthermore, any failure to comply with these laws can result in significant protracted litigation, government investigation, penalties or other damages that could have an adverse effect on our financial condition, results of operations, and cash flow. We may be subject to liability for environmental damages.
Furthermore, any failure to comply with these laws can result in significant protracted litigation, government investigation, penalties or other damages that could have an adverse effect on our financial condition, results of operations, and cash flow. 25 Table of Contents We may be subject to liability for environmental damages.
Our inability to obtain additional financing or refinancings on terms acceptable to us could delay or eliminate some or all of our growth plans, 19 Table of Contents necessitate the sales of assets at unfavorable prices or both, and would have a material adverse effect on our business, financial condition, cash flows, and results of operations.
Our inability to obtain additional financing or refinancings on terms acceptable to us could delay or eliminate some or all of our growth plans, necessitate the sales of assets at unfavorable prices or both, and would have a material adverse effect on our business, financial condition, cash flows, and results of operations.
If we are unable to raise additional funds or obtain them on terms acceptable to us, we may have to delay or abandon some or all of our plans or opportunities. Further, if additional funds are raised through the issuance of additional equity securities, the percentage ownership of our stockholders would be diluted.
If we are unable to raise additional funds or obtain them on terms acceptable to us, we may have to delay or 19 Table of Contents abandon some or all of our plans or opportunities. Further, if additional funds are raised through the issuance of additional equity securities, the percentage ownership of our stockholders would be diluted.
Any newly issued equity securities may have rights, preferences, or privileges senior to those of our common stock. Risks Related to Our Business, Operations and Strategy We have incurred losses from operations in each of the last two fiscal years and may do so in the future.
Any newly issued equity securities may have rights, preferences, or privileges senior to those of our common stock. Risks Related to Our Business, Operations and Strategy We have incurred losses from operations in each of the last two fiscal years and may do so in the future. We incurred net losses in fiscal years 2023 and 2022.
Due to challenges in hiring and retaining adequate accounting staffing levels, this material weakness has not been remediated during the quarter ended and the year ended December 31, 2022.
Due to challenges in hiring and retaining adequate accounting staffing levels, this material weakness has not been remediated during the quarter ended and the year ended December 31, 2023.
Our failure to comply with financial covenants and other restrictions contained in our debt instruments could result in the accele ration of the related debt or in the exercise of other remedies. Our outstanding indebtedness is secured by our communities, and, in certain cases, a guaranty by us or by one or more of our subsidiaries.
Our failure to comply with financial covenants and other restrictions contained in our debt instruments could result in the acceleration of the related debt or in the exercise of other remedies. Our outstanding indebtedness is secured by our communities, and, in certain cases, a guaranty by us or by one or more of our subsidiaries.
While we cannot 29 Table of Contents predict the size of future resales or distributions of our common stock, if there is a perception that such resales or distributions could occur, or if the holders of our securities registered for resale sell a large number of the registered securities, the market price for our common stock could be adversely affected.
While we cannot predict the size of future resales or distributions of our common stock, if there is a perception that such resales or distributions could occur, or if the holders of our securities registered for resale sell a large number of the registered securities, the market price for our common stock could be adversely affected.
If we are unable to remediate this material weakness, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock. • There is an inherent risk of liability in the provision of personal and health care services, not all of which may be covered by insurance. • Damage from catastrophic weather and other natural events have resulted in losses and adversely affected certain of our residents. • The geographic concentration of our communities could leave us vulnerable to an economic downturn, regulatory changes, acts of nature, or the effects of climate change in those areas, which could negatively impact our financial condition, revenues, results of operations, and cash flow. • We rely on information technology in our operations, and failure to maintain the security and functionality of our information technology and computer systems, or to prevent a cybersecurity attack, breach or other unauthorized access, could adversely affect our business, reputation and relationships with our residents, employees and referral sources and may subject us to remediation costs, government inquiries and liabilities under HIPAA and data and consumer protection laws, any of which could materially and adversely impact our revenues, results of operations, cash flow and liquidity. • Because we do not presently have plans to pay dividends on our common stock, holders of our common stock must look solely to appreciation of our common stock to realize a gain on their investment.
If we are unable to remediate this material weakness, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock. • There is an inherent risk of liability in the provision of personal and health care services, not all of which may be covered by insurance. • Damage from catastrophic weather and other natural events could result in losses and adversely affect certain of our residents. • The geographic concentration of our communities could leave us vulnerable to an economic downturn, regulatory changes, acts of nature, or the effects of climate change in those areas, which could negatively impact our financial condition, revenues, results of operations, and cash flow. • We rely on information technology in our operations, and failure to maintain the security and functionality of our information technology and computer systems, or to prevent a cybersecurity attack, breach or other unauthorized access, could adversely affect our business, reputation and relationships with our residents, employees and referral sources and may subject us to remediation costs, government inquiries and liabilities under HIPAA and data and consumer protection laws, any of which could materially and adversely impact our revenues, results of operations, cash flow, and liquidity. • Because we do not presently have plans to pay dividends on our common stock, holders of our common stock must look solely to appreciation of our common stock to realize a gain on their investment. • We cannot predict the potential emergence and effects of a future pandemic, epidemic or outbreak of an infectious disease, on our operations, financial condition and liquidity.
We have increased, and may again in the future, attempt to increase, our capital resources by offering additional equity securities. Additional equity offerings may dilute the economic and voting rights of our existing stockholders and/or reduce the market price of our common stock.
Future offerings of equity securities by us may adversely affect the market price of our common stock. We have increased, and may again in the future, attempt to increase, our capital resources by offering additional equity securities. Additional equity offerings may dilute the economic and voting rights of our existing stockholders and/or reduce the market price of our common stock.
We have a high concentration of communities in various geographic areas, including the states of Texas, Indiana, Ohio and Wisconsin, which we estimate represented approximately 24%, 18%, 20%, and 10%, respectively, of our resident revenues for the year ended December 31, 2022.
We have a high concentration of communities in various geographic areas, including the states of Texas, Indiana, Ohio and Wisconsin, which we estimate represented approximately 23%, 18%, 20%, and 10%, respectively, of our resident revenues for the year ended December 31, 2023.
Further, the Investor Rights Agreement prohibits certain change of control transactions without the prior written consent of Conversant Fund A and the existence of a majority stockholder, such as Conversant, may also have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of our company.
Further, we entered into an investor rights agreement with certain of our largest stockholders that prohibits certain change of control transactions without the prior written consent of Conversant Fund A and the existence of a majority stockholder, such as Conversant, may also have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of our company.
The United States’ unemployment rate remained at or below 4.0% each month during 2022, and many states experienced record low unemployment rates. Labor pressures have resulted in higher-than-typical associate turnover and wage growth, and we have experienced difficulty in filling open line-level positions timely.
The United States’ unemployment rate remained at or below 4.0% each month during 2023 and 2022, and many states experienced record low unemployment rates. Labor pressures have resulted in higher-than-typical associate turnover and wage growth, and 23 Table of Contents we have experienced difficulty in filling open line-level positions timely.
We also will be dependent on the available labor pool of semi-skilled and unskilled employees in each of the markets in which we operate. Historically, labor costs have comprised of approximately two-thirds of our total operating expenses. We began to experience pressures associated with the intensely competitive labor environment during 2021, which continued throughout 2022.
We also will be dependent on the available labor pool of semi-skilled and unskilled employees in each of the markets in which we operate. Historically, labor costs have comprised of approximately two-thirds of our total operating expenses. We experienced pressures associated with the intensely competitive labor environment during 2022, which continued throughout 2023.
There are various financial covenants and other restrictions in certain of our debt instruments, including provisions which: • require us to meet specified financial tests, which include, but are not limited to, tangible net worth and liquidity requirements; • require us to meet specified financial tests at the community level; • require us to purchase interest rate derivative instruments; • require us to maintain the physical condition of the community and meet certain minimum spending levels for capital and leasehold improvements; and • require consent for changes in control of us.
There are various financial covenants and other restrictions in certain of our debt instruments, including provisions which: • require us to meet specified financial tests, which include, but are not limited to, tangible net worth and liquidity requirements; • require us to make payments on time; • require us to meet specified financial tests at the community level; 18 Table of Contents • require us to purchase interest rate derivative instruments; • require us to meet specified reserve requirements; • require us to maintain the physical condition of the community and meet certain minimum spending levels for capital and leasehold improvements; and • require consent for changes in control of us.
We may fail to meet the expectations of our stockholders or securities analysts at some point in the future, and our stock price could decline as a result. This volatility may prevent you from being able to sell your common stock at or above the price you paid for your common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
We may fail to meet the expectations of our stockholders or securities analysts at some point in the future, and our stock price could decline as a result. This volatility may prevent you from being able to sell your common stock at or above the price you paid for your common stock.
These increases primarily resulted from merit and market wage rate adjustments, more hours worked with higher occupancy during 2022, and an increase in the use of premium labor, primarily overtime.
These increases primarily resulted from filling our open positions, merit and market wage rate adjustments, more hours worked with higher occupancy during 2023, and an increase in the use of premium labor, primarily overtime.
Any declaration of dividends is at the discretion of the Company’s Board of Directors. If the Board does not declare a dividend in respect of any dividend payment date, the amount of such accrued and unpaid dividend is added to the liquidation preference and compounds quarterly thereafter.
If the Board does not declare a dividend in respect of any dividend payment date, the amount of such accrued and unpaid dividend is added to the liquidation preference and compounds quarterly thereafter.
To cover existing open positions, during 2021 and continuing into 2022, we needed to rely on more expensive premium labor, primarily contract labor and overtime. In our same-story community portfolio the labor component of our operating expense increased approximately $9.5 million, or 10.2%, during 2022 compared to 2021.
To cover existing open positions, during 2022 and continuing into 2023, we needed to rely on more expensive premium labor, primarily contract labor and overtime. In our consolidated community portfolio the labor component of our operating expense increased approximately $7.2 million, or 6.9%, during 2023 compared to 2022.
Approximately 90.0 % of our total resident revenues from communities that we operated were attributable to private pay sources and approximately 10.0% of our resident revenues from these communities were attributable to reimbursements from Medicaid, in each case, during fiscal year 2022.
Approximately 89.6% of our total resident revenues from communities that we operated were attributable to private pay sources and approximately 10.4% of our resident revenues from these communities were attributable to reimbursements from Medicaid, in each case, during fiscal year 2023.
During the year ended December 31, 2022, $2.3 million of accrued and unpaid dividends was added to the liquidation preference of the Series A Preferred Stock, which will be payable under the redemption features.
During the years ended December 31, 2023 and 2022, accrued and unpaid dividends of $5.0 million and $2.3 million, respectively, were added to the liquidation preference of the Series A Preferred Stock, which will be payable under the redemption features.
As of December 31, 2022, we had approximately $137.6 million of long-term variable rate debt outstanding which is indexed to the London Interbank Offer Rate ("LIBOR") or Secured Overnight Financing Rate ("SOFR"), plus an applicable margin. Accordingly, our annual interest expense related to long-term variable rate debt is directly affected by movements in LIBOR and SOFR.
As of December 31, 2023, we had approximately $137.3 million of long-term variable rate debt outstanding which is indexed to the Secured Overnight Financing Rate (“SOFR”), plus an applicable margin. Accordingly, our annual interest expense related to long-term variable rate debt is directly affected by movements in SOFR.
Risk Factors Summary Risks Related to Our Liquidity and Indebtedness • If we are unable to successfully implement our business plans and strategies, our consolidated results of operations, financial position, liquidity and ability to continue as a going concern could be negatively affected. • We have significant debt and our failure to generate cash flow sufficient to cover required interest and principal payments could result in defaults of the related debt. • Our failure to comply with financial covenants and other restrictions contained in our debt instruments could result in the acceleration of the related debt or in the exercise of other remedies. • We may require additional financing and/or refinancing actions in the future and may issue equity securities. 16 Table of Contents • Increases in market interest rates have significantly increased the costs of our variable rate debt obligations, which has affected our liquidity and earnings. • The phasing out of London Inter-Bank Offer Rate (“LIBOR”) may increase the interest costs of our debt obligations, which could affect our results of operations and cash flow. • We may need additional capital to fund our operations, capital expenditure plans, and strategic priorities, and we may not be able to obtain it on terms acceptable to us, or at all.
Risk Factors Summary Risks Related to Our Liquidity and Indebtedness • We have significant debt and our failure to generate cash flow sufficient to cover required interest and principal payments could result in defaults of the related debt. • Our failure to comply with financial covenants and other restrictions contained in our debt instruments could result in the acceleration of the related debt or in the exercise of other remedies. • We may require additional financing and/or refinancing actions in the future and may issue equity securities. • Increases in market interest rates have significantly increased the costs of our variable rate debt obligations, which has affected our liquidity and earnings. 16 Table of Contents • We may need additional capital to fund our operations, capital expenditure plans, and strategic priorities, and we may not be able to obtain it on terms acceptable to us, or at all.
As a result, we are dependent on loans, distributions and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations. Our subsidiaries are legally distinct from us and have no obligation to make funds available to us.
As a result, we are dependent on loans, distributions and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations.
Financing may not be available to us or may be available to us only on terms that are unfavorable. In addition, certain of our outstanding indebtedness restrict, among other things, our (or our subsidiaries') ability to incur additional debt.
Funding our capital expenditure plans, pursuing an acquisition, or funding investments to support our strategy may require additional capital. Financing may not be available to us or may be available to us only on terms that are unfavorable. In addition, certain of our outstanding indebtedness restrict, among other things, our (or our subsidiaries’) ability to incur additional debt.
Pursuant to the Investor Rights Agreement, Conversant Fund A is entitled to designate four individuals to be appointed to the Company’s board of directors, including the Chairperson, and Silk is entitled to designate two individuals to be appointed to the Company’s board of directors, in each case so long as they and their respective permitted transferees and affiliates maintain minimum aggregate holdings of our stock as described in further detail in the Investor Rights Agreement.
As of December 31, 2023, the Conversant Investors collectively owned a majority of the voting power of the Company’s issued and outstanding securities. 26 Table of Contents Pursuant to our investor rights agreement, Conversant Fund A is entitled to designate four individuals to be appointed to the Company’s board of directors, including the Chairperson, and Silk Partners LP is entitled to designate two individuals to be appointed to the Company’s board of directors, in each case so long as they and their respective permitted transferees and affiliates maintain minimum aggregate holdings of our stock as described in further detail in the investor rights agreement.
Unfavorable economic conditions in the housing, financial and credit markets, rising interest rates, unemployment, decreased consumer confidence, inflation, or other circumstances that adversely affect the ability of seniors to pay for our services could have a material adverse effect on our business, financial condition, cash flows, and results of operations. 20 Table of Contents The senior living services industry is very competitive and some competitors may have substantially greater financial resources than us.
Unfavorable economic conditions in the housing, financial and credit markets, rising interest rates, unemployment, decreased consumer confidence, inflation, or other circumstances that adversely affect the ability of seniors to pay for our services could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
In addition, government regulation intended to mitigate the impact of climate change, severe weather patterns, or natural disasters could result in additional required capital expenditures to comply with such regulation without a corresponding increase in our revenues. 22 Table of Contents We rely on information technology in our operations, and failure to maintain the security and functionality of our information technology and computer systems, or to prevent a cybersecurity attack, breach or other unauthorized access, could adversely affect our business, reputation and relationships with our residents, employees and referral sources and may subject us to remediation costs, government inquiries and liabilities under HIPAA and data and consumer protection laws, any of which could materially and adversely impact our revenues, results of operations, cash flow, and liquidity.
We rely on information technology in our operations, and failure to maintain the security and functionality of our information technology and computer systems, or to prevent a cybersecurity attack, breach or other unauthorized access, could adversely affect our business, reputation and relationships with our residents, employees and referral sources and may subject us to remediation costs, government inquiries and liabilities under HIPAA and data and consumer protection laws, any of which could materially and adversely impact our revenues, results of operations, cash flow, and liquidity.
We may require additional financing and/or refinancing actions in the future and may issue equity securities. Our ability to obtain such financing or refinancing on terms acceptable to us would have a material adverse effect on our business, financial condition, cash flows, and results of operations.
Our ability to obtain such financing or refinancing on terms acceptable to us would have a material adverse effect on our business, financial condition, cash flows, and results of operations.
The geographic concentration of our communities could leave us vulnerable to an economic downturn, regulatory changes, acts of nature, or the effects of climate change in those areas, which could negatively impact our financial condition, revenues, results of operations, and cash flow.
Damage to facilities or loss of electricity or water could adversely impact our residents and result in a decline in occupancy at our communities. 21 Table of Contents The geographic concentration of our communities could leave us vulnerable to an economic downturn, regulatory changes, acts of nature, or the effects of climate change in those areas, which could negatively impact our financial condition, revenues, results of operations, and cash flow.
Our financial statement close process controls, which relate to all financial statement accounts, did not operate effectively to ensure account reconciliations and journal entries were performed or reviewed at the appropriate level of precision and on a timely basis.
Our financial statement close process controls did not consistently operate effectively to ensure account reconciliations and journal entries were performed or reviewed at the appropriate level of precision and on a timely basis. Additionally, we identified deficiencies with our revenue transaction cycle.
As disclosed in previous filings for the year ended December 31, 2021, and for the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022, we identified a material weakness in our internal control over financial reporting.
As disclosed in previous filings for the year ended December 31, 2022, and for all the interim quarterly filings during 2023 and 2022, we identified a material weakness in our internal control over financial reporting.
If a large number of residents elected to or otherwise terminate their resident agreements at or around the same time and/or the living spaces we lease remain unoccupied for a long period of time, including as a result of the COVID-19 pandemic, our occupancy revenues, cash flows and earnings could be adversely affected.
If a large number of residents elected to or otherwise terminate their resident agreements at or around the same time and/or the living spaces we lease remain unoccupied for a long period of time, our occupancy revenues, cash flows and earnings could be adversely affected. 20 Table of Contents We have identified a material weakness in our internal control over financial reporting as of December 31, 2023.
Control weaknesses are not considered remediated until new internal controls have been operational for a period of time, have been tested and management concludes that these controls are operating effectively.
We have developed a plan for remediation of the material weakness, including developing and maintaining appropriate management review and process level controls. Control weaknesses are not considered remediated until new internal controls have been operational for a period of time, have been tested and management concludes that these controls are operating effectively.
The holders of our Series A Preferred Stock have the right to receive a payment on account of the distribution of assets on any voluntary or involuntary liquidation, dissolution, or winding up of our business before any payment may be made to holders of any other class or series of capital stock. 28 Table of Contents In addition, dividends on the Series A Preferred Stock accrue and are cumulative at the rate of 11.0% per annum, compounding quarterly.
The holders of our Series A Preferred Stock have the right to receive a payment on account of the distribution of assets on any voluntary or involuntary liquidation, dissolution, or winding up of our business before any payment may be made to holders of any other class or series of capital stock.
In the event of a loss in excess of insured limits, such loss could have a material adverse effect on our business, financial condition, cash flows, and results of operations. Damage to facilities or loss of power or water could adversely impact our residents and result in a decline in occupancy at our communities.
In the event of a loss in excess of insured limits, such loss could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
The provisions of the legislation and other regulations implementing the provisions of the Affordable Care Act or any amended or replacement legislation may increase our costs, adversely affect our revenues, expose us to expanded liability or require us to revise the ways in which we conduct our business. 25 Table of Contents In addition to its impact on the delivery and payment for healthcare, the Affordable Care Act and the implementing regulations have resulted and may continue to result in increases to our costs to provide health care benefits to our employees.
The provisions of the legislation and other regulations implementing the provisions of the Affordable Care Act or any amended or replacement legislation may increase our costs, adversely affect our revenues, expose us to expanded liability or require us to revise the ways in which we conduct our business.
Risks Related to Other Market Factors Various factors, including general economic conditions such as rising inflation, could adversely affect our financial performance and other aspects of our business.
Our subsidiaries are legally distinct from us and have no obligation to make funds available to us. 27 Table of Contents Risks Related to Other Market Factors Various factors, including general economic conditions such as rising inflation, could adversely affect our financial performance and other aspects of our business.
Risks Related to Other Market Factors • Various factors, including general economic conditions such as rising inflation, could adversely affect our financial performance and other aspects of our business. • Future offerings of equity securities by us may adversely affect the market price of our common stock. • The price of our common stock has fluctuated substantially over the past several years and may continue to fluctuate substantially in the future. • Actions of activist stockholders could cause us to incur substantial costs, divert management's attention and resources, and have an adverse effect on our business, results of operations, cash flow, and the market price of our common stock.
Risks Related to Other Market Factors • Various factors, including general economic conditions such as rising inflation, could adversely affect our financial performance and other aspects of our business. • Future offerings of equity securities by us may adversely affect the market price of our common stock. • The price of our common stock has fluctuated substantially over the past several years and may continue to fluctuate substantially in the future. • Our trading volume may not provide adequate liquidity for investors.
We believe that such regulation will increase in the future, and we are unable to predict the content of new regulations or their effect on our business, any of which could materially adversely affect our business, financial condition, cash flows, and results of operations.
We believe that such regulation will increase in the future, and we are unable to predict the content of new regulations or their effect on our business, any of which could materially adversely affect our business, financial condition, cash flows, and results of operations. 24 Table of Contents Various states, including several of the states in which we currently operate, control the supply of licensed beds and assisted living communities through a “Certification of Need” requirement or other programs.
In addition, expanded use of telemedicine and home healthcare by seniors, for which regulatory barriers have been relaxed during the pandemic, may result in additional competition for our services. We also compete with other health care businesses with respect to attracting and retaining nurses, technicians, aides and other high-quality professional and non-professional employees and managers.
We compete with other companies providing independent living, assisted living, home health care and other similar services and care alternatives. In addition, expanded use of telemedicine and home healthcare by seniors, for which regulatory barriers have been relaxed during the pandemic, may result in additional competition for our services.
As of December 31, 2022, we had mortgage and other indebtedness, excluding deferred loan costs, totaling approximately $676.3 million. We cannot assure you that we will generate cash flow from operations or receive proceeds from refinancing activities, other financings, and/or the sales of assets sufficient to cover required interest and principal payments.
We cannot be assured that we will generate cash flow from operations or receive proceeds from refinancing activities, other financings, and/or the sales of assets sufficient to cover required interest and principal payments.
These control deficiencies could result in a material misstatement of our accounts or disclosures that would not be prevented or detected, and accordingly, we determined that these control deficiencies constitute a material weakness. We have developed a plan for remediation of the material weakness, including developing and maintaining appropriate management review and process level controls.
These control deficiencies could result in a material misstatement of our accounts or disclosures that would not be prevented or detected on a timely basis, and accordingly, we determined that these control deficiencies in aggregate constitute a material weakness.
We may need additional capital to fund our operations, capital expenditure plans, and strategic priorities, and we may not be able to obtain it on terms acceptable to us, or at all. Funding our capital expenditure plans, pursuing an acquisition, or funding investments to support our strategy may require additional capital.
The costs of obtaining additional interest rate cap derivatives may offset the benefits of our existing interest rate cap agreements. We may need additional capital to fund our operations, capital expenditure plans, and strategic priorities, and we may not be able to obtain it on terms acceptable to us, or at all.
Disruptions in the financial markets may have a significant adverse effect on the market value of our common stock and other adverse effects on us and our business.
We used a portion of the proceeds from the 2024 Private Placement to fund the remaining cash portion of the purchase price for the Protective Life Loan Purchase. Disruptions in the financial markets may have a significant adverse effect on the market value of our common stock and other adverse effects on us and our business.
Risks Related to Human Capital • We rely on the services of key executive officers and the transition of management or loss of these officers or their services could have a material adverse effect on us. • A significant increase in our labor costs could have a material adverse effect on us. • We are subject to risks related to the provision for employee health care benefits and ongoing health care reform legislation. 17 Table of Contents Risks Related to Regulatory, Compliance and/or Legal Matters • We are subject to government regulations and compliance, some of which are burdensome and some of which may change to our detriment in the future. • Changes in federal, state and local employment-related laws and regulations, or our failure to comply with these laws and regulations, could have an adverse effect on our financial condition, results of operations and cash flow. • We may be subject to liability for environmental damages.
Risks Related to Human Capital • We rely on the services of key executive officers and the transition of management or loss of these officers or their services could have a material adverse effect on us. • A significant increase in our labor costs could have a material adverse effect on us. • We are subject to risks related to the provision for employee health care benefits and future health care reform legislation.
Our non-labor operating expenses have historically comprised of approximately one-third of our total operating expenses and are subject to inflationary pressures. The United States consumer price index increased 6.5% during 2022, with food and energy prices increasing above 10%.
Our non-labor operating expenses have historically comprised of approximately one-third of our total operating expenses and are subject to inflationary pressures. The United States consumer price index increased 3.4% during 2023, as compared to an increase of 6.5% in 2022. Our non-labor operating expense in our community portfolio decreased approximately $0.8 million compared to the prior year.
All of our long-term variable rate debt is subject to interest rate cap agreements and include provisions that obligate us to enter into additional interest rate cap agreements upon the maturity of the existing interest rate cap agreements. The costs of obtaining additional interest rate cap derivatives may offset the benefits of our existing interest rate cap agreements.
The SOFR steadily increased throughout 2023, ending the year approximately 110 basis points higher than as of December 31, 2022. All of our long-term variable rate debt is subject to interest rate cap agreements and include provisions that obligate us to enter into additional interest rate cap agreements upon the maturity of the existing interest rate cap agreements.
Various states, including several of the states in which we currently operate, control the supply of licensed beds and assisted living communities through a "Certification of Need" requirement or other programs. In those states, approval is required for the addition of licensed beds and some capital expenditures at those communities.
In those states, approval is required for the addition of licensed beds and some capital expenditures at those communities.
The senior living services industry is highly competitive, and we expect that all segments of the industry will become increasingly competitive in the future. We compete with other companies providing independent living, assisted living, home health care and other similar services and care alternatives.
The senior living services industry is very competitive and some competitors may have substantially greater financial resources than us. The senior living services industry is highly competitive, and we expect that all segments of the industry will become increasingly competitive in the future.
Therefore, we cannot assure that we will be able to obtain liability insurance in the future or that, if that insurance is available, it will be available on acceptable economic terms. Damage from catastrophic weather and other natural events could result in losses and adversely affect certain of our residents.
A number of insurance carriers have stopped writing coverage to this market or reduced the level of coverage offered, and those remaining have increased premiums and deductibles substantially. Therefore, we cannot assure that we will be able to obtain liability insurance in the future or that, if that insurance is available, it will be available on acceptable economic terms.
If we become insolvent or fail to continue as a going concern, our common stock may become worthless. We have significant debt and our failure to generate cash flow sufficient to cover required interest and principal payments could result in defaults of the related debt.
Risk Factors Risks Related to Our Liquidity and Indebtedness We have significant debt and our failure to generate cash flow sufficient to cover required interest and principal payments could result in defaults of the related debt. As of December 31, 2023, we had mortgage and other indebtedness, excluding deferred loan costs, totaling approximately $633.8 million.
Accordingly, holders of our common stock must look solely to appreciation of our common stock to realize a gain on their investment. This appreciation may not occur. Risks Related to the COVID-19 Pandemic COVID-19 has had a significant adverse impact on occupancy levels, revenues, expenses, and operating results at our communities.
Accordingly, holders of our common stock must look solely to appreciation of our common stock to realize a gain on their investment. This appreciation may not occur. We cannot predict the potential emergence and effects of a future pandemic, epidemic or outbreak of an infectious disease, on our operations, financial condition and liquidity.
Risks Related to the COVID-19 Pandemic • COVID-19 has had a significant adverse impact on occupancy levels, revenues, expenses, and operating results at our communities.
New variants or future surges of COVID-19, or the emergence or outbreak of another infectious disease, could adversely impact our occupancy levels, revenues, expenses and operating results at our communities.
During the first quarter of 2023, the Company elected not to make principal and interest payments due in February and March of 2023 related to certain non-recourse mortgage loan agreements covering four of the Company’s properties, with outstanding debt amount under such agreements totaling $70.0 million as of December 31, 2022. Therefore, the Company is in default on these loans.
During 2023, we elected to not make principal and interest payments due under certain non-recourse mortgage loan agreements with Protective Life . On February 2, 2024, we purchased all seven of the loans held by Protective Life with a total outstanding balance of $74.4 million plus accrued expenses of $3.3 million at a purchase price of $40.2 million.
Removed
Because we are unable to predict the full nature and extent of the impact of COVID-19 at this time, COVID-19 may continue to have a significant adverse effect on our business, financial condition, liquidity, and results of operations.
Added
At the time of the Annual Report on Form 10-K filing, the balance was reduced by $49.6 million. See “ Note 16–Subsequent Events ” in the Notes to Consolidated Financial Statements.
Removed
Risk Factors Risks Related to Our Liquidity and Indebtedness If we are unable to successfully implement our business plans and strategies, our consolidated results of operations, financial position, liquidity, and ability to continue as a going concern could be negatively affected.
Added
We expanded our outstanding loan with Ally Bank by $24.8 million as part of the transaction. See “ Note 7–Notes Payable ” and “Note 16–Subsequent Events” in the Notes to Consolidated Financial Statements. We may require additional financing and/or refinancing actions in the future and may issue equity securities.
Removed
As noted elsewhere in this Annual Report on Form 10-K, due to the current inflationary environment, interest rates and continued impact of the COVID-19 pandemic on our financial position and our upcoming debt maturities, management has concluded that there is substantial doubt about our ability to continue as a going concern.
Added
During the first quarter of 2024, we completed the 2024 Private Placement pursuant to which we issued and sold an aggregate of 5,026,318 Shares of our common stock to certain of our largest stockholders, including the Conversant Investors, at a price of $9.50 per share.
Removed
We have taken, and intend to take, actions to improve our liquidity position and to address the uncertainty about our ability to operate as a going concern, but these actions are subject to a number of assumptions, projections, and analyses.
Added
The Company currently has limited resources and substantial debt obligations.
Removed
If these assumptions prove to be incorrect, we may be unsuccessful in executing our business plans or achieving the projected results, which could adversely impact our financial results and liquidity. Those plans include various cost-cutting, efficiency, and profitability initiatives.
Added
We also compete with other health care businesses with respect to attracting and retaining nurses, technicians, aides and other high-quality professional and non-professional employees and managers.
Removed
There are no assurances such initiatives will prove to be successful or the cost savings, profitability, or other results we achieve through those plans will 18 Table of Contents be consistent with our expectations. As a result, our results of operations, financial position, and liquidity could be negatively impacted.
Added
Damage from catastrophic weather and other natural events could result in losses and adversely affect certain of our residents.
Removed
The Company is currently engaged in active discussion with Protective Life Insurance Company, the lender of such debt, in order to resolve this matter. However, we cannot give any assurance that a mutually agreeable resolution will be reached. See “Note 16–Subsequent Events” in the Notes to Consolidated Financial Statements.
Added
In addition, government regulation intended to mitigate the impact of climate change, severe weather patterns, or natural disasters could result in additional required capital expenditures to comply with such regulation without a corresponding increase in our revenues.
Removed
The LIBOR and SOFR steadily increased throughout 2022, ending the year more than 400 basis points higher than as of December 31, 2021.
Added
We have been required, and we may in the future be required, to restrict or limit access to our communities, including limitations on in-person prospective resident tours and, in certain cases, new resident admissions, which could cause a decline in the occupancy levels at our communities and negatively impact our revenues and operating results.
Removed
The phasing out of London Inter-Bank Offered Rate ("LIBOR") may increase the interest costs of our debt obligations, which could affect our results of operations and cash flow. The interest rates for certain of our variable-rate debt obligations are calculated based on LIBOR plus a spread.
Added
Further, COVID-19 surges, outbreaks of new variants and future pandemics, epidemics or outbreaks could again exacerbate existing workforce shortages and costs and require us to incur significant additional operating costs and expenses in order to care for our residents, including costs to acquire additional personal protective equipment, cleaning and disposable food services, testing of our residents and employees, and enhanced cleaning and environmental sanitation costs.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES. Our executive and administrative offices are located at 16301 Quorum Drive, Suite 160A, Addison, Texas 75001, and consist of approximately 6,500 square feet. The sublease on the premises extends through March 31, 2023. Effective April 1, 2023, the Company's corporate offices will be located at 14755 Preston Road, Suite 810 Dallas, Texas 75254.
Biggest changeITEM 2. PROPERTIES. Our executive and administrative offices are located at 14755 Preston Road, Suite 810, Dallas, Texas 75254, and consist of approximately 8,900 square feet. Our sublease on the premises extends through January 31, 2025.
As of December 31, 2022, we owned or managed the senior housing communities referred to in Part I, Item 1 above under the caption “Operating Communities.”
As of December 31, 2023, we owned or managed the senior housing communities referred to in Part I, Item 1 above under the caption “Operating Communities.”

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe repurchase program does not obligate the Company to acquire any particular amount of common stock and the share repurchase authorization has no stated expiration date. All shares that have been acquired by the Company under this program were purchased in open-market transactions.
Biggest changeOn January 14, 2016, the Company announced that its board of directors approved a continuation of the share repurchase program. The repurchase program does not obligate the Company to acquire any particular amount of common stock and the share repurchase authorization has no stated expiration date.
Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) Total at September 30, 2022 32,941 $ 104.10 32,941 $ 6,570,222 October 1 – October 31, 2022 — — — 6,570,222 November 1 – November 30, 2022 — — — 6,570,222 December 1 – December 31, 2022 — — — 6,570,222 Total at December 31, 2022 32,941 $ 104.10 32,941 $ 6,570,222 _______________________________________ (1) Does not include shares withheld to satisfy tax liabilities due upon the vesting of restricted stock, all of which have been reported in Form 4 filings relating to the Company.
Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) Total at September 30, 2023 32,941 $ 104.10 32,941 $ 6,570,222 October 1 – October 31, 2023 — — — 6,570,222 November 1 – November 30, 2023 — — — 6,570,222 December 1 – December 31, 2023 — — — 6,570,222 Total at December 31, 2023 32,941 $ 104.10 32,941 $ 6,570,222 _______________________________________ (1) Does not include shares withheld to satisfy tax liabilities due upon the vesting of restricted stock, all of which have been reported in Form 4 filings relating to the Company.
Not applicable. (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers. The following information is provided pursuant to Item 703 of Regulation S-K. The information set forth in the table below reflects information regarding the aggregate shares repurchased by the Company pursuant to its share repurchase program (as described below) as of December 31, 2022.
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers. The following information is provided pursuant to Item 703 of Regulation S-K. The information set forth in the table below reflects information regarding the aggregate shares repurchased by the Company pursuant to its share repurchase program (as described below) as of December 31, 2023.
Securities Authorized for Issuance Under Equity Compensation Plans The following table presents information relating to the Company’s equity compensation plans as of December 31, 2022: Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of the Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column) Equity compensation plans approved by security holders — $ — 545,214 Equity compensation plans not approved by security holders — — — Total — $ — 545,214 (b) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.
Securities Authorized for Issuance Under Equity Compensation Plans The following table presents information relating to the Company’s equity compensation plans as of December 31, 2023: Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of the Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column) Equity compensation plans approved by security holders — $ — 601,617 Equity compensation plans not approved by security holders — — — Total — $ — 601,617 (b) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.
Market Information and Holders The Company’s shares of common stock are listed for trading on the NYSE under the symbol “SNDA.” As of February 28, 2023 , there were 41 known registered stockholders of record of the Company’s common stock.
Market Information and Holders The Company’s shares of common stock are listed for trading on the NYSE under the symbol “SNDA.” As of March 25, 2024 , there were 41 known registered stockholders of record of the Company’s common stock.
The Company may evaluate whether to acquire additional shares of common stock under this program at its discretion. ITEM 6. RESERVED. 31 Table of Contents Not applicable.
All shares that have been acquired by the Company under this program were purchased in open-market transactions. The Company may evaluate whether to acquire additional shares of common stock under this program at its discretion. ITEM 6. [RESERVED]. Not applicable.
The average price paid per share for such share withholding is based on the closing price per share on the vesting date of the restricted stock or, if such date is not a trading day, the trading day immediately prior to such vesting date.
The average price paid per share for such share withholding is based on the closing price per share on the vesting date of the restricted stock or, if such date is not a trading day, the trading day immediately prior to such vesting date. 31 Table of Contents (2) On January 22, 2009, the Company’s board of directors approved a share repurchase program that authorized the Company to purchase up to $10.0 million of the Company’s common stock.
Removed
(2) On January 22, 2009, the Company’s board of directors approved a share repurchase program that authorized the Company to purchase up to $10.0 million of the Company’s common stock. On January 14, 2016, the Company announced that its board of directors approved a continuation of the share repurchase program.
Added
No activity as of December 31, 2023. During the first quarter of 2024, we completed the 2024 Private Placement pursuant to which we issued and sold an aggregate of 5,026,318 Shares of our common stock to certain of our largest stockholders, including the Conversant Investors, at a price of $9.50 per share for gross proceeds of approximately $47.8 million.
Added
We used approximately $15.4 million of the proceeds from the Private Placement to fund the remaining cash portion of the purchase price for the Protective Life Loan Purchase. We expect to use the remaining proceeds from the Private Placement for capital expenditure projects at our senior living communities, working capital, potential acquisition opportunities and other general corporate purposes.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYears Ended December 31, 2022 2021 (in thousands) $ % $ % Revenues: Resident revenue $ 208,703 87.5 $ 190,213 81.0 Management fees 2,359 1.0 3,603 1.5 Managed community reimbursement revenue 27,371 11.5 40,902 17.4 Total revenues $ 238,433 100.0 % $ 234,718 100.0 % Expenses: Operating expenses 171,635 72.0 157,269 67.0 General and administrative expenses 30,286 12.7 32,328 13.8 Depreciation and amortization expense 38,448 16.1 37,870 16.1 Long-lived asset impairment 1,588 0.7 6,502 2.8 Managed community reimbursement expense 27,371 11.5 40,902 17.4 Total expenses 269,328 113.0 % 274,871 117.1 % Other income (expense): Interest income 235 0.1 6 — Interest expense (33,025) (13.9) (37,234) (15.9) (Loss) gain on extinguishment of debt, net (641) (0.3) 199,901 85.2 Loss on settlement of backstop — — (4,600) (2.0) Other income 10,011 4.2 8,270 3.5 Income (loss) before benefit (provision) for income taxes (54,315) (22.8) 126,190 53.8 Provision for income taxes (86) — (583) (0.2) Net (loss) income and comprehensive (loss) income $ (54,401) 53.6 % $ 125,607 53.5 % Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Revenues Resident revenue for the year ended December 31, 2022 was $208.7 million as compared to $190.2 million for the year ended December 31, 2021, an increase of $18.5 million, or 9.7%.
Biggest changeYears Ended December 31, 2023 2022 (in thousands) $ % $ % Revenues: Resident revenue $ 232,032 90.9 $ 208,703 87.5 Management fees 2,191 0.9 2,359 1.0 Managed community reimbursement revenue 21,099 8.3 27,371 11.5 Total revenues $ 255,322 100.0 % $ 238,433 100.0 % Expenses: Operating expense 177,323 69.5 171,635 72.0 General and administrative expense 32,198 12.6 30,286 12.7 Depreciation and amortization expense 39,888 15.6 38,448 16.1 Long-lived asset impairment 5,965 2.3 1,588 0.7 Managed community reimbursement expense 21,099 8.3 27,371 11.5 Total expenses 276,473 * 269,328 * Other income (expense): Interest income 608 0.2 235 0.1 Interest expense (36,118) (14.1) (33,025) (13.9) Gain (loss) on extinguishment of debt, net 36,339 14.2 (641) (0.3) Other income (expense), net (532) (0.2) 10,011 4.2 Loss before provision for income taxes (20,854) (8.2) (54,315) (22.8) Provision for income taxes (253) (0.1) (86) — Net loss $ (21,107) (8.3) % $ (54,401) (22.8) % * Represents positive or negative change in excess of 100% Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Revenues Resident revenue for the year ended December 31, 2023 was $232.0 million as compared to $208.7 million for the year ended December 31, 2022, an increase of $23.3 million, or 11.2%.
The COVID-19 pandemic has required the Company to incur significant additional operating costs and expenses in order to implement enhanced infection control protocols and otherwise care for its residents, including increased costs and expenses relating to supplies and personal protective equipment, testing of the Company’s residents and employees, labor and specialized disinfecting and cleaning services, which has increased the costs of caring for the residents and resulted in reduced occupancy at such communities.
The COVID-19 pandemic required the Company to incur significant additional operating costs and expenses in order to implement enhanced infection control protocols and otherwise care for its residents, including increased costs and expenses relating to supplies and personal protective equipment, testing of the Company’s residents and employees, labor and specialized disinfecting and cleaning services, which has increased the costs of caring for the residents and resulted in reduced occupancy at such communities.
The United States’ unemployment rate remained at or below 4.0% each month during 2022, and many of states experienced record low unemployment rates. Labor pressures have resulted in higher-than-typical associate turnover and wage growth, and we have experienced difficulty in filling open positions timely.
The United States’ unemployment rate remained at or below 4.0% each month during 2023 and 2022, and many of states experienced record low unemployment rates. Labor pressures have resulted in higher-than-typical associate turnover and wage growth, and we have experienced difficulty in filling open positions timely.
Overview The following discussion and analysis addresses (i) the Company’s results of operations on a historical consolidated basis for the years ended December 31, 2022 and 2021, and (ii) liquidity and capital resources of the Company, and should be read in conjunction with the Company’s historical consolidated financial statements and the selected financial data contained elsewhere in this Annual Report on Form 10-K.
Overview The following discussion and analysis addresses (i) the Company’s results of operations on a historical consolidated basis for the years ended December 31, 2023 and 2022, and (ii) liquidity and capital resources of the Company, and should be read in conjunction with the Company’s historical consolidated financial statements and the selected financial data contained elsewhere in this Annual Report on Form 10-K.
Management believes that the liability for outstanding losses and expenses is adequate to cover the ultimate cost of losses and expenses incurred as of December 31, 2022; however, actual claims and expenses may differ. Any subsequent changes in estimates are recorded in the period in which they are determined.
Management believes that the liability for outstanding losses and expenses is adequate to cover the ultimate cost of losses and expenses incurred as of December 31, 2023; however, actual claims and expenses may differ. Any subsequent changes in estimates are recorded in the period in which they are determined.
For 2023, we expect to continue to experience inflationary pressures. Historically, labor costs have comprised of approximately two-thirds of our total operating expenses. We began to experience pressures associated with the intensely competitive labor environment during 2021, which continued throughout 2022.
For 2024, we expect to continue to experience inflationary pressures. Historically, labor costs have comprised of approximately two-thirds of our total operating expenses. We began to experience pressures associated with the intensely competitive labor environment during 2022, which continued throughout 2023.
The increase in revenue was primarily due to increased occupancy, increased average rent rates, and the acquisition of two new communities in early 2022.
The increase in revenue was primarily due to increased occupancy, increased average rent rates, and the acquisition of two new communities in Q1 2022.
Interest income generally reflects interest earned on the investment of cash balances and escrow funds or interest associated with certain income tax refunds or property tax settlements. Interest income increased by $0.2 million compared to the prior year primarily due to more active cash management and increased investment in money market accounts.
Other income and expense Interest income generally reflects interest earned on the investment of cash balances and escrow funds or interest associated with certain income tax refunds or property tax settlements. Interest income increased by $0.4 million compared to the prior year primarily due to more active cash management and increased investment in money market accounts.
While we intend to pursue additional funding that may become available, there can be no assurances that we will qualify for, or receive, any additional relief funds in the future. The Company elected to utilize the CARES Act payroll tax deferral program to delay payment of a portion of its payroll taxes incurred from April 2020 through December 2020.
While we intend to pursue additional funding that may become available, there can be no assurances that we will qualify for, or receive, any additional relief funds in the future. The Company elected to utilize the CARES Act payroll tax deferral program to delay payment of a portion of its payroll taxes incurred during 2020.
The net cash used in investing activities for the year ended December 31, 2022 primarily results from ongoing capital improvements and refurbishments at the Company’s senior housing communities of $24.6 million and the acquisition of two communities in Indiana for an aggregate purchase price of $12.3 million.
The net cash used in investing activities for the year ended December 31, 2022 primarily results from ongoing capital improvements and refurbishments at the Company’s senior housing communities of $24.6 million and the acquisition of two communities in Indiana for $12.3 million.
Both the Phase 4 and Phase 3 Provider Relief Funds were recorded as other income in the years ended December 31, 2022 and 2021, respectively. The CARES Act Provider Relief Funds are grants that do not have to be repaid provided we satisfy the terms and conditions of the CARES Act.
The Phase 4 Provider Relief Funds were recorded as other income in the year ended December 31, 2022. The CARES Act Provider Relief Funds are grants that do not have to be repaid provided we satisfy the terms and conditions of the CARES Act.
On December 13, 2022, the Company entered into an agreement with Ally Bank to amend the Refinance Facility by adding two additional subsidiaries of the Company (which own the two Indiana properties acquired during the first quarter of 2022) as borrowers.
On December 13, 2022, the Company entered into an agreement with Ally Bank to amend the Refinance Facility by adding two additional subsidiaries of the Company (which own the two Indiana properties acquired during the first quarter of 2022) as borrowers. The amendment increased the principal by $8.1 million to $88.1 million.
To cover existing open positions, during 2021 and continuing into 2022, we needed to rely on more expensive premium labor, primarily contract labor and overtime. In our same-store community portfolio, the labor component of our operating expense increased approximately $9.5 million, or 10.2% during 2022 compared to 2021.
To cover existing open positions, during 2022 and continuing into 2023, we needed to rely on more expensive premium labor, primarily contract labor and overtime. In our community portfolio, the labor component of our operating expense increased approximately $7.2 million, or 6.9% during 2023 compared to 2022.
Significant Financial and Operational Highlights Operations The Company derives its revenue primarily by providing senior living and healthcare services to seniors. During the year ended December 31, 2022, the Company generated resident revenue of approximately $208.7 million compared to resident revenue of approximately $190.2 million in the prior year representing an increase of approximately $18.5 million.
Significant Financial and Operational Highlights Operations The Company derives its revenue primarily by providing senior living and healthcare services to seniors. During the year ended December 31, 2023, the Company generated resident revenue of approximately $232.0 million compared to resident revenue of approximately $208.7 million in the prior year, representing an increase of approximately $23.3 million.
Other Significant Transactions Transactions Involving Certain Fannie Mae Loans The CARES Act, among other things, permitted borrowers with mortgages from Government Sponsored Enterprises who experienced a financial hardship related to the COVID-19 pandemic to obtain forbearance of their loans for up to 90 days.
Other Significant Transactions Transactions Involving Certain Fannie Mae Loans The Coronavirus Aid, Relief and Economic Security Act of 2020 (“CARES Act”), among other things, permitted borrowers with mortgages from Government Sponsored Enterprises who experienced a financial hardship related to the COVID-19 pandemic to obtain forbearance of their loans for up to 90 days.
New Accounting Pronouncements See “Note 3–Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for a discussion of new accounting pronouncements. 39 Table of Contents Results of Operations The following table includes our Consolidated Statements of Operations and Comprehensive Income (Loss) data in thousands of dollars and expressed as a percentage of total revenues for the years ended December 31, 2022 and 2021.
See “Note 5–Property and Equipment, net.” New Accounting Pronouncements See “Note 3–Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for a discussion of new accounting pronouncements. 38 Table of Contents Results of Operations The following table includes our Consolidated Statements of Operations data in thousands of dollars and expressed as a percentage of total revenues for the years ended December 31, 2023 and 2022.
The Company regularly adjusts these estimates to reflect changes in the foregoing factors. However, since this reserve is based on estimates, the actual expenses incurred may differ from the amounts reserved.
The Company regularly adjusts these estimates to reflect changes in the foregoing factors. However, since this reserve is based on estimates, the actual expenses incurred may differ from the amounts reserved. Any subsequent changes in estimates are recorded in the period in which they are determined.
Weighted average occupancy for the years ended December 31, 2022 and 2021 for the 60 communities owned by the Company during both periods was 83.3% and 79.0%, respectively, reflecting continued occupancy recovery following the onset of the COVID-19 pandemic.
Weighted average occupancy for the years ended December 31, 2023 and 2022 for the communities owned by the Company during both periods was 84.6% and 83.0%, respectively, reflecting continued occupancy recovery following the onset 35 Table of Contents of the COVID-19 pandemic.
Impact of Inflation The continuation of the current inflationary environment could affect the Company’s future revenues and results of operations because of, among other things, the Company’s dependence on senior residents, many of whom rely primarily on fixed incomes to pay for the Company’s services.
See “ Note 16–Subsequent Events ” in the Notes to Consolidated Financial Statements. Impact of Inflation The continuation of the current inflationary environment could affect the Company’s future revenues and results of operations because of, among other things, the Company’s dependence on senior residents, many of whom rely primarily on fixed incomes to pay for the Company’s services.
Our non-labor operating expenses have historically comprised of approximately one-third of o ur total operating expenses and are subject to inflationary pressures. The United States consumer price index increased 6.5% during 2022, with food and energy prices increasing above 10%.
Our non-labor operating expenses have historically comprised of approximately one-third of o ur total operating expenses and are subject to inflationary pressures. The United States consumer price index increased 3.4% during 2023, as compared to an increase of 6.5% in 2022, with food and energy prices increasing approximately 70 basis points.
As of December 31, 2022, the Company operated 72 senior housing communities in 18 states with an aggregate capacity of approximately 8,000 residents, including 62 senior housing communities that the Company owned and 10 communities that the Company third-party managed.
As of December 31, 2023, the Company operated 71 senior housing communities in 18 states with an aggregate capacity of approximately 8,000 residents, including 61 senior housing communities that the Company owned and 10 communities that the Company managed on behalf of third parties.
At each balance sheet date, the Company reviews the carrying value of its property and equipment to determine if facts and circumstances indicate the carrying amount of an asset group may not be recoverable, or that the depreciation period may need to be changed.
At each balance sheet date, the Company reviews the carrying value of its property and equipment to determine if facts and circumstances suggest that they may be impaired or that the depreciation period may need to be changed.
We mitigated a portion of the increase in food costs with the scale benefit of a higher number of residents, along with appropriate product substitution. Despite our mitigation efforts and with higher occupancy, for 2022 our non-labor operating expense in our same-store community portfolio increased approximately $4.0 million, or 6.8%, compared to the prior year.
We mitigated a portion of the increase in food costs with the scale benefit of a higher number of residents, along with appropriate product substitution. As a result of our mitigation efforts, for 2023 our non-labor operating expense in our community portfolio decreased approximately $0.8 million, compared to the prior year.
General and administrative expenses for the year ended December 31, 2022 were $30.3 million as compared to $32.3 million for year ended December 31, 2021, a decrease of $2.0 million, or 6.3%.
General and administrative expenses for the year ended December 31, 2023 were $32.2 million as compared to $30.3 million for year ended December 31, 2022, an increase of $1.9 million, or 6.3%.
As a result of the default, Fannie Mae filed a motion with the United States District Court (the "District Court") requesting that a receiver be appointed over the 18 properties, which was approved by the District Court.
Therefore, the Company was in default on such loans, which were non-recourse loans. As a result of the default, Fannie Mae filed a motion with the United States District Court (the “District Court”) requesting that a receiver be appointed over the 18 properties, which was approved by the District Court.
As a result of the foregoing factors, the Company reported net loss and comprehensive loss of $54.4 million for the year ended December 31, 2022, compared to net income and comprehensive income of $125.6 million for the year ended December 31, 2021.
Net loss As a result of the foregoing factors, the Company reported net loss of $21.1 million for the year ended December 31, 2023, compared to $54.4 million for the year ended December 31, 2022.
The average monthly rental rate for these owned communities for the year ended December 31, 2022 was higher by 270 basis points when compared to the year ended December 31, 2021.
The average monthly rental rate for these owned communities for the year ended December 31, 2023 was 9.6% higher when compared to the year ended December 31, 2022.
The net cash used in investing activities for the year ended December 31, 2021 primarily results from ongoing capital improvements and refurbishments at the Company’s senior housing communities of $10.4 million. Financing activities.
Investing activities The net cash used in investing activities for the year ended December 31, 2023 primarily results from ongoing capital improvements and refurbishments at the Company’s senior housing communities of $17.9 million , offset by $1.4 million from the proceeds from sale of assets.
The net cash used in financing activities for the year ended December 31, 2022 primarily results from repayments of notes payable of $102.4 million, deferred loan costs of $2.4 million, purchase of derivative assets of $2.7 million, and preferred stock dividends of $3.0 million, partially offset by $88.1 million of proceeds from the refinancing of certain of our mortgage debt, See "Note 8–Notes Payable" in the Notes to Consolidated Financial Statements.
The net cash used in financing activities for the year ended December 31, 2022 primarily results from the refinancing of certain of our mortgage debt, preferred stock dividends o f $3.0 million, and purchase of derivative assets of $2.7 million. See “Note 7–Notes Payable” and “Note 8–Securities Financing” in the Notes to Consolidated Financial Statements.
During the years ended December 31, 2022 and 2021, the Company incurred $0.4 million and $1.9 million, respectively, in direct costs related to the COVID-19 pandemic. 33 Table of Contents In April 2022 and January 2021, the Company accepted $9.1 million and $8.7 million of cash, respectively, through grants from the Public Health and Social Services Emergency Fund’s (the “Provider Relief Fund”) Phases 4 and 3 General Distribution, respectively, which was expanded by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the "CARES Act") to provide grants or other funding mechanisms to eligible healthcare providers for healthcare-related expenses or lost revenues attributable to COVID-19.
The Company received approximately $9.1 million in the year ended December 31, 2022 through grants from the Public Health and Social Services Emergency Fund’s (the “Provider Relief Fund”) Phase 4 General Distribution which was expanded by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”) to provide grants or other funding mechanisms to eligible healthcare providers for healthcare-related expenses or lost revenues attributable to COVID-19.
See “Note 2–Going Concern Uncertainty" in the Notes to Consolidated Financial Statements. The Company, from time to time, considers and evaluates financial and capital raising transactions related to its portfolio, including debt refinancings, purchases and sales of assets and other transactions.
The Company, from time to time, considers and evaluates financial and capital raising transactions related to its portfolio, including debt refinancings, purchases and sales of assets, equity financings and other transactions.
The cost of employee health and dental benefits, net of employee contributions, is shared between the Company’s corporate office and its senior housing communities based on the respective number of plan participants.
The Company is self-insured up to certain limits and is insured if claims in excess of these limits are incurred. The cost of employee health and dental benefits, net of employee contributions, is shared between the Company’s corporate office and its senior housing communities based on the respective number of plan participants.
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially could result in materially different results under different assumptions and conditions. The Company believes the following are our most critical accounting policies and/or typically require management’s most difficult, subjective, and complex judgments.
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially could result in materially different results under different assumptions and conditions.
Any subsequent changes in estimates are recorded in the period in which they are determined. 38 Table of Contents Long-Lived Assets and Impairment Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the assets.
Long-Lived Assets and Impairment Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the assets.
The Company elected not to pay $3.8 million on the loans for the remaining 18 properties as of that date as it initiated a process intended to transfer the operations and ownership of such properties to Fannie Mae. Therefore, the Company was in default on such loans, which were non-recourse loans.
During 2020, the Company entered into several loan forbearance agreements with Fannie Mae. In July 2020, the Company elected not to pay $3.8 million on the loans for 18 properties as of that date as it initiated a process intended to transfer the operations and ownership of such properties to Fannie Mae.
Years Ended December 31, (in millions) 2022 2021 Property and equipment, net $ 1.6 $ 6.5 Total $ 1.6 $ 6.5 During the fourth quarter of 2022, the Company recorded a non-cash impairment charge of $1.6 million to its "Property and equipment, net", which related to one owned community.
The Company recognized a non-cash impairment charge of $6.0 million to its “Property and equipment, net” during the year ended December 31, 2023, which related to one owned community. In addition, the Company recognized a non-cash impairment charge of $1.6 million to its “Property and equipment, net” during the year ended December 31, 2022, which related to one owned community.
The respective lender would have the right to declare all of the related outstanding amounts of indebtedness immediately due and payable, to foreclose on our mortgaged communities and/or pursue other remedies available to such lender. We cannot provide assurance that we would be able to pay the debts if they became due upon acceleration following an event of default.
The respective lender would have the right to declare all of the 41 Table of Contents related outstanding amounts of indebtedness immediately due and payable, to foreclose on our mortgaged communities and/or pursue other remedies available to such lender.
The increase primarily resulted from merit and market wage rate adjustments, more hours worked with higher occupancy during 2022, and an increase in the use of premium labor, primarily contract labor and overtime. 43 Table of Contents For 2023, we expect to continue to experience labor cost pressures as a result of the continuing labor conditions previously described and an anticipated increase in hours worked as our occupancy levels grow.
For 2024, we expect to continue to experience labor cost pressures as a result of the continuing labor conditions previously described and an anticipated increase in hours worked as our occupancy levels grow.
Risk Factors.” In summary, the Company’s cash flows were as follows (in thousands): Years Ended December 31, 2022 2021 Net cash used in operating activities $ (2,578) $ (28,795) Net cash used in investing activities (36,904) (10,443) Net cash (used in) provided by financing activities (22,652) 99,415 (Decrease) increase in cash and cash equivalents $ (62,134) $ 60,177 Operating activities.
Risk Factors.” In summary, the Company’s cash flows were as follows (in thousands): Years Ended December 31, 2023 2022 Net cash provided by (used in) operating activities $ 10,683 $ (2,578) Net cash used in investing activities (16,562) (36,904) Net cash used in financing activities (7,113) (22,652) Decrease in cash and cash equivalents $ (12,992) $ (62,134) Operating activities The net cash provided by operating activities for the year ended December 31, 2023 primarily results from increases in operating assets and liabilities of $13.8 million.
During the year ended December 31, 2022, the Company continued to be impacted by the senior living industry's workforce challenges related to limited staff availability, which resulted in the use of overtime, shift bonuses, and contract labor to properly support our senior living communities and residents. 2022 Mortgage Refinance In March 2022, the Company completed the refinancing of certain existing mortgage debt with Ally Bank (the “Refinance Facility”) for ten of its communities.
During the year ended December 31, 2023 the Company continued to be impacted by the senior living industry's workforce challenges related to limited staff availability, which required the use of overtime, shift bonuses and contract labor to properly support our senior living communities and residents. Management Services The Company has property management agreements with affiliates of Ventas, Inc.
The 2021 gain is related to the derecognition of notes payable and liabilities as a result of transition of legal ownership of sixteen communities to Fannie Mae, the holder of the non-recourse debt related to such properties.
Gain on extinguishment of debt for the year ended December 31, 2023 was $36.3 million related to the derecognition of notes payable and liabilities as a result of the transition of legal ownership of two communities to Fannie Mae, the holder of the related non-recourse debt.
As of December 31, 2022, two properties remained for which the legal ownership had not been transferred back to Fannie Mae. As of December 31, 2022, the Company included $31.8 million of outstanding debt in current portion of notes payable, net of deferred loan costs of $0.2 million.
As of December 31, 2022, the Company included $31.8 million of outstanding debt in current portion of notes payable, net of deferred loan costs of $0.2 million. As of December 31, 2022, the accrued interest related to the remaining two properties was $4.1 million and was included in accrued expenses.
Managed community reimbursement expense for the year ended December 31, 2022 was $27.4 million as compared to $40.9 million for the year ended December 31, 2021, a decrease of $13.5 million, or 33.1%. The decrease was primarily a result of transitioning sixteen Fannie Mae communities to other operators during the year ended December 31, 2021. Other income and expense.
Managed community reimbursement expense for the year ended December 31, 2023 was $21.1 million as compared to $27.4 million for the year ended December 31, 2022, a decrease of $6.3 million, or 22.9%. The decrease was primarily a result of managing fewer communities in 2023.
(collectively, "Ventas") pursuant to which the Company agreed to manage certain communities for Ventas, and Ventas agreed to pay the Company a management fee based on gross revenues of the applicable communities, and other customary terms and conditions.
(collectively, “Ventas”) in which the Company manages certain communities for Ventas, and Ventas pays the Company a management fee based on gross revenues of the applicable communities, and other customary terms and conditions. The Company managed ten communities on behalf of Ventas during the years ended December 31, 2023 and 2022.
Interest expense for the year ended December 31, 2022 was $33.0 million as compared to $37.2 million for the year ended December 31, 2021, a decrease of $4.2 million, or 11.3%, due to lower overall borrowings in 2022, partially offset by increased interest rates associated with the Company’s variable rate mortgages.
Interest expense for the year ended December 31, 2023 was $36.1 million as compared to $33.0 million for the year ended December 31, 2022, an increase of $3.1 million, or 9.4%, due to increased interest rates associated with the Company’s variable rate mortgages and the additional interest expense on the two Indiana communities financed during December 2022.
The purchase price for these communities was funded at the time of acquisition with cash on hand and subsequently financed in December 2022, as described in the "2022 Mortgage Refinance" paragraph above. 36 Table of Contents Management Services On December 31, 2020, the Company entered into property management agreements with affiliates of Ventas, Inc.
The purchase price for these communities was funded at the time of acquisition with cash on hand and subsequently financed in December 2022.
As of December 31, 2022 and December 31, 2021, the Company had $4.8 million and $3.7 million, respectively, in deferred payroll taxes, which is included in accrued expenses in the Company’s Consolidated Balance Sheets.
As of December 31, 2023 and December 31, 2022, the Company had $5.1 million and $4.8 million, respectively, in deferred payroll taxes, which is included in accrued expenses in the Company’s Consolidated Balance Sheets. On September 14, 2023, amid concerns about aggressive employee retention credit (“ERC”) marketing, the IRS announced a moratorium on processing new claims.
Operating expenses for the year ended December 31, 2022 were $171.6 million as compared to $157.3 million for the year ended December 31, 2021 , an increase of $14.4 million or 9.1%.
The decrease was primarily a result of managing fewer communities in 2023. Expenses Operating expenses for the year ended December 31, 2023 were $177.3 million as compared to $171.6 million for the year ended December 31, 2022, an increase of $5.7 million.
As of December 31, 2022, the Company had deferred $1.6 million in rent payments pursuant to the Healthpeak Forbearance, which is included in notes payable, net of deferred loan costs and current portion on the Company’s Consolidated Balance Sheets.
(“Healthpeak”) for the years ended December 31, 2023 and 2022. As of December 31, 2023, the Company had $1.6 million due to Healthpeak, which is included in notes payable.
As of December 31, 2022, all of the Company's senior living communities were open for new resident move-ins. Although vaccines are now widely available, we cannot predict the duration of the ongoing impact of the pandemic on our business.
As of December 31, 2023, all of the Company's senior living communities were open for new resident move-ins.
During the year ended December 31, 2022, the Company recorded a non-cash impairment charge of $1.6 million related to the management's commitment to a plan to sell the community shortly after the balance sheet date, and the agreed-upon selling price being below the community's carrying amount, compared to $6.5 million of non-cash impairment charges recorded during the year ended December 31, 2021, in relation to one owned community with decreased cash flow estimates as a result of recurring net operating losses.
During the year ended December 31, 2022, the Company recorded a non-cash impairment charge of $1.6 million due to the management's commitment to sell the community at a selling price below the community's carrying amount.
The increase in revenue was primarily due to increased occupancy, increased average rent rates, and the acquisition of two new communities in early 2022. Management fee revenue for the year ended December 31, 2022 decreased by $1.2 million as compared to the year ended December 31, 2021, primarily as a result of managing fewer communities in 2022.
The increase in revenue was primarily due to increased occupancy and increased average rent rates. Managed community reimbursement revenue for the year ended December 31, 2023 was $21.1 million as compared to $27.4 million for the year ended December 31, 2022, representing a decrease of $6.3 million, or 22.9%.
In addition, during the years ended December 31, 2022 and 2021 the Company received approximately $1.2 million and $0.6 million, respectively, in relief from various state agencies.
For the years ended December 31, 2023 and 2022, the Company received approximately $2.9 million and $1.2 million, respectively, in various relief funds received from state departments due to financial distress impacts of COVID-19 (“State Relief Funds”).
Self-Insurance Liability Accruals The Company offers full-time employees an option to participate in its health and dental plans. The Company is self-insured up to certain limits and is insured if claims in excess of these limits are incurred.
The Company believes the following are our most critical accounting policies and/or typically require management’s most difficult, subjective, and complex judgments. 37 Table of Contents Self-Insurance Liability Accruals The Company offers full-time employees an option to participate in its health and dental plans.
See “Note 10–Stock-Based Compensation" in the Notes to Consolidated Financial Statements. COVID-19 Pandemic The United States broadly continues to recover from the pandemic caused by COVID-19, which significantly disrupted the nation’s economy, the senior living industry, and the Company’s business.
On November 1, 2023, the Company made an equity draw of $4.0 million and issued 400,000 shares of common stock to the Conversant Investors. 34 Table of Contents COVID-19 Pandemic The United States broadly continues to recover from the pandemic caused by COVID-19, which significantly disrupted the nation’s economy, the senior living industry, and the Company’s business.
Provision for income taxes for the year ended December 31, 2022 was $0.1 million, or 0.16% of net income before income taxes, compared to a provision for income taxes of $0.6 million, or 0.46% of loss before income taxes, for the year ended December 31, 2021.
Loss on extinguishment of debt for the year ended December 31, 2022 was $0.6 million related to the 2022 debt refinancing. Other income (expense), net for the year ended December 31, 2022 was $10.0 million, which included $9.1 million for Provider Relief Funds.
As of December 31, 2022, the Company did not manage any properties on behalf of Fannie Mae. 37 Table of Contents On January 11, 2023, Fannie Mae completed the transfer of ownership of the two remaining properties. See "Note 16–Subsequent Events" in the Notes to Consolidated Financial Statements.
As of December 31, 2022, the Company did not manage any properties on behalf of Fannie Mae. In January 2023, the Company received notice that the foreclosure sales conducted by Fannie Mae had successfully transitioned the remaining two properties to new owners which relieved the Company of the existing Fannie Mae debt.
The net cash used in operating activities for the year ended December 31, 2021, primarily results from net income of $125.6 million, partially offset by decreases in operating assets and liabilities of $9.4 million and net non-cash charges of $145.0 million. 42 Table of Contents Investing activities.
Financing activities The net cash used in financing activities for the year ended December 31, 2023 primarily results from repayments of notes payable of $13.8 million, deferred financing costs paid of $0.8 million, and purchase of derivative assets of $2.4 million, partially offset by proceeds of $10.0 million from equity draws under the Equity Commitment.
The Company has implemented plans, which include strategic and cash-preservation initiatives, designed to provide the Company with adequate liquidity to meet its obligations for at least the 12-month period following the date its fiscal year 2022 financial statements are issued.
Based on these events, the Company concluded it has adequate cash to meet its obligations as they become due for the 12-month period following the date the December 31, 2023 financial statements are issued.
Except for the non-compliance with Fannie Mae mortgages for the two properties in the process of transitioning back to Fannie Mae, and certain mortgage loan agreements with Protective Life (See "Note 16–Subsequent Events" in the Notes to Consolidated Financial Statements), the Company was in compliance with all aspects of its outstanding indebtedness as of December 31, 2022.
We cannot provide assurance that we would be able to pay the debts if they became due upon acceleration following an event of default. Except for the non-compliance with certain mortgage loan agreements with Protective Life, the Company was in compliance with all other aspects of its outstanding indebtedness as of December 31, 2023.
During the year ended December 31, 2021, Fannie Mae completed the transition of legal ownership of 16 of the Company's properties and the Company recorded a gain on extinguishment of debt of $200.9 million, which is included in gain on extinguishment of debt in the Company's Consolidated Statement of Operations and Comprehensive Income (Loss).
During the year ended December 31, 2021, Fannie Mae completed the transition of legal ownership of 16 of the Company's properties. As of December 31, 2022, two properties remained for which the legal ownership had not been transferred back to Fannie Mae.
Removed
Corporate Events and Transactions Corporate Name Change On November 9, 2021, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, with the Delaware Secretary of State to effect the change of the Company’s name from "Capital Senior Living Corporation" to “Sonida Senior Living, Inc.” effective as of November 15, 2021.
Added
Corporate Transactions Fannie Mae Loan Modification On June 29, 2023, the Company entered into a forbearance agreement (“ Fannie Forbearance ” and “Fannie Forbearance Agreement”) with Fannie Mae for all 37 of its encumbered communities, effective as of June 1, 2023 (“Fannie Forbearance Effective Date”).
Removed
In addition, the Company’s board of directors adopted an amendment to the Company’s Second Amended and Restated Bylaws to reflect the Company’s new legal name, effective as of November 15, 2021.
Added
Under the Fannie Forbearance, Fannie Mae agreed to forbear on its remedies otherwise available under the community mortgages and Master Credit Facility (“MCF”) in connection with reduced debt service payments made by the Company during the forbearance period. In connection with the Fannie Forbearance, the Company made a $5.0 million principal payment in July 2023.
Removed
In conjunction with the Name Change, the ticker symbol of the Company’s common stock on the New York Stock Exchange changed from "CSU" to “SNDA.” The CUSIP number for the Company’s common stock following the effectiveness of the Name Change remained unchanged.
Added
The Fannie Forbearance was the first of a two-step process to modify all existing mortgage loan agreements with Fannie Mae by October 2023 under proposed loan modification agreement, as defined in the Fannie Forbearance (“Loan Modification Agreements.”) T erms outlined in an agreed upon term sheet accompanying the Fannie Forbearance were included in the Loan Modification Agreements as the final step to modify the various 37 Fannie Mae community mortgages and MCF prior to the expiration of the Fannie Forbearance, which was subsequently extended to October 6, 2023.
Removed
Investment Agreement On October 1, 2021, the Company entered into an Amended and Restated Investment Agreement (the "A&R Investment Agreement") with Conversant Dallas Parkway (A) LP (“Conversant Fund A”) and Conversant Dallas Parkway (B) LP ("Conversant Fund B" and, together with Conversant Fund A, the “Conversant Investors”), affiliates of Conversant Capital LLC, which amended and restated in its entirety the Investment Agreement that the Company entered into with the Conversant Investors on July 22, 2021 (the “Original Investment Agreement”).
Added
The Company entered into Loan Modification Agreements with Fannie Mae on October 2, 2023. The material terms of the Loan Modification Agreements are as follows: 32 Table of Contents • Maturities on 18 community mortgages, ranging from July 2024 to December 2026, have been extended to December 2026.
Removed
Pursuant to the A&R Investment Agreement, (i) the Conversant Investors purchased from the Company, and the Company sold to the Conversant Investors, in a private placement (the “Private Placement”) pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), 41,250 shares of newly designated Series A convertible preferred stock, par value $0.01 per share (the “Series A Preferred Stock”), at a price per share equal to $1,000; and 1,650,000 shares of common stock, par value $0.01 per share, at a price per share equal to $25; (ii) the Conversant Investors received 1,031,250 warrants, each evidencing the right to purchase one share of common 32 Table of Contents stock at a price per share of $40 and with an exercise expiration date of five years after the Closing Date; (iii) the Company amended the terms of its previously announced rights offering under the Original Investment Agreement to allow the holders of record of its outstanding shares of common stock at the close of business on September 10, 2021 the right to purchase at $30 per share, 1.1 shares of common stock for each share of common stock held (the “Rights Offering”), in each case as more fully described in the A&R Investment Agreement.
Added
The remaining 19 communities under the MCF have existing maturities in January 2029. • The Company is not required to make scheduled principal payments due under the 18 community mortgages and 19 communities under the MCF through the revised maturity date of December 2026 or 36 months from the Fannie Forbearance Effective Date, respectively. • The monthly interest rate will be reduced by a 1.5% weighted average on all 37 communities for 12 months from the Fannie Forbearance Effective Date and deferred until it is contractually waived in June 2024 so long as there is no event of default (the “Fannie Interest Abatement Period”). • The Company is required to make a second principal payment of $5.0 million with respect to the Fannie Mae debt which is due on June 1, 2024, the one-year anniversary of the Fannie Forbearance Effective Date. • The Company provided a full corporate guaranty in the amount of $5.0 million related to the second principal payment of $5.0 million (the “Second Payment Guaranty”).
Removed
In addition, pursuant to the A&R Investment Agreement, the Conversant Investors agreed to partially backstop the Amended Rights Offering up to $50.5 million through the purchase of additional shares of the Company's common stock at $30 per share.
Added
This guaranty will fully expire upon payment of the second $5.0 million principal payment. • In addition to the Second Payment Guaranty above, the Company also provided a $10.0 million guaranty (the “Supplemental Fannie Guaranty”).
Removed
In consideration for the backstop commitments of the Conversant Investors, the Company paid to the Conversant Investors, as a premium, 174,675 shares of common stock.
Added
After the expiration of 24 months from the Fannie Forbearance Effective Date, Sonida may discharge the full amount of the Supplemental Fannie Guaranty by making a $5.0 million principal payment to Fannie Mae on its community mortgages and/or its MCF. • In the first twelve months following the effective date of the Loan Modification Agreements, the Company is required to escrow 50% of Net Cash Flow less Debt Service (as defined in the Fannie mortgages and MCF) on an aggregate basis over all 37 Fannie Mae communities.
Removed
On or after the closing date under the A&R Investment Agreement, the Company may from time to time request additional investments from the Conversant Investors in shares of Series A Preferred Stock for investment in accretive capital expenditures and acquisitions post-closing up to an aggregate amount equal to $25.0 million, subject to certain conditions.
Added
The excess cash flow will be deposited into a lender-controlled capital expenditure reserve on a monthly basis to support the re-investment into certain communities, as mutually determined by the Company and Fannie Mae. The Company will be able to draw down such amounts on qualifying projects as the capital expenditures are incurred.
Removed
Simultaneously with the entry into the Original Investment Agreement, the Company and the Conversant Investors entered into a $17.3 million secured promissory note (the “Promissory Note”) to provide interim debt financing which was scheduled to mature in July 2022 and was subsequently amended.
Added
As of December 31, 2023, the Company has funded $0.2 million into such escrow account. As of December 31, 2023, the Company had drawn down $10.0 million of the Equity Commitment as more fully described in the “ Conversant Equity Commitmen t” below. As of December 31, 2023, $3.5 million remains in the Equity Commitment.
Removed
The Promissory Note was amended to reduce the aggregate indebtedness outstanding by $1.3 million, resulting in an amended secured promissory note in the amount of $16.0 million. The Promissory Note was fully repaid upon closing of the transactions contemplated by the A&R Investment Agreement and the Company recognized a $1.0 million loss on extinguishment of the Promissory Note.

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