Capital Senior Living Corporation Stock

Thank you. Hello, everyone. Thank you for joining us and welcome to the Sonita Seniors Living Second Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Megan Caldwell, VP of Investor Relations. Megan, please go ahead.

Thank you, operator. All statements made today, August 10, 2026, which are not historical facts are forward-looking statements within the meaning of federal securities laws. The company expressly disclaims any obligation to update these statements in the future, except as required by law. Actual results or performance may from forward-looking statements. Certain factors that could cause actual results to differ are detailed in the earnings release that the company issued earlier today, as well as in the reports that the company files with the SEC, including the risk factors contained in the annual report on Form 10-K and quarterly reports on Form 10-Q. Please see today's press release for the full Safe Harbor and Forward Looking Statements, which may be found in the Form 8K filing from this morning or at the company's investor relations page found at investors.sonitaseniorliving.com. As previously disclosed, the company completed its acquisition of C&L Healthcare Properties Inc. or CHP on March 11th, 2026. Unless otherwise specifically noted or the context otherwise requires, the financial and operating results we are discussing today and that are included in our earnings release and presentation represent the combined company on a pro forma basis for any period presented in which we did not own CHP for the full period, including CHP as if the acquisition had closed on the first day of the period.

We believe this pro forma information provides a meaningful method of comparing the performance of the combined business over historical periods. This pro information giving effect to the CHP acquisition has not been prepared in compliance with Article 11 of Regulation SX and does not reflect the actual results we have achieved had the CHP acquisition occurred on the first day of the applicable period and may not be predictive of future results. Please Please note that our GAAP financials reflect CHP's results from the closing date only and our second quarter 2026 financials reflect CHP for the full period without any adjustment. See the disclaimer slide in our presentation for additional information about the preparation of and the limitations associated with this perform of financial information. Please also note that during this call, the company will present non-GAAP financial measures. For reconciliations of these non-GAAP measures to the most comparable GAAP measure, please see today's earnings release and presentation. If you'd like to follow along during today's call, you can find Sunita's second quarter 2026 earnings presentation in the investor relations section of the company's website.

In addition, we have included supplemental earnings information within our presentation consistent with prior quarter releases. I would now like to turn the call over to Sunita, president and CEO.

Brandon Rebar. Thanks, Megan. Good morning and thank you for joining us on our second quarter 2026 earnings call. Last quarter, we outlined Sunita's shift from building its foundation to compounding on it, transitioning from survival and stabilization to now, in 2026, compounding. Our compounding phase is well underway with today's results showing clear fundamental and I'm pleased to report a strong second quarter. On the same store basis, weighted average occupancy increased 240 basis points year over year to 87.8%, reflecting continuous growth continued gains in move-in volume and sustained execution by our sales, operations, and clinical teams. top line growth continued to flow through efficiently to profitability. We're encouraged that this momentum continued into the third quarter with our total portfolio occupancy increasing sequentially by 40 basis points in July versus June. QSameStore Community NOI grew 16.9% with NOI margin expanding 250 basis points year-over-year to 32.6%, underscoring the operating leverage embedded in the portfolio. We are pleased that our operational efforts have demonstrated a significant expansion from our 14% year-over-year same community NOI growth in Q1.

On a total portfolio basis for the second quarter, normalized FFO per share was 48 cents with adjusted EBITDA of $50 million, both reflecting the earnings power of the platform as it scales. The strength of these results highlights the caliber of leadership across the operating platform, the effectiveness of our proprietary SPIN business intelligence tools, and the operational discipline to balance onboarding new communities while delivering consistent performance in our core portfolio. The continued integration of the CHP portfolio remains on track, and our pipeline of additional near-term investment opportunities continues to expand, both of which I'll cover in more detail later in my remarks. Our primary objective remains generating durable per share value creation through the combination of a stronger balance sheet, a differentiated operating model, and a deeper leadership bench. We are also pleased to formally introduce Anton Nicodemus as our Chief Operating Officer, a newly created and vital role as we focus on continuing to compound value. Anton's arrival reflects a deliberate investment in enhancing the resident and overall customer experience as we build on a strong operating foundation and position Sunita for long-term competitive advantage as an owner-operator. Anton brings a valuable perspective rooted in hospitality.

At its best, senior living is not simply a care business. It is an experience business. Culinary quality, service consistency, resident programming, and the design of the physical environment, together with disciplined sales, marketing, and revenue management, are details that drive renewals, generate referrals, and sustain pricing power through market cycles. They're also the most difficult things to replicate at scale. As Sunita's platform grows, our ability to embed a hospitality-driven culture at the community level and to hold that standard across a larger and more diverse portfolio is a key source of differentiation in our business model. Anton is here to build and sustain that capability, and we are excited to have him leading that work. This mandate is especially relevant given the pace of integration work underway. As of July 1st, 14 communities, more than a quarter of the CHP shop portfolio, have transitioned to CINEDA management.

The execution was smooth, and more importantly, it was instructive. Our operational excellence team, built over the last several years since we began acquiring assets in 2024, continues to accelerate asset transitions and data migration onto our SPIN platform, enhancing a playbook refined through two years of integration work. To contextualize this a bit, the six communities transitioned at the beginning of May, delivered year-over-year NOI improvement exceeding 60%, and expanded NOI margin by 850 basis points compared to Q2 2025. Ongoing investment in detailed training and development of new leadership coupled with community-level incentive structures are keeping teams focused and results steady throughout the integration process. We remain confident in the performance of our remaining third party managers. They have preserved operational continuity and institutional knowledge at the community level, and in a handful of cases are evolving into longer term strategic partnerships, a dynamic that is opening incremental opportunities for us across a range of fronts, That's deal flow, sourcing networks, or regional density advantages. That same playbook mentality, building infrastructure that gets smarter with each transition, extends beyond the integration itself.

It is what underpins the Sonita Performance Insight Navigator, or SPIN, our proprietary operating platform that provides real-time insights around occupancy, rate, and labor trends, with datasets coming from over 100 of our communities. We introduced SPIN to our investors for the first time in our April shareholder letter and in further detail on our Q1 call, though it reflects work we've been building for years. SPIN FIN is a proprietary system with layered best-in-class third-party capabilities specifically tailored to how we operate, bringing resident care, workforce, and community-level data into a single real-time view. What's changed since last quarter is scale. Each community acquisition we integrate enriches that data set and drives further development of predictive insights into resident clinical profiles and labor efficiency. Dividing to capital allocation, our investment focus remains return driven, not category driven. Every dollar deployed is measured against the creation to free cash flow and net asset value per share. underwrite with the same rigor and cost of capital discipline as an institutional investor.

But the CINEDA advantage lives in what happens after the deal closes. We execute as a best-in-class operator, converting operational upside directly into NOI in a way a pure capital allocator cannot. That operating advantage shapes our conviction about the types of assets that create the most value for CINEDA shareholders. assets that reward not just an owner, but an operator, where our operational capabilities allow us to lean into a deal, specifically high quality assets available at a discount to replacement cost in markets with favorable supply demand dynamics, where we see multiple levers to grow occupancy, rate, and margin, rather than a single asset thesis dependent on cap rate compression. Regional density is a particularly important part of that thesis. Today, local operating density is becoming harder to replicate and more valuable. Our concentrated presence in key markets such as Dallas, Fort Worth, northern Florida and Atlanta deepens access to the operating and market data that sharpens our capital deployment decisions, while regional clustering drives referral networks, purchasing power, and labor efficiencies that optimize our operational opportunity. This density is also reinforced by how we're perceived in the market.

We believe our platform is resonating with sellers who care about what happens to their communities after a transaction closes, and we expect that to become an increasingly important differentiator to our sourcing efforts over time. Together, these dynamics feed the flywheel we described last quarter, where every acquisition deepens our operator relationships as to the spend dataset and strengthens our density in the markets that matter most. The value of SPIN and our broader integration and operations playbook is increasingly reflected in our results. Our stone joint venture is a case in point. Formed in 2024 to acquire four highly distressed communities across the Midwest, the portfolio NOI has grown 5.6 times, driven by a complete overhaul of the operating model to drive both top line and margin growth. performance yielded a cash out refinancing that closed this quarter, returning the full amount of invested capital to Sunita and our joint venture partner with attractively priced long duration flexible mortgage debt. Importantly, we believe the growth from this acquisition is far from finished. The portfolio remains in the stabilization phase with meaningful upside opportunities ahead.

We've previously discussed our 2024 cohort, which is currently yielding approximately 11.5% relative to our cost basis, with meaningful further upside ahead. Our 2025 cohort is showing similarly strong momentum since Q4 2025, the first full quarter of ownership. CINCY and NOI are up 1,400 basis points and 1,600 basis points respectively. Notably, occupancy for the 2025 cohort sits at 70.4% as of June, reflecting significant upside ahead. The Stone JV and our other one-off acquisitions to date reflect the kind of value creation we look to replicate as we continue to deploy capital. And we are seeing that same opportunity set in our current pipeline. Today, we are under contract to acquire approximately $88 million of assets that share these same characteristics. attractive markets, and well-located buildings where our operating prowess can drive a significant uplift in performance.

We anticipate these assets to generate a mid-teens on levered IRR and accretion to normalized FFO and NAV per share on a stabilized basis. This is all consistent with the approach laid out in our April shareholder letter, where we are looking for acquisitions that generate outsized return on unlevered cost of capital when compared to our current implied cost of capital in the public markets. We continue to build the pipeline behind this initial $88 million, which remains deep and compelling and our acquisitions team is as busy as it's ever been. We look forward to sharing more on our acquisition efforts in the upcoming calls. With that, I'll turn the call over to Kevin to walk through the financial results, balance sheet and asset recycling efforts in more detail.

Thanks Brandon. Turning to slide 16 in the investor deck, a quick reminder on how we're structuring portfolio reporting. As we outlined last quarter, we report across three groupings, same store, non-same store, and triple net lease, a framework designed to provide a clean read on our core earnings base while isolating the parts of the portfolio still in motion. That second bucket, non-Same Store, is where our active portfolio management shows up most directly. It includes newly acquired and stabilizing communities, assets undergoing reinvestment or care model conversion, and a target set of communities identified for disposition as part of our ongoing portfolio optimization strategy. On that last group, we are making significant progress towards an efficient exit of these non-core positions to redeploy that capital into higher quality communities that better align with our growth and margin profile. Capital recycling of these 14 communities, which represent less than 2% of total NOI for Q2, should have a deleveraging impact on the company's balance sheet beyond enhancing overall quality and earnings power. We see this as one of the clearest ways to show disciplined capital allocation in action, and it's a dynamic we expect to keep pointing to as the portfolio accelerates a shift to higher quality, higher growth assets.

The net lease portfolio includes the 15 communities we own that have operating leases in place. Initial lease maturities are between May 2030 and July 2032, and all include five-year tenant renewal options. Turning to slide 17, our same store portfolio generated strong operating gains in the second quarter. We picked up 240 basis points of occupancy on a year over year basis. The percentage of same store communities with occupancy above 90% grew from 43% in 2Q25 to 54% today, while the percentage below 80% declined from 30% to 20%. These occupancy gains are supported by increased lead volume from our focused digital marketing efforts, coupled with a higher conversion to tour ratio. REF4 grew 4.9% year-over-year, reflecting continued rate strength following the annual renewal of 70% of the company's resident leases in Q1.

The overall strong performance and revenue was complemented by well-controlled operating expenses, which yielded an NOI margin of 32.6% for the quarter and increase of 250 basis points year-over-year. The continued discipline in labor and non-labor cost management drove an incremental flow-through of 63.4% on the increase in revenue for the same quarter and prior year. Also contributing to the widening margins within our same store portfolio is the steady stabilization of the 2024 acquisition cohort, which continues to increase its absolute NOI contribution with each consecutive quarter. While we are encouraged by Q2 strong operating results, which were highlighted by 16.9% year over year increase in NOI, we see several avenues for margin expansion and a still maturing same store portfolio. all anchored into the utilization of the SPIN platform by our community leaders and regional teams. Moving to total portfolio results on slide 18, total shop NOI grew 17 and a half percent, supported primarily by growth in the same store portfolio. The estimated average occupancy increased 170 basis points year over year to 86.6%, reflecting continued strength across the stabilized core portfolio while incorporating acquired communities with lower starting occupancy basis. Assets still in transition and assets that are being actively recycled cycled out.

In addition to these occupancy gains, total shop rev4 also grew 4.9%, with rate opportunities still embedded in our newer and repositioning communities as they continue to mature. As Brandon mentioned, the 2025 cohort's occupancy trajectory has been a standout, and that momentum has flown through to our profitability as well. NOI margin across these four communities moved from negative 1% in Q4 2025, the first full quarter in which all four assets were included, to 15% this quarter. With plenty of runway left on these assets, the pace of stabilization should support meaningful year-over-year NOI contribution when they flip into same-store or in 2027. More broadly, total shop NOI margin for the quarter was 29.9%, a level that we expect to build upon as we execute on our strategies across acquisition stabilization, community transitions and portfolio pruning. We will move to slide 19 now to look at our same store portfolio in more depth. A steady increase of rev core over the last five quarters reflects the company's focus on optimizing resident rates through SPIN, as well as the staggered nature of the legacy CHP rate renewal conventions.

The combination of these two factors should provide for further rate increase capture throughout the year and beyond. The company continues to appropriately match level of care revenues to its acuity-based staffing model within SPIN, providing another lever to widen margin profile while both occupancy and operational efficiencies climb. Moving to slide 20, you'll see our same store labor efficiency continues to drive up incremental margin flow. In Q2, total labor costs declined 1.5%. 130 basis points as a percentage of revenue year over year to 40.4%, a portfolio low, primarily highlighted by 100 basis point improvement in direct labor, with both contract and other labor remaining minimal and stable. These continued improvements in our labor profile are the direct result of the utilization and proficiency of real-time spin labor metrics by our community teams. Other non-labor operating expenses also continue to push down relative to increasing revenues, contributing to a 410 basis point spread between REF4 and EX4, and ultimately the 16.9% increase in NOI from Q2 and prior year. This three-quarter trajectory reflects the continued evolution of our spin labor modules, and more importantly, their broadening adoption and utilization across our community and regional teams.

Turning to slides 22 and 23, our balance sheet continues to strengthen as we advance toward our targeted near-term leverage range of six to six and a half times. of June 30th, the company's capitalization includes two term loans totaling $575 million, which includes an additional $25 million commitment received in Q2. The two term loans are priced at SOFR plus 195 basis points with step downs that allow pricing to compress to as low as SOFR plus 130 basis points as leverage is reduced. Subsequent to quarter end on August 7th, we completed a $380 million five-year term loan, including two extension options with Ally Bank. The proceeds from the allied term loan were used to fully settle the $170 million bridge loan and the existing allied term loan of $122 million, with the remaining proceeds used to pay down the senior revolving credit facility increase availability to fund future acquisitions. The LA term loan, along with the two term loans from the CHP merger in Q1, meaningfully extend our debt maturity profile and addresses any near-term refinancing risk associated with the company's debt stack. transaction on a pro forma basis, total debt stands at approximately $1.6 billion at a weighted average interest rate of 5.43%. 86% of our total debt is either fixed rate or floating hedge. The Ally refinancing also reshapes our maturity ladder meaningfully, with 97% of total debt maturing in 2029 or later and 43% maturing in 2031 or later, prior to the inclusion of extension options. As of the date of the Allied Turn Loan financing, the secured revolving credit facility carries a total commitment of $455 million. of which roughly $166 million is available immediately and continues to provide meaningful incremental capacity to support future growth.

Finally, in July, the company issued approximately 672,000 shares of common stock under its ATM program at an average price of $41.05, resulting resulting in net proceeds of $27.3 million. We anticipate these funds to be used for the equitization of the nearest term community acquisitions within our pipeline. We remain pleased with the quality, flexibility, and duration of our capital structure following this transaction as we execute on our growth and de-lettering strategy. With that, I'm going to pass the call back to Brandon for closing remarks. Thanks, Kevin, and thank you all for joining us today. Taken together, our second quarter results reflect the strength and durability of the operating momentum we've built across the portfolio. Same store and total shop performance both point to a business generating meaningful top line growth while translating that growth into outsized margin expansion.

And our recent balance sheet actions have further strengthened our financial flexibility to support that momentum going forward. None of this happens without the people behind it. Our team members across each of our communities and in our support roles show up every day for our residents with genuine care and pride. And that dedication is the foundation. Everything else the Sanita story is built on. We are also grateful for the continued confidence of our investors who have partnered with us through this journey and share in our excitement about where Sunita is headed. Thank you again for your time today, and we look forward to speaking with many of you in the weeks ahead.

Operator, you can open the line for any questions. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. standby while we compile the Q&A roster. Your first question from the line of Ronald Camden.

with Morgan Stanley. Ronald, your line is open. Please go ahead. Great. I guess just a couple of quick ones from me. Starting with the normalized FFO 48 cents in the quarter, which looked pretty strong. Can you guys just remind us when you guys plan to give sort of normalized FFO guidance and how the thinking is going through there?.

Hey, Ron, good morning. Our goal is to start issuing guidance for the full year 2027 as we just continue to pull the entire portfolio together and work through the completion of the integrations from the CHP deal as well as the other acquisitions we have in our pipeline. So that's the goal.

Great, that's really helpful. And then as you sort of take a step back, I'm just curious when you look at the portfolio right now, where in your mind you think stabilized occupancy can get to over time and if you can just overlay what sort of the new COO Ohio as well as the SPID platform, the SPIN platform, excuse me, how that plays into that occupancy trajectory. Thanks.

Certainly, I'd say that from an occupancy perspective, you know, we see continued improvement. We've seen good year-over-year growth and, you know, don't see any major headwinds to that continuing here in the next, you know, the foreseeable future. So getting into the low to mid-90s seems, from my perspective, a good idea. from our perspective, very achievable. Obviously, pace will depend on our performance and the market. And I'd say that the hiring of Anton was a big piece of just the continued improvement and trajectory of the business. his experience over 30 years in adjacent industries and what he'll be able to do in terms of the overall resident and customer experience as we continue to build out, you know, just our exceptional operating platform is something we're incredibly excited about his knowledge of the customer and and how to create the right type of offering to match and exceed their expectations is something that even in the first couple of months of his joining our team, we've been super impressed with. And so how we continue to build out the operating platform for the future resident and their family is something we're excited to continue down very quickly. And then I'd say just on the SPIN tool, the more that we've been able to add communities to our overall just base of analytics, the more we learn about areas of opportunity, both on the staffing side, which is exciting because we just have a very real-time view of what's going on in our communities, but also as we think about continuing to push through and expand our rate profile, just understanding how long units are on the market, we can get them filled up and priced appropriately, and then just doing more on a real-time pricing basis as we build out our product and grow that occupancy is really important because as as you know when you start exceeding 90 occupancy um it's absolutely foundational that you get very strong rate growth and so we're always trying to balance the the growth of the rate with our occupancy as well and excited to have anton on board to help us drive with the continued build out of our SPIN platform and our overall customer offering.

Ron Riggio. Helpful. That's it for me. Thank you so much. Thank you, Ron.

Your next question from the line of Rich Anderson with Cantor Fitzgerald. Rich, your line is open. Please go ahead.

James Heitingkamp, Norcal PTAC, All right, thanks good morning next quarter. James Heitingkamp, Norcal PTAC, So I just want to talk about good morning, so I want to talk about the triple net portfolio and the recycling plan there. You mentioned the lease expirations and the extensions. Like, to what degree, can that process you know start rolling sooner rather than later And, you know, what's your what's your mindset around cap rates and redeploying, you know, you know what the spread would would be to redeploying into growth, your assets and so on any any incremental color you can give on timing and economics to that area.

to that strategy would be helpful. Thanks. Yes, absolutely. I'd say that as we built the relationship with both of our tenants, we've been impressed with their capabilities and, you know, they're both structures that we have a lot of confidence in from a stability perspective. But as we talked about before, ultimately, we're not interested really in growing the triple net business. And so I think, you know, just continuing to get market color on, you know, what that would look like should we go down a path, you know, here in the, you know, in the future. in the near to midterm, we're not in any real hurry because it's still very strong cash flowing assets that have good underlying metrics. I think, you know, just we can obviously continue to evaluate opportunities for more of a shop style profile of those assets. But I'd say that, you know, here in the next probably six, months to a year, we want to make sure that we're clear on whether or not that's something we want to pursue from a market transaction perspective or not. And I'd say that the spread there, based on what we're seeing in the marketplace and kind of the asset profile that we referenced in our pipeline, you know, that there would be, you know, clearly a solid spread to where the triple net would trade today.

And I guess it's fair to say that there's differing opinions on what the cap rate would be on the triple net side until you really were to pursue a market type of a transaction. But that's what we'll look at is can we can we recycle that and buy it, you know, at 100, 200 basis point type of a spread? Okay.

Thanks very much. Last second for me. You know, very unique operating model. I think we all can appreciate everything under one roof or almost everything and transitioning those that aren't at the moment. When you're out in the market looking for activity, though, is there any situation where you're taken out of the running because an operator may want to still be an operator and doesn't want to lose lose that business. And so because you're you're more than likely to transition to the Sanita operating platform, is there a hesitancy to do business with CINEDA in some cases? Thanks.

I would say overwhelmingly, the opportunity for it to be part of the Sunita platform has been part of the reason that we've been successful. And there are occasions where an operator might have that stipulation if they have a very close relationship with the party that's selling. more realistically, people are not interested in limiting the value opportunity when they're taking transactions to market. And so, you know, they're open to multiple types of structures. And I'd say that, you know, similar to what we did with the CHP opportunity, you know, if there's strategic opportunities within that operating platform or that operator, we're not going to be so set on our ways that they couldn't potentially stay a part of that or be a part of the CINEDA platform as well. So we like to maintain that flexibility as we're bidding on assets, but we haven't seen that to be a barrier of any kind.

any significance in the deals we've been we've been bidding on. And quick one just follow for me. You mentioned regional deficit density being a high priority. ticket item for you guys Dallas, North Florida, Atlanta were mentioned. Where do you need, do you see an immediate need to build scale and density that didn't make that top three list today?.

I'd say that we're continuing to look at assets in the Midwest. We've seen really strong performance. We talked about that stone portfolio, and those four assets are positioned really well across markets in the Midwest that we're interested in additional density. kind of the mid-Atlantic, the Carolinas and Virginia are areas that we're looking at as well. I think, though, that we've seen a lot of success and, you know, the profile of the assets that are in our pipeline are being layered into markets where we already have, you know, a solid presence but not a ton of density, I'd say. markets like in Atlanta or northern Florida, you still have plenty of runway to grow where you can identify other suburbs or complementary product types that can be added into the portfolio. So we think that there's really still plenty of room to grow in those key markets and expand in others in the kind of Midwest and Southeast as well. Great, great caller. Thanks very much, everybody.

Thank you. A reminder, if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Your next question comes from the line of Wes Galladay with Baird. Wes, your line is open. Please go ahead.

Hey, good morning, everyone. I want to go on to the topic of margin expansion. With the merger, I think you inherited some contracts from vendors, and now you have a lot more scale. Do you think you can get after some of these contracts by 2027 and start to see that benefit of scale?.

Good morning, Wes. Thanks for the comment. So we are already getting out under the master contracts in instances where we share the same vendor as the same as the community or the operating company that we're now working with. So a lot of that is already in motion. And generally the contracts are short-term in nature. So if it's things like purchasing food or insurance, all those are one year or less. So don't see any headwinds relative to optimizing kind of the scale purchasing power of the combined company.

Okay, thank you for that. And then when you look at your acquisition pipeline, what type of deals are you seeing? I think you commented on the geography already, but maybe talk about are you seeing more value add, newer assets? What's in the pipeline there?.

I'd say the pipeline is very consistent with the assets that we were purchasing in 2024 and 2025. So there are some that have a little bit heavier lift to them and definitely a risk-adjusted return that's stronger. And we're also looking at those that we can apply our operating model, but they're not fully stabilized at this point. They're not massive recoveries, but things like mid to high 80s occupancy. And we look at the kind of market rate profile and see pretty interesting opportunities to adjust those to higher market level rates. I'd say that our confidence in these deals comes from the fact that they look and feel very, very similar to those we've had success with in 2024 and 2025. And we're still buying them at attractive pricing relative to replacement value and feel like there's a really good near-term path to driving good, strong NOI recovery once we bring them on board.

Great. Thank you for the time. Thank you.

Your next question from the line of Ben Hendrix with RBC Capital Markets. Ben, your line is open. Please go ahead.

Great. Thank you very much. Appreciate the comments about the SPIN advancement, particularly the REV4 and X4 spread, the incremental spread you're getting there. I'm wondering if you could provide some additional commentary around how much of, you know, occupancy gain you might be able to attribute to some of this added leadership capacity. capacity, marketing, programming, and facility enhancements. Any way to think about how much of the 240 basis points the same store occupancy growth, kind of came from these spin transition facilities? Thanks.

Yes, I'd say we've seen good, consistent growth across the board. One thing we included this quarter, hopefully it's helpful for investors, is a breakdown of the occupancy levels across the board. just the various segments in terms of total numbers of communities, you know, at or above 90, 95%. And then those that, you know, or still have plenty of room for recovery. And I think that tells a really nice story of balance that we have, you know, a significant amount of upside in the bottom kind of 20% that are still below 80. 80% occupancy and a lot of those are communities that have transitioned into the portfolio as well as those that we bought in 2024 that still have good runway to them. And so I think we've been able to hold a high number of our communities in that 90% and and over level. We generally run right around 10% or so of our communities that are full and those are the areas where we can keep focusing on on rate growth. I'd say there's a good mix of kind of legacy same store opportunity as well as, you know, of the chance to keep moving at those types of occupancy improvement levels with the assets that we're rolling in.

And so we think about like the 2025 cohort that we talked about, that's still in the low 70s in terms of its overall occupancy. So start rolling that into the same store next year and feel like we're going to be able to continue to generate those good strong year over year occupancy gains in the same store portfolio.

Great, thanks. And then as you look at the SPIN platform's analytical capabilities and kind of the insight it can give you, is there any indication of that? expansion of the pipeline, the M&A pipeline related specifically to that? Is it opening up the pipeline, maybe making new markets more attractive, or are we kind of continuing really with that focus on your core markets where you're building clusters?.

I think what it's really doing is reiterating where we can be very successful in terms of things like the markets we want to play in, what type of density in the market that we really want to target, the mix of products, whether it's IL, AL, or memory care, being able to tie that into the performance of existing assets. within both our same store and non-same store cohorts is really helpful because we're moving very quickly on deals that are off market and feel like we can underwrite them against what we've been able to do in other circumstances. Feel like our track record in terms of performance on those acquisitions is something that's also giving us a leg up when we're having discussions on deals. And so we apply those metrics that we're seeing in an individual community or a cluster of communities to the underwriting we're doing for new assets. And that means, you know, what is the overall percent and kind of structure of our labor model look like in the potential acquisition opportunity? What's the rate growth profile and how quickly and how do we think about the types of units, you know, one bedrooms, two bedrooms, studios that are in the assets that we're looking at. So we really focus on how to translate our direct kind of in the four walls operating knowledge into our underwriting. So we're ultimately giving ourselves a very high chance of success in, delivering on an accretive transaction and ensuring that it gets integrated in a very timely fashion as well. So I think there's all components of the SPIN platform that we apply when our team's underwriting the acquisition opportunities as an operator.

Thank you. MR. Thanks, Ben. MS. There are no further questions at this time. I'll now turn the call back to Brandon Rebar for closing remarks. Thank you all for joining our call this morning. great week take care this concludes today's call thank you for attending you may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Hello, everyone. Thank you for joining us, and welcome to Sonida Senior Living Q1 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Megan Caldwell, VP of Investor Relations. Megan, please go ahead.

Thank you, operator. All statements made today, May 11, 2026, which are not historical facts, are forward-looking statements within the meaning of federal securities laws. The company expressly disclaims any obligation to update these statements in the future, except as required by law. Actual results or performance may differ materially from forward-looking statements.

Certain factors that could cause actual results to differ are detailed in the earnings release that the company issued earlier today as well as in the reports that the company files with the SEC, including the risk factors contained in the annual report on Form 10-K and quarterly reports on the Form 10-Q. Please see today's press release for the full safe harbor and forward-looking statements which may be found in the Form 8-K filing from this morning or at the company's Investor Relations page found at investors.sonidaseniorliving.com.

As further described in the company's current report on Form 8-K filed with the SEC this morning, the company completed its previously announced acquisition of CNL Healthcare Properties, Inc., or CHP, on March 11, 2026. The transaction was completed through a series of steps ending with a forward merger of CHP with and into a subsidiary of Sonida. And as a result, the company now directly owns all of the assets of CHP.

Unless otherwise specifically noted or the context otherwise requires, the financial results we are discussing today and that are included in our presentation reflect the combined company on a pro forma basis for the full quarters including CHP for the entire reporting period. These pro forma metrics giving effect to the CHP acquisition are preliminary and subject to change. And we have provided estimated ranges in our earnings release.

For the sake of clarity, during this earnings call, we will discuss our pro forma results based on the midpoint of the range presented, but we refer you to our earnings release for the ranges and more information. Please note that our GAAP financials reflect CHP's results from the closing date only. References to pro forma metrics, including those presented in the investor presentation, reflect a full quarter of CHP activity.

Please note that during this call, the company will present non-GAAP financial measures. For reconciliations of these non-GAAP measures to the most comparable GAAP measure, please see today's earnings release.

If you'd like to follow along during today's call, you can find Sonida's first quarter 2026 earnings presentation in the Investor Relations section of the company's website. In addition, we have included supplemental earnings information within our presentation consistent with prior quarter releases.

I would now like to turn the call over to Sonida President and CEO, Brandon Ribar.

Thanks so much, Megan, and we are excited to welcome you to the Sonida leadership team. Good morning, and thank you for joining us on our first quarter 2026 earnings call. This quarter marks an important milestone for Sonida as we report results following a period of transformational expansion. With platform integration underway and on track and our operating foundation firmly in place, we are entering what we described in our recently published shareholder letter as Phase 3: Compounding.

In Phase 1: Survival, and Phase 2: Stabilization, our team focused on strengthening the foundation of the business, stabilizing operations, repairing and fortifying the balance sheet, upgrading portfolio quality and investing in the operating capabilities required to compete effectively at scale. Today we are shifting from building that foundation to now leveraging it to compound value for our shareholders. As a scaled, pure-play senior housing owner and operator, we enter this next phase supported by a stronger balance sheet, expanded liquidity and a differentiated operating platform.

Performance for the company continues to trend positively, supported by our constructive early momentum in 2026. Leveraging that stable operating foundation, we are heavily focused on a smooth integration of recently added communities into the Sonida platform, and unlocking a defined set of unmodeled synergies across our cost structure and operating model. These initiatives span asset management and community-level operations and are designed to support margin expansion and cash flow growth over time.

Equally important, we are reinforcing performance through clearly defined incentive structures tied to community-level outcomes and dedicated operational support to sustain results while minimizing disruption as operational integration progresses.

Underpinning all of this is the quality of our people. We entered Phase 3 with a meaningfully strengthened leadership team across operations, leaders who have deep experience at driving performance at scale. That investment in talent is not incidental to our growth strategy. It is the foundation on which Phase 3 is built.

The CHP transaction was not simply an owner-operator combination. We acquired a REIT and, with it, a network of third-party manager relationships that preserves institutional knowledge and operational continuity across the portfolio. Those relationships are key to the performance trajectory of these communities whether or not they ultimately move to Sonida operations. And as some of those relationships mature into long-term strategic partnerships, they are a growing source of deal flow.

Our recent preferred equity investment is a good example. Through one of these managers, we invested capital to support the refinancing of a high-end, full-continuum community in Texas while earning an attractive risk-adjusted return. This is the kind of bespoke relationship-driven investment Sonida is built for and will continue to pursue.

Executing across a larger, more complex portfolio requires the right operating infrastructure, and that is precisely what we have built. Essential component of that work is the rollout of SPIN, our Sonida Performance Insight Navigator.

SPIN is our proprietary technology infrastructure that integrates resident care data, workforce information and operational metrics into a single actionable framework, giving community leaders the real-time visibility to act decisively as occupancy and acuity evolve. The platform optimizes both labor and nonlabor costs against relative occupancy, acuity and care levels to enhance unit economics and drive incremental margin expansion.

SPIN provides the framework for decentralized decision-making without sacrificing accountability, enabling our local leaders to drive community performance with owner-operator urgency and without bureaucratic lag. Importantly, we view SPIN as a foundational operating platform rather than a finished product. We are continuously improving its capabilities and refining usage.

As our platform scales across a larger and more diverse portfolio, it generates a richer data set, further strengthening timely insights, improved decision-making and compounding margin expansion. Each community and portfolio acquisition added to SPIN accelerates asset-level visibility and tie to performance through a standardized data infrastructure, which protects NOI from day 1. This scalable foundation is central to our growth strategy and our ability to drive sustainable margin expansion across our growing portfolio.

As SPIN becomes more deeply embedded, early feedback and performance indicators have been encouraging, and we believe there remains significant opportunity to further refine and leverage the system as the business continues to scale.

As part of Phase 3, we are also introducing our Refined Capital Allocation Framework, first outlined in our Shareholder Letter and included in today's earnings presentation. This framework establishes a clear and disciplined approach for how we will evaluate and deploy capital as we move into the next phase of growth. Following Kevin's remarks, I'll expand on the strategy and its core principles.

Turning to our performance for the first quarter. We are pleased with both the results we delivered and the momentum we are building. As previewed on our fourth quarter earnings call, this quarter reflects our new reporting buckets: Same-Store, Non Same-Store and NNN Lease.

The portfolio delivered solid year-over-year growth across our Same-Store communities, highlighted by continued occupancy expansion, sustained pricing power and meaningful NOI margin improvement. On a Same-Store basis, weighted average occupancy increased 220 basis points year-over-year to 87.2%, reflecting steady improvements in move-in volume, stable length of stay trends and continued execution by our sales, operations and clinical teams.

This occupancy growth combined with significant annual rate increases drove a 7.6% increase in resident revenue and a 5% increase in RevPOR, demonstrating our ability to capture value while maintaining a high-quality resident experience. Sonida's SHOP portfolio is concentrated in markets projected to outpace the national average for 75-plus population growth by approximately 300 basis points over the next 5 years, positioning the portfolio at the intersection of demographic demand.

Importantly, this revenue growth translated efficiently to the bottom line. Same-Store community NOI increased 14% year-over-year to $48 million, and NOI margins expanded 170 basis points to 31.2%. Based on early operational indicators across the portfolio, the performance we saw in the first quarter has continued into the second quarter.

Last week we completed the first operational transition following the CHP acquisition, bringing 6 communities from 2 third-party operators onto the Sonida platform. These communities represent an important value creation opportunity for the company, and we are initially encouraged by the immediate feedback and smooth execution by our operational excellence team. We expect to transition an additional 11 communities from 4 third-party operators this summer while developing strategic growth partnerships with a select group of in-place third-party operators.

Our first quarter results reinforce the core tenets of our strategy: driving organic growth through consistent operational execution, leveraging pricing power responsibly and deploying capital in ways that enhance long-term earnings power. The scale achieved through the CHP acquisition further strengthens this approach by expanding our regional density, improving purchasing and operating leverage, and increasing flexibility to allocate capital toward the highest return opportunities across the portfolio.

Our team remains intensely focused on execution both within the stabilized portfolio and across communities that are still ramping. We are encouraged by the momentum we are carrying into 2026 and confident in the durability of the operating trends taking shape across the portfolio.

With that, I'll turn the call over to Kevin to walk through the financial results and balance sheet in more detail.

Thanks, Brandon. Before jumping into our results, I'd like to start on Slide 15 with a brief overview of our new reporting framework, how we're segmenting the portfolio and why this structure is important for the company.

Beginning with the first quarter of 2026, we are reporting results across 3 portfolio groupings: Same-Store, Non Same-Store and NNN Lease. This structure better reflects differences in asset maturity across the portfolio and provides clear transparency into stabilization dynamics and capital allocation decisions. As Brandon discussed earlier, a core element of our Phase 3 strategy is the continued evolution of the portfolio toward communities with more durable, long-term growth characteristics.

To support that objective, we will be deliberate in recycling capital out of select lower-growth or noncore communities over time. Based on current visibility, this represents approximately 10% of the portfolio by community count. Importantly, these communities represent significantly less than 10% of total NOI for the quarter ended March 31, 2026, reflecting their lower relative margin and growth profile.

The Non Same-Store portfolio captures these noncore assets being ready for disposition alongside recently acquired and stabilizing communities, as well as communities undergoing targeted reinvestments or care model conversions. By separating these assets from our stabilized Same-Store base, we provide a clear view of the portfolio's core earnings power while highlighting areas of active optimization and integration. Over time, this framework allows us to more clearly demonstrate how disciplined portfolio management and capital deployment are contributing to margin expansion and long-term per share value creation.

The NNN Lease portfolio includes the 15 communities we own that have operating leases in place. The initial lease maturities are between May 2030 and July 2032 and include tenant renewal options.

Turning to Slide 16. And as a reminder, all metrics referenced reflect a full quarter on a pro forma basis. Our Same-Store portfolio delivered strong year-over-year growth across all key operating metrics. RevPOR increased 5% as a direct result of another strong annual rate renewal campaign. This continued rate trajectory, along with a 220 basis point increase in occupancy, yielded a 7.6% increase in Same-Store resident revenue. Importantly, more than half of this revenue growth flowed through to NOI over the same period.

Same-Store community NOI increased 14% year-over-year to $48 million, while NOI margins expanded 170 basis points to 31.2%, supported by a strong contribution from our 2024 acquisition cohort as those communities continue to progress towards stabilization. These Same-Store results reflect effective labor management, disciplined control of nonlabor operating costs and the operating leverage we continue to generate as occupancy ramps up across a still-maturing Same-Store portfolio.

With enhanced visibility into our revised Same-Store portfolio, we believe our ability to deliver on outsized resident rate increases commensurate with our elevated resident service offering, combined with a now stable operating cost profile, should result in wider incremental margin gains as occupancy continues to climb.

Moving to total portfolio results on Slide 17. Total SHOP NOI grew 11.3%, supported by a steady same-store performance. Weighted average occupancy increased 100 basis points year-over-year to 85.7%, reflecting continued strength across stabilized core portfolio while incorporating acquired communities with lower starting occupancy basis and assets still in transition.

Additionally, as seen on Slide 37, the percentage of communities with occupancy above 90% grew from 39% to 52%. Conversely, the percentage of communities below 80% decreased from 28% to 20%.

In addition to the occupancy gains, the total SHOP RevPOR increase of 4.9% was consistent with the Same-Store portfolio's increase of 5%, supporting the quality of the underlying geographical submarkets with broader occupancy upside realizable upon community stabilization and/or transition.

Resident revenue increased 8.5% year-over-year and community NOI reached $51.3 million, with NOI margin expanding 70 basis points year-over-year despite the near-term dilution associated with bringing newly-acquired, noncore and transitioning communities into the platform.

I'll now spend some time diving deeper into our Same-Store portfolio and what's driving performance. Turning to Slide 18, we continue to see strong pricing fundamentals across the portfolio. Underlying RevPOR growth remains strong as occupancy continues to ramp.

In the first quarter, our resident lease renewal rate averaged 6.5%. Additionally, within the Same-Store portfolio, there are several legacy CHP communities that utilize the rolling anniversary convention for annual resident rate increases that should provide opportunity to further capture additional rate increases throughout the year.

Finally, as we progress towards near-term management transitions that we referenced earlier in the call, there should be ancillary opportunities associated with the overlay of our clinical platform and the potential capture of incremental level of care revenue.

I'll now turn briefly to our year-over-year expense trends on Slide 19. Our Same-Store labor efficiency continued to improve in the first quarter. Total labor costs declined approximately 100 basis points as a percentage of revenue on a year-over-year basis, driven primarily by improved direct labor productivity, while both contract and other labor remain minimal and stable. The significant decrease in direct labor reflects our targeted pay-for-performance initiatives implemented in early 2025 and referenced in our recent Shareholder Letter.

Specifically, SPIN allows us to more precisely measure job function productivity and invest in our top performers through above-market pay increases. This in turn resulted in fewer but more impactful labor hours required to serve our residents while significantly increasing retention and morale. These total labor results also reflect the durability of the more tactical labor initiatives we implemented in the second half of last year, all supported by SPIN. This included more informed and tighter scheduling discipline, daily staffing KPI dashboards, and ongoing work oversight and training from our corporate support center as occupancy continues to scale.

On the nonlabor side, expenses remained well controlled. While EXPOR increased modestly year-over-year, it grew meaningfully below RevPOR, resulting in a 320 basis point expansion in the RevPOR-to-EXPOR spread on a year-over-year basis. This reflects procurement efficiencies, disciplined cost management and the benefits of increased scale across the combined platform.

Turning to balance sheet on Slide 20. Our balance sheet remains well positioned as we continue to make progress toward our targeted leverage range of 6 to 6.5x. As of March 31, 2026, the company's capitalization includes 2 term loans, totaling $550 million priced at SOFR plus 195 basis points, with step-down that allows pricing to compress to as low as SOFR plus 130 basis points as leverage is reduced. These facilities provide attractive economics and meaningful flexibility as we continue to execute on our operating and growth initiatives.

Since quarter-end, we have further strengthened our capital structure through an additional $50 million upsizing to corporate debt facilities, which allowed us to reduce our bridge financing dollar for dollar to $170 million and increase capacity within our permitted facilities with no change of net debt. As a result, our capital stack is now even more weighted toward longer-duration, lower-cost financing.

In addition, as of today, our secured revolving credit facility now carries a $455 million total commitment inclusive of the additional post-quarter commitment, and continues to feature an accordion that provides significant incremental borrowing capacity to support future growth. Taken together, our bank facilities represent $1.2 billion of committed capital, underwritten by a single borrowing base and supported by a strong diversified lender group that includes both new relationships and our long-standing partners: BMO and RBC. We remain very pleased with the quality, flexibility and scalability of this capital structure as we execute on our growth and deleverage strategy.

Lastly, we expect the outstanding bridge loan of $170 million to be refinanced with new mortgage debt in the coming months. On the asset side, our approximate cash balance as of April 30 sits slightly above $50 million. Subsequent to quarter-end, we paid down $17 million on our revolver and closed 2 small investments, buying out a JV partner's interest in a high-performing 2024 acquisition cohort community for $3.6 million and investing $2.9 million of preferred equity that was referenced by Brandon earlier in the call. The balance of the cash was used to settle post-close transaction expenses. As of April 30, we had over $100 million in availability under our revolving credit facility, which we expect to increase based on our NOI growth.

Overall, our first quarter results reflect the earnings power of a maturing Same-Store portfolio, strong rate growth, disciplined cost management and expanding margins. They also demonstrate our ability to absorb near-term dilution from newly-acquired and transitioning communities as they progress along the stabilization curve.

With that, I'll hand things over to Brandon to close out the call by walking through our new capital allocation framework.

Thanks, Kevin. As I noted earlier, today we formally introduced our Refined Capital Allocation Framework, which is a core pillar of Sonida's Phase 3 strategy. This framework reflects a simple but powerful belief that long-term value creation in seniors housing comes from the combination of disciplined capital allocation and exceptional operating execution. And every investment decision we make in Phase 3 will be measured against that standard.

Our approach is grounded in 3 core principles. First, we will continue to enhance the quality and strategic positioning of our portfolio by investing in assets, markets and operating initiatives that strengthen the durability and long-term earnings power of the platform, while actively recycling capital out of lower-growth or noncore assets.

Second, we will deploy capital only where we believe returns meaningfully exceed our cost of capital and drive accretion to free cash flow and net asset value per share. Scale alone is not the objective; compounding per share value is. Importantly, our framework is return-driven, not category-driven. We will pursue stabilized assets when price, structure and fit meet our return thresholds.

And third, we will maintain disciplined risk-adjusted execution, preserving balance sheet flexibility so we can reach our near-term leverage target in the mid-6x range, with a longer-term goal of an even lower level that allows us to play offense through any future market volatility and act decisively as the opportunity set evolves.

In practice, we deploy capital in a deliberate sequence. First priority is the highest-conviction internal opportunities: optimizing occupancy, RevPOR and margins, and investing in selective CapEx with the clearest return visibility across the existing portfolio. From there, we pursue accretive external growth, targeting acquisitions with operational upside, strategic fit and disciplined underwriting, where returns are driven primarily by operational improvement and platform integration, not cap rate compression. And we maintain a strong focus on top MSA densification, building regional clustering that compounds operating leverage over time.

Underpinning this framework is what we call our Sonida Growth Flywheel. Each acquisition makes the platform more powerful, broadening deal flow, deepening operator relationships and enriching the data sets that power SPIN, enabling sharper benchmarking and performance improvement across a larger, more diversified asset base. This reinforcing cycle has a structural advantage that compounds over time.

That flywheel also expands the aperture of investable opportunities available to us. As our platform scales and our operating track record deepens, we are increasingly well positioned to pursue higher-quality assets with stable operating characteristics provided they are located in strategic growth markets and can be acquired at a basis aligned with our cost of capital.

For those opportunities, our underwriting discipline remains consistent. We require a clear line of sight to FFO per share accretion based on the underwritten growth profile of the asset, supported by the demographic tailwinds of the market and our demonstrated ability to drive performance through the Sonida platform.

This is not a theoretical framework. Our 2024 acquisition cohort, 19 assets acquired at an attractive basis and underwritten to a 10%-plus stabilized yield on cost over an 18 to 24-month horizon, is tracking ahead of plan. As of the first quarter, that cohort is running at an 11.5% yield on cost on an annualized basis, with meaningful gains across occupancy, NOI margin and absolute NOI. That track record gives us confidence in our underwriting discipline and the further refined operating model behind it.

With an operational foundation firmly in place, a scaled and integrated platform and a sector backdrop that we believe is increasingly favorable, we are focused on deliberately compounding value over time and delivering durable, long-term returns for our shareholders. Central to that execution is a people-centered culture and a leadership team with deep experience scaling senior living platforms, a combination that reinforces our confidence in the strategy and our ability to deliver on it.

Thank you to everyone for joining our call today. This concludes our prepared remarks. Operator, please open the line for any questions.

[Operator Instructions] Our first question comes from the line of Ronald Kamden from Morgan Stanley.

This is Derrick Metzler on for Ron. I guess you guys have been growing at an impressive rate, expanding the portfolio. And I know the dust has barely settled for the acquisition, but I guess looking forward, have you guys -- how should we think about the rate that you'll continue to deploy additional capital, continue to grow the portfolio? And are there other kind of large portfolios similar to this that might be in your pipeline in the next couple of years? Or should we be looking at more like one-off assets and community acquisitions?

So I'd say a couple of things. One is we remain very active in the acquisition market, that not only the work we're doing to integrate the assets that we've just completed the purchase of in March, but also identifying opportunities to continue growing, building density in similar -- in some new markets as well. I'd say that we're targeting across the board opportunities both on the enterprise side as well as the individual asset basis. We've set up the company to be able to continue to purchase as we are integrating the CHP portfolio. And so we are engaging on both fronts.

And I think in terms of just size of our pipeline, feel really good that it's at a robust level and believe that we can continue to acquire, if you kind of remove the CHP acquisition from the last couple of years, continue to acquire at a consistent pace as we did in '24 and 2025.

Great. That's really helpful. As is the capital allocation plan that you guys published, I guess you've got really good returns on your '24 acquisitions. And is that a similar range that you're targeting going forward? Or have you put out a different set of kind of yield or IRR hurdles that you're targeting as part of this plan?

I'd say that we're in a position to continue to target opportunities of similar quality to -- as what we bought in 2024. It's fair to say that the returns may have tightened just a bit because the markets, I think, heated up since 2024. We feel confident that our operating capabilities, when applied to kind of portfolio-level or smaller acquisition types of opportunities, can continue to drive yields that are really strong and in the high-single, low-double digits.

So we also believe there's good opportunity in those 2024 assets to continue growing. So that 11.5% yield that we referenced in our deck, that number will continue to improve as operational performance in that cohort stabilizes as well.

Your next question comes from the line of Wes Golladay from Baird.

Can you talk about the SPIN? Is it something you're using in underwriting right now, or will it be a big part going forward? And do you have any incremental SPIN -- or spend to build off the SPIN platform?

So twofold. One is, we are using it currently in our underwriting process as we think about where assets are located and how they compare to any and all -- any of our existing portfolio across the 153 communities. And so we can look at margin trends. We can look at occupancy and rate profile of our existing communities to help us in underwriting assets in markets where we are today.

I'd say that the big things we think about in terms of the benefit of SPIN is the timeliness of information that our communities are receiving on a real-time basis. And then the granularity of the information that, when we combine what we can now see across our various systems, helps people in decision-making around deploying labor that's in line with the needs of our residents.

It also helps us to identify how residents are trending from a clinical perspective on the kind of, call it, their wellness time line. And then it also helps us with identifying opportunities on the rate front, both in capturing the rate requirements for the services we're providing, but also we can identify when occupancy is getting even higher where we have areas that we can grow rate and improve market rate.

So we use it not only for acquisitions, but kind of the real-time decision-making for our local and regional leadership teams.

And we'll continue to invest in it. Sorry, I wanted to answer your last question. But we do have investments, as opportunities in AI continue to unfold that will allow for, again, more informed decision-making and advanced analytics, we'll keep investing on the AI front.

Okay. And then you did mention unmodeled synergies. Do you expect to see any of that this year? And can you quantify any of it at this point?

I'd say that we will see it this year. We're already seeing opportunities. We referenced that we transitioned the first 6 communities into the Sonida management portfolio here just last week. And so the communities that we've identified for transition in 2026 in various phased approach, each of those, we do think that there's benefits from our operational platform that we'll see.

Now we're always thoughtful around potential kind of immediate-term disruption as you're transitioning into our management platform. But we do see towards the back of the year, we'll begin to realize some of those benefits. And we'll provide additional color as we go throughout the year on exactly what those numbers look like and how they're progressing from the communities we are bringing internal.

I'd say that opportunities on the labor front that we've talked about as well as procurement and insurance and just kind of the overall Sonida program are still things we're optimistic we'll see.

And Wes, beyond that -- thanks for the questions too. But beyond that, there's also the internalization of management. So right now, we're generally paying 5% of revenues to the third-party operators. And to the extent that we internalize those upon transition, that number should ramp down significantly, laid out on Slide 30, so that the cost to serve and operate those communities would be something south of 5%.

All right. Fantastic. Last one for me. On the disposition front, do you think that's going to be more of a 3Q, 4Q thing? Or are you going to start to see some already in the second quarter?

I think 3Q, 4Q is a good way to think about that.

Your next question comes from the line of Ben Hendrix from RBC Capital Markets.

Just wanted to follow up on some of that last line of questioning regarding the third-party operators and bringing those over under internal management. You also noted that you had some strategic investments with some of your operators in certain markets. I'm just wondering if that is changing in any way the longer-term opportunity to bring down that $19 million in management fee, and if you think that there could be maybe additional synergies with some of those relationships going forward?

Ben, yes, I'd say that we're really optimistic about the relationships that we'll have for potentially longer-term strategic opportunities. We also feel that the $19 million management fee number that we'll be able to significantly reduce, as we've learned more and more, that number will be right on kind of our internal expectations of being able to -- we've talked about being able to save significant dollars against that $19 million.

So no change in our approach. And I would still expect that over the long term, we will internalize the significant majority of all those 54 SHOP communities. And then we'll hold on to relationships that are strategic in nature with a small but meaningful number of the other managers, should opportunities arise.

Great. And then just in terms of the pacing of, I guess, dispositions you're planning through the rest of the year and any incremental M&A, and then also your just thoughts on the efficiencies that you've gained thus far, any color, with all those moving parts, any color on kind of pacings in earnings and cash flow? With cash flow, I know we had refinancings, we had working capital movements just in the closing of the acquisition. But any thoughts on pacing of earnings and cash flow through the balance of the year would be very helpful.

Sure, Ben. I'd say that in our remarks, we are optimistic of seeing at or above continued improvement in terms of year-over-year NOI growth. Feel like there's additional earnings potential in the communities that we have internalized. We were really pleased with the rate growth that we saw in terms of the in-place resident rate increases as well as good trends on the occupancy front. So I think it's incumbent upon us to minimize disruption in the portfolio of new assets, and then to continue to aggressively move forward on the dispositions that have already been identified. We've talked about kind of 10% plus or minus on the total community count that we're targeting, and those are in active processes.

And then on the acquisition side, again, we're out there and we are aggressively looking to acquire in what is a competitive landscape. I'd say that on the acquisition front, one aspect of our business that is -- we feel like can be differentiated is the opportunity to invest in owner-operators because we are not a REIT and we're a C-Corp. We are having discussions with a number of different owner-operators where there's opportunity to consolidate those into the Sonida platform, both within our existing manager base but also outside of that.

So we want to be continuing to aggressively grow and feel good about the trajectory of improvement in our earnings.

Great. Just last quick one for me. I just wanted to confirm. It sounds like you, with some of the refinancing or the additional bank group members that you've brought on, it sounds like the bank loan piece and the revolver piece of your financing is kind of where you want the remaining $170 million agency and mortgage exclusively? Or is there opportunities to continue to expand the bank piece?

Ben, this is Kevin. Yes, we've gotten a lot of good feedback from lots of groups that want to participate. So we feel like we'll be in a position to take out the bridge at the end of the second quarter or early Q3 at the latest just based on the demand and the pricing that's coming back and the overall participation in our cap stack.

Your final question comes from the line of Rich Anderson from Cantor Fitzgerald. A reminder to unmute yourself locally, if you are.

We have reached the end of the question-and-answer session. And I will now turn the call back to Brandon Ribar, President and Chief Executive Officer, for closing remarks.

Thank you all for participating this morning. Have a great week.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sonida Senior Living Q4 and Full Year 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Jason Finkelstein, Investor Relations. Jason, please go ahead.

Thank you, operator. All statements made today, March 11, 2026, which are not historical facts, may be deemed to be forward-looking statements within the meaning of federal securities laws. The company expressly disclaims any obligation to update these statements in the future, except as required by law. Actual results or performance may differ materially from forward-looking statements. Certain factors that can cause actual results to differ are detailed in the earnings release that the company issued earlier today as well as in the reports that the company files with the SEC, including the risk factors contained in the annual report on Form 10-K and quarterly reports on Form 10-Q. Please see today's press release for the full safe harbor statement, which may be found in the 8-K filing from this morning or at the company's Investor Relations page found at investors.sonidaseniorliving.com.

As further described in the company's current report on Form 8-K filed with the SEC this morning, the company completed its previously announced acquisition of CNL Healthcare Properties, Inc. or CHP, through a series of steps ending with a forward merger of CHP within I, a subsidiary of the company with such subsidiaries surviving the CHP merger as a result of which the company now indirectly owns all the assets of CHP. Unless otherwise specifically noted or the context otherwise requires, the information presented on today's call does not reflect the closing of the CHP acquisition.

Please also note that during the call, the company will present non-GAAP financial measures. For reconciliations of these non-GAAP measures to the most comparable GAAP measure, please see today's earnings release. If you'd like to follow along during today's call, you can find Sonida's fourth quarter and full year 2025 earnings presentation in the Investor Relations section of the company's website. In addition, we've included supplemental information within our presentation consistent with prior quarter's releases.

I would now like to turn the call over to Sonida President and CEO, Brandon Ribar.

Good afternoon, and thank you for joining us on our fourth quarter and year-end earnings call. This morning, we announced the completion of our previously announced merger in which Sonida has acquired CNL Healthcare Properties, or CHP, for a total consideration of $1.8 billion. The transaction closed on an accelerated time frame with the overwhelming support of shareholders from both Sonida and CHP. More than 95% of votes received supported the transaction, a reflection of the significant value proposition delivered to shareholders of both companies. I'm thankful for the substantial effort put forth by both parties and our respective advisers.

The transaction significantly enhances the company's competitive positioning, including benefits of scale with additional accretive investment opportunities, increased trading liquidity and balance sheet strength, accelerates our growth profile and is expected to deliver earnings accretion to Sonida's shareholders. It's worth pointing out that based on the creative asymmetrical collar structure that was put in place, we have issued approximately 8 million fewer shares than originally anticipated based on the reference price at the time of the announcement, resulting in material additional value creation for both legacy Sonida and CHP shareholders.

Further, based on yesterday's closing price, which is above the high end of the collar range, CHP shareholders received $7.22 of total consideration, which compares favorably to the $6.90 of value they would have received had the stock remained in the collar range. We are excited to welcome all of the CHP shareholders to Sonida. We assure you that every day, we strive to create significant value and returns to our investors. The company has been on quite the journey over the last 3 years. Including this transaction, we have added 93 communities to our portfolio of owned real estate since 2024, nearly all of which are high-quality assets in growth markets that are newer than most of the competition in the market.

We will continue to strive for excellence in our operational capabilities and customer service across each community we manage. I'll provide additional color on the integration work completed since the transaction was announced last November later in my remarks. Switching to the performance of our business. I'm pleased with the progress and continued momentum in the fourth quarter, which continues into the beginning of 2026. The impact of investments in our labor model and the restructuring of operations were evident in our fourth quarter results and continue to trend well in the early months of 2026.

Growth in both our same-store and acquisition portfolios accelerated in Q4, and we are optimistic that with Q1 results, we will continue the trend of year-over-year and sequential quarterly improvement in top line and bottom line metrics. For the full year 2025, Sonida net operating income increased more than 22% and adjusted EBITDA at share improved 28%, a testament to both the earnings potential of assets purchased in 2024 and our operating team's ability to drive organic asset growth while limiting our incremental G&A. We continue to see improving trends in the first quarter based on occupancy improvement in the same-store portfolio alongside an accelerated recovery in newly purchased communities. Additionally, for the full year 2026, we are targeting growth in our revenue per occupied room at or above our same-store growth achieved in 2025.

Our portfolio top line continued to deliver sequential growth and year-over-year improvement driven by both occupancy and rate, highlighted by accelerated recovery in our acquisition communities. I'd like to quickly highlight the accelerated recovery in our acquisition communities. The 19 communities acquired in 2024 performed exceptionally well with a sequential occupancy improvement of 290 basis points from Q3 to Q4. Comparing Q4 2025 to Q4 2024 for these communities, total occupancy improved 820 basis points, revenue increased more than 22% and NOI margin expanded from 21% to 28%. This further demonstrates the growth potential in 2026 and beyond and a reflection on the caliber of real estate we acquired and our team's operating capabilities.

Given both the scale of the CHP transaction and Sonida's track record of successfully integrating communities into our operating platform with minimal periods of disruption, we are extremely optimistic that this merger will continue to drive improved performance trends and significant upside in the combined platform. Heading into 2026, our operating team will place added emphasis in 2 specific areas the consistent delivery of excellent clinical care and services to support the health and well-being of our residents and the continued development of a labor model that rewards our strongest employees and furthers our retention efforts. We are proud of the work done in recent years to reduce our turnover by more than 30 percentage points.

However, we still have room for improvement. Kevin will provide additional detail on our efforts across the labor side of the business as well as progress across key operating metrics in Q4. I'll quickly touch on the work completed over the previous 4 months on post-transaction integration and our updated view on synergies, both corporate and operational. We've spent considerable time working with the 16 operators across the existing CHP portfolio to understand areas of opportunity and assess potential strategic relationships. Our first priority is minimizing operational disruption for residents and community team members.

Two key components to the effort are creating additional incentives for strong ongoing performance at the operator level and maintaining continuity within the CHP asset management function in the pro forma Sonida platform. Performance at the CHP operator and asset level has continued to trend favorably post announcement with strong results in Q4 and positive trends as well early in 2026. We previously identified value-creating synergy in 3 components: the reduction in the costs associated with managing the 54 SHOP assets and the operational benefits communities will experience as part of the Sonida platform. Kevin will provide further detail in his comments in addition to our plans for reporting changes in Q1, consistent with real estate heavy peers, including the REITs.

The addition of high-quality real estate located in strong growth markets further enhances the near- and long-term earnings power of our portfolio. On the combined portfolio, we will also accelerate deleveraging through strategic asset dispositions, enabling Sonida to recycle capital into higher growth, higher-quality assets. This approach will apply to approximately 10% of the portfolio based on community count and subject to operational trajectory and market dynamics.

We also expect the company's free cash flow generation post transaction to provide significant capital for reinvestment in both internal ROI projects and new acquisitions. The commitment of a new upsized $405 million revolver at close of the transaction will further increase our available capital to capitalize our robust investment pipeline during the remainder of 2026. Finally, I'll touch briefly on the company's capital structure. We are pleased to have reached an agreement with Conversant Capital for the early conversion of its Series A convertible preferred stock into common equity.

As disclosed earlier today in our 8-K, the convertible preferred originated in 2021 with the Conversant recapitalization and as of 12/31 had an outstanding balance of $51,250 million, carrying an 11% coupon, which we have been paying in cash. Under the terms of the new agreement, the Series A will be converted into common equity at $32 per share, thereby eliminating a high cost and onerous remnant of the company's legacy capital structure.

This more than $5 million of additional annual free cash flow savings will be used to reinvest in opportunities in excess of the current 11% cost of capital. Pro forma for the conversion, Conversant will be fully aligned with all shareholders with all exposure via common equity. The transaction simplifies our capital structure, reduces our cost of capital, accelerates our deleveraging and improves the pro forma free cash flow profile of the business.

Note that the impact from this subsequent event is not reflected in the financial information being shared in today's earnings presentation. These operating results and the continued value-creating growth of our platform, including the CHP transaction, depend on the strength and capabilities of our local and regional leadership. We are proud of the compassion and commitment to results delivered every day in our Sonida communities. Our focus will intensify further on retaining, developing and recruiting new talent as we grow. Employee turnover and leadership turnover within our communities continues to trend favorably. Kevin will share additional details on company-wide trends, and I am confident these retention levels are a result of the investments we have made in wages, benefits and the positive and supportive culture at Sonida.

We continue to attract high-level talent in the operating and support functions due to elevated interest in career opportunities with Sonida, and I'm confident we will continue to attract top-notch talent with a commitment to providing high-quality care and services to our residents. Our near-term strategy and focus remains consistent as we accelerate our growth trajectory. Our mission is to continue building a best-in-class real estate portfolio with geographic purpose that enables our owner-operator model to deliver differentiated FFO and NOI growth.

Operational performance based on retention and development of strong local and regional leadership, combined with advanced technology platforms to improve resident outcomes and operating efficiency remain the linchpin to our success. Continued acquisitions in our primary geographies, along with strategic expansion into additional markets will create further benefit operationally, including the additional product offerings and pricing options, efficiencies in sales and marketing costs and labor efficiencies.

I'll now turn the call over to Kevin for a detailed discussion of our Q4 financial performance.

Thanks, Brandon. I will pick up on Slide 16 with some commentary on Q4 and full year 2025. For our total portfolio at share for Q4, the company realized a 5.9% increase in RevPOR when comparing to the same quarter in the prior year. Annually, the year-over-year RevPOR growth was 8.8%, which reflects an elevated rate profile from our acquisitions and outsized rate increases on our same-store portfolio during the year. On an annual basis, adjusted EBITDA grew 28% through a combination of our same-store portfolio steady growth and the high paced growth of our 2024 acquisition cohort.

The same-store portfolio picked up an additional 20 basis points of sequential occupancy gains in Q4 on the heels of growing our Q3 occupancy by 90 basis points to close out a strong second half of overall occupancy gain. With the 19 communities from the 2024 acquisition cohort moving into the same-store portfolio in 2026, we anticipate accelerated occupancy gains as these communities achieve full stabilization. Moving to our acquisition portfolio in more depth on Slide 18. The company realized an annual 680 basis point occupancy jump from 2024. Just as significant, most of this top line performance flowed through with the acquisition portfolio's community NOI margin expanding 550 basis points to 24.7% from its 19.2% average. This 1-year look at our 2024 and 2025 acquisitions validates the company's strategy of acquiring under-operated quality assets in strong submarkets at significant discounts to replacement cost.

Further, due to the timing of the 4 community acquisitions that came online in 2025, -- this year's NOI margin success was largely driven by the 2024 acquisition. Because of this, we believe there's a similar significant runway for outsized KPIs on the 2025 acquisition cohort in the upcoming year. Moving to total portfolio highlights on Slide 19. The company grew its year-over-year total portfolio NOI at share by 22% or $15 million on an annualized basis. Note that the overall year-over-year occupancy and margin percentage for the total portfolio at share is unfavorably impacted due to the acquisitions coming in at lower starting average occupancy and margin levels.

Moving ahead to Slide 20, where I will briefly touch on our new reporting portfolios for 2026 and beyond. Going forward, our communities will be presented in 1 of 3 portfolios: same-store, non-same-store and triple net lease. This simplified grouping aims to create more meaningful comps to our peer set and more closely aligns with how management thinks about the business and the company's core portfolio. Earlier, Brandon referenced our strategy to upgrade our portfolio to a higher quality and younger community composition. To support this strategy, the company anticipates pruning its portfolio by approximately 10% based on community count, both legacy Sonida as well as CHP communities and recycling capital out of communities with limited long-term growth prospects.

Note that these communities represent significantly less than the 10% of NOI as they are less profitable than the company's core assets. These noncore assets will be reported in our non-same-store portfolio, along with our 4 stabilizing communities that came online in 2025 and other communities where targeted reinvestments and/or care conversions are in flight. The pro forma impact of bifurcating these noncore assets out of our same-store portfolio yielded a 16.2% year-over-year NOI growth rate when comparing Q4 2025 to Q4 2024.

The related pro forma NOI margin percentage on this future state same-store portfolio of 27.8%, coupled with the recent execution of another successful annual in-place rate renewal campaign positions the company for near to midterm achievement of breaking the 30% NOI margin threshold. Hitting once more on occupancy on Slide 21, our same-store occupancy gained 20 basis points sequentially in the last quarter of the year, which is typically the softest quarter of the year in terms of resident demand and tours. Despite this, we believe the widened sales funnel from our investments into digital marketing during the first half of 2025 allowed us to convert an outsized percentage of tours to move-ins, particularly in the second half of the year.

We also believe that with similar strong demographics and our increased submarket density, the CHP portfolio will be favorably impacted by the overlay of Sonida's digital marketing and SEO capabilities. On to the same-store rate discussion on Slide 22. Looking ahead to 2026, the average annual rent renewal rate on in-place leases for the recent March 1 renewal was 7.9%, which was applicable to 96% of the total same-store residents. For context, the same percentage 1 year ago on a similar resident lease count was 6.8%. Additionally, the level of care revenues for 2025 increased 11.4% compared to prior year.

Both these KPIs confirm that our thoughtful and detailed approach to rate setting, which is anchored by our investments in technology and close collaboration with community leaders on market rate analysis is sustainable and will position us to continue to expand margins. We believe our pricing power will also benefit from the pruning of a handful of under-earning communities and increasing overall demand as occupancy levels continue to rise. On the CHP portfolio, we are excited to see how the investments made in our clinical technologies will expand the capture of more timely and accurate care reassessments and related ancillary revenues.

Diving into margin drivers and NOI more broadly, we will move ahead to Slide 23 to discuss same-store operating expense trends. As a percentage of revenue, total labor, excluding benefits, decreased 40 basis points from the previous quarter and also decreased slightly from the same quarter in 2024. In our Q3 earnings call, we discussed several communities labor not being flexed timely amidst a rapid spike in occupancy. During that quarter, using our proprietary labor tools, we identified the drivers of the labor misses and implemented more stringent labor controls and close monitoring oversight from our corporate support center.

These measures took root and supported reduced labor levels towards the second half of Q3 and fully into Q4. For the fourth quarter, hours relative to occupancy decreased 2%. Additionally, absolute direct labor and overtime decreased approximately $200,000 from Q3 to Q4. On the nonlabor expense front, absolute operating costs decreased slightly from Q3 '25 to Q4 '25, resulting in a favorable export trending over the same period. Based on the structural changes to our labor control program in 2025 and positive early trending in 2026, we are encouraged by a solid foundation of unit economics around overall labor dollars.

On the G&A and synergies front, we will revisit Slide 11 for some of the merits of the CHP acquisition. We previously identified value creation in 3 distinct and separate areas. First, the reduction of total company G&A; second, the reduction in costs associated with internalizing management of a portion of the 54 SHOP assets; and third, the operational benefits CHP communities will experience as part of the Sonida platform, not necessarily limited to communities for which Sonida will start to operate directly. Our initial guidance contemplated only the reduction in G&A with a range of $16 million to $20 million for year 1 run rate synergies. Based on our diligence, this synergy estimate continues to be appropriate, largely in part to the immediate termination of CNL's advisory fee in connection with the close of the transaction.

Beyond this initial guidance, we have identified further opportunities for future synergies tied to the latter 2 areas. Since November's acquisition announcement, the initial discussions we've had with CHPs, third-party operators and our combined company deployment structure analysis have provided us with clear visibility into both top and bottom line upside that should gradually be realized through planned integration activities.

Starting with our first full combined reporting period in Q2, we will introduce additional reporting metrics such as normalized FFO, consistent with real estate peers. Closing out my prepared comments, we will move to the balance sheet on Slide 24. The CHP acquisition has allowed the company to take a significant stride towards its short-term leverage target of 6x to 6.5x. The capitalization includes 2 term loans totaling $525 million at S+195 with the ability to push down to S+130 as the company further reduces its leverage levels.

Beyond the upsizing of the company's revolver to $405 million that Brandon referenced earlier, the accordion feature provides for an additional $320 million of debt capacity to support the company's growth initiatives. In total, the bank debt provides for total capacity of $1.25 billion and was led by blue-chip banks, including 7 first-time lenders to Sonida as well as the re-upping from our 2 legacy corporate lenders, BMO and RBC. We are extremely pleased with the execution of the syndication and the support that the bank group can provide to our ongoing growth.

Back to you, Brandon.

Thanks, Kevin. 2026 is off to a strong start on all fronts. The combination of organic growth across our 96 communities, coupled with the addition of high-quality assets within the CHP portfolio provides opportunity for accelerated growth. On the people front, our leadership team across the community, regional and central support level has never been stronger or more motivated to create great outcomes for our residents, team members and key stakeholders. Plans are in place for the successful integration of new communities on a responsible and productive time line and further strategic relationships with select new managers offer additional growth opportunities.

We welcome our new shareholders as of today and the additional institutional investors seeking a differentiated owner-operator platform. We are truly excited about the future ahead and thankful for the consistent support from our existing investors. The Sonida team remains fully dedicated to the successful execution of our organic and inorganic growth objectives. This concludes our prepared remarks.

Operator, please open the line for any questions.

[Operator Instructions] Your first question comes from the line of Ronald Kamdem with Morgan Stanley.

Great. Congrats on closing the merger. I'm sure that was a lot of work to get done. I guess my first question, and I can appreciate, I think you mentioned normalized FFO guidance is coming in 2Q, but I think the presentation had $1.25 sort of on a run rate basis and so forth. I was just wondering if you could talk through some high level what the adjusted EBITDA and interest cost and any other assumptions that was going into that number post merger?

Yes, Ron, thank you for the congrats. The team did a ton of work over the last handful of months. And I think in terms of what's going to go into the calculation, we'll continue to kind of get that information out as we release in Q1 and all the various components that are going to go into it. But our goal has been to make it comparable with the other large-scale reporters on the REIT side. So you should expect that there'll be consistent kind of puts and takes around those numbers as we convert them over to providing that additional information.

Great. And then my second question was just on the 10% of the portfolio that is to be pruned. Sort of any idea of like the speed of that? Is that over the next 6 to 12? Or how you're thinking about that? And is that capital going into more acquisitions on the pipeline? Is it paying down debt? Is there sort of more development CapEx to spend? Just how are you thinking about sort of those sources and uses?

Yes. I'd say that we do want to make progress on that front kind of right out of the gate. So I would expect kind of the 6- to 12-month time line that we'll be in the market on a handful of those assets. As Kevin mentioned in his script, not really high NOI contributors in terms of the percent of the total portfolio. Dollars from those transactions would first go to delever the company and then would be available for recycling into assets that we feel like reflect what the go-forward portfolio represents, which are high-quality, newer vintage assets in strong growth markets. that have a really good growth trajectory. So think about it in terms of like reducing the low-growth assets and recycling that into higher growth, newer long-term hold assets.

Great. And then my last one, if I may, is just on the portfolio changes. I think you said 16-plus percent -- 16% to 17% same-store NOI pro forma sort of the new same-store pool. Is that sort of a good -- is that a good run rate number? Is there any sort of puts and takes in terms of comps or anything like that? Because I think the reported number was sort of 6.5% for 4Q. So that's sort of a big delta. Just wondering if any sort of other puts and takes around that.

Ron, this is Kevin. I appreciate all the comments. We think about that number as just a jumping off point from '25 in terms of how that new bucket, that redefined bucket of assets performed, not necessarily relative to the peer set. So as we release the blocks for how to kind of model this out and the normalized FFO metrics, we'll get more insight as to what we think that NOI growth percentage would be. But right now, what we're seeing, particularly on the rate environment and the stabilization of rate hours and labor, we think that's a pretty good number in terms of what we can expect from that new same-store portfolio.

Your next question comes from the line of Wes Golladay with Baird.

On getting the merger completed. A follow-up on Ron's question. I guess when you look at your new same-store pool, it looks like there's going to be a lot of occupancy gain and also some pricing power on the legacy portfolio. But for that 7.9% rate increase, is that for the legacy pool or the current pool?

That's for the legacy pool that just got pushed through March -- last week, March 1.

Okay. And then you talked about working on your labor model boost and retention. Do you think that will be all completed within this year?

I don't think we'll ever be fully complete on optimizing our labor model. This is the reality we're always going to be working on it. I think we feel really good about the market right now in terms of being able to retain our people at levels of wage increases that are in line with our expectations and inside of what we've experienced last year. So I think that the areas in the middle of last year that we saw challenges in or invested in additional labor costs, feel confident that trends we saw in Q4 are continuing in the early part of this year. And we've got a significant amount of resources kind of dedicated to ensuring stability on that front. And then also working as we bring new communities into the fold on areas of opportunity within their labor model. So that will be a heavy focus for us this year.

Okay. And then on the disposition front, you did mention selling lower income-producing assets, but maybe you can talk about what is your long-term plan with the net lease assets? Will those be any part of the dispositions this year?

Yes. I would say that right out of the gate, clearly, there's heavily a very attractive profile from a cash flow perspective that we've shared in terms of our expectations around kind of like stabilized free cash flow. So there's a really strong component to that. It's not our kind of core business, but I think that we will kind of ongoing evaluation of how the market is looking at those types of assets and opportunities. So no immediate plans. I think that we'll be just kind of thoughtfully considering how that continues to look in the market and whether or not there is an opportunity that makes sense to sell and recycle the capital. But realistically, immediately, we're going to see the benefit of 2 really good operators in there that are delivering really stable cash flow through those leases.

That concludes our question-and-answer session. I will now turn the call back over to Brandon Ribar for closing remarks.

Thank you all for participating in the call today. I appreciate all the support. excited around the announcement this morning of the completion of the merger and look forward to continued discussions next time we chat around Q1 results. Take care.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. At this time, I would like to welcome everyone to the Sonida Senior Living Third Quarter Earnings Call. [Operator Instructions]

I will now turn the call over to Jason Finkelstein, Investor Relations.

Thank you, operator. All statements made today, November 10, 2025, which are not historical facts may be deemed to be forward-looking statements within the meaning of federal securities laws. The company expressly disclaims any obligation to update these statements in the future. Actual results or performance may differ materially from forward-looking statements. Certain factors that could cause actual results to differ are detailed in the earnings release that the company issued earlier today as well as in the reports that the company files with the SEC, including the risk factors contained in the annual report on Form 10-K and quarterly report on Form 10-Q. Please see today's press release for the full safe harbor statement, which may be found in the 8-K filing from this morning or at the company's Investor Relations page found at investors.sonidaseniorliving.com.

In addition, as it relates to any discussions today regarding the proposed transaction announced on November 5, 2025, and we have made and will continue to make important filings with the SEC in connection with the proposed transaction, including a registration statement on Form S-4 and the related joint proxy statement prospectus we filed with the SEC in connection with the proposed transaction. Today's call is not intended to be and is not a substitute for those filings. We urge you to read those materials carefully when they become available before making any voting or investment decisions. Please also note that during this call, the company will present non-GAAP financial measures. For reconciliations of these non-GAAP measures to the most comparable GAAP measure, please see today's earnings release.

If you'd like to follow along during today's call, you can find Sonida's Third Quarter 2025 earnings presentation in the Investor Relations section of the company's website. In addition, we have included supplemental earnings information within our presentation consistent with prior quarter releases.

I would now like to turn the call over to Sonida, President and CEO, Brandon Ribar.

Thanks, Jason. Good morning, and thank you for joining us on our third quarter earnings call. Last week, we announced a significant step in the Sonida journey with the signing of a merger agreement to acquire CNL Healthcare Properties or CHP, for a total consideration of $1.8 billion. The transaction, which is scheduled to close in late Q1 or early Q2 of 2026, accelerates the company's growth profile and should deliver significant value to Sonida's current and future shareholders. The structure of the transaction achieves 4 simple but highly impactful objectives. First, it is accretive to the quality and age of our real estate with an average age below public peers and our existing portfolio. .

Second, the transaction is significantly accretive to AFFO per share through structural and operational synergies, while at the same time, it materially reduces leverage with a clear path to achieving our target of 6x leverage. And finally, the additional liquidity generated through the issuance of shares to CHP's current retail shareholder base will immediately increase the free float of the stock to approximately $1 billion following closing of the transaction.

The addition of high-quality real estate located in strong growth markets further enhances the near- and long-term earnings power of the portfolio and creates additional flexibility for portfolio optimization as we look to recycle out of select lower-growth assets into higher return acquisitions. For reference, we have acquired 23 assets over the last 18 months. Once we close and integrate the CHP portfolio, we hope to return to this pace of acquisitive growth. The company's free cash flow generation post transaction provides significant capital for accretive reinvestment in both internal ROI projects and bolt-on acquisitions. Additionally, the commitment of a new upsized $300 million revolver at close of the transaction will further increase our available capital to capitalize on our robust investment pipeline in the second half of 2020.

Switching now to our third quarter results. Our portfolio top line continued to deliver sequential growth and year-over-year improvement driven by both occupancy and rate, highlighted by an accelerated recovery in our acquisition communities. Total portfolio NOI grew 21% year-over-year, including the NOI drag from communities opened or acquired in 2025. Adjusted EBITDA improved more than 30% on the strength of our acquired communities same-store NOI growth and the effective management of our G&A. Same-store occupancy increased 90 basis points in sequential quarters to 87.7% and finished October with an average of 88% a portfolio high point.

Our 19 communities acquired in 2024 performed exceptionally well with a sequential improvement of 370 basis points from Q2 to Q3. Our operating team will place added emphasis in 2 specific areas as we close the year. The consistent delivery of excellent clinical care and services to support the health and well-being of our residents, and the laser focus on NOI flow-through with a strong occupancy base. Additionally, managing outlier community performance in the same-store portfolio remains a key focus and has limited the headline same-store NOI growth numbers in Q2 and Q3, as Kevin will further detail.

Our goal is to continually assess the long-term earnings potential of each community and implement required optional changes, further invest to drive higher performance or monetize those nonstrategic or low-growth assets. Kevin will elaborate further on the details of the results, but I want to touch on a few important elements of the operating plan moving forward.

For the month of October, we had a record high occupancy for our same-store portfolio of 88%. Additionally, our overall rate profile of the business remains strong and labor trends have moved in line with expectations after the completion of our regional restructuring and scheduling system overhaul, which heightened labor volatility in July and early August. Labor metrics in the early stages of the fourth quarter remained steady in terms of hours of labor per resident day and total wages.

We are moving in a positive direction on the labor front and the continued emphasis on the use of technology to staff our communities based on the daily service and clinical needs of our residents will be key to achieving margin expansion as occupancy levels approach 90%. The phased rollout of our new clinical system supporting a robust electronic health record system in our assisted living and memory care apartments was completed at the end of the third quarter in conjunction with the full implementation of additional scheduling technology and staffing data generated through our nurse call system, our operations team will now have a consistent view of staffing trends and variability in each of our communities.

A strong technology platform, coupled with more robust labor management processes and oversight provide our local leadership to tools to manage their workforce efficiently while delivering excellent care and services to our residents. Fundamental to our acquisition strategy is the ability to enhance resident care while optimizing the labor cost model as communities deliver occupancy growth. Our acquisitions continue to shine with another strong quarter of growth on both the top line and net operating income.

Specific to the acquisitions completed in 2024, we view November 2024 as the baseline month given all 19 communities had been transitioned into the portfolio. Over the last 12 months, average occupancy has increased from 76.3% to 83.7% and resident rates have increased 4.2% over the same period. These acquisition communities reached a high point in both occupancy and NOI in Q3 and trends in October remained strong.

Given the scale of the CHP transaction, Sonida's track record of successfully integrating communities into our operating platform, minimizing the period of initial disruption and improving performance trends gives us confidence in our team's ability to execute this more complex and scaled transaction. On the whole, our acquisitions continue to achieve or exceed our underwriting and the pace of recovery has accelerated in less than the 18 to 24-month time line previously indicated in our comments.

The combined NOI of the acquisitions completed in 2024, represents a greater than 10% yield on total acquisition costs with additional upside remaining in all key operating metrics. These operating results and the continued growth of our platform, including the CHP transaction, depending on the strength and capabilities of our local and regional leadership. We are proud of the compassion and commitment to results delivered every day in our Sonida communities. We are also intensely focused on retaining, developing and recruiting new talent as we grow.

Employee turnover and leadership turnover within our communities continues to trend favorably. I am confident these retention levels are a result of the investments we have made in wages, benefits and the positive and supportive culture at Sonida. Recruiting additional talent to successfully scale the business and execute our growth plan will be imperative and based on the elevated external interest in career opportunities within Canida, I'm confident we will continue to attract top-notch talent with a commitment to providing high-quality care and services to our residents.

I'll now turn the call over to Kevin for a detailed discussion of our Q3 financial performance.

Thanks, Brandon. I'll begin my comments with an overview on the work our teams have completed in recent months to support the NOI ramp of our acquisitions as well as identify outlier performance opportunities in our same-store portfolio. The availability of more robust technology related to labor has allowed for increased visibility in communities where costs have not flexed with the pace of occupancy growth or where premium labor has weighed down margin expansion.

Our finance, clinical HR teams, including a newly appointed CHRO are working collectively with operational leadership to ensure community staffing aligns with the needs of our residents. Our team has also redirected additional resources to assist our operators to ramp margin while maintaining the high level of care and service consistent with the Sonida culture. In the past few months, we have seen significant progress in overall labor management. I'll now walk through a few key pages in our Q3 investor deck posted this morning.

Starting on Slide 17, with the same-store comparisons of sequential and year-over-year quarters, we are happy to report occupancy of 87.7% for Q3, which is our highest quarter post COVID. This represents an increase of nearly a full point over the previous quarter's occupancy of 86.8%. Revisiting some of the organizational changes this summer, the shift of G&A dollars towards our marketing team has created a more consistent and wider sales funnel that has supported this growth. This shift, combined with a dedicated focus on generating internal sales leads has moved reliance on outside placements from 43% to 26% year-over-year. This momentum in occupancy carried into Q4 with a spot occupancy of 89.0% as of October 31.

And finally, the portfolio continued its strong rate trajectory with a year-over-year RevPOR increase of 4.7%, more on the same-store NOI further in the presentation.

Moving ahead to our acquisition portfolio performance on Slide 18. Note that these figures include the results from our 20 community acquisitions from 2024, including the at share results of our 2 joint venture investments and the December 31, 2024 acquisition of our North Bend Crossing Vista community that opened in July as well as our 3 recent 2025 community acquisitions.

In consecutive quarters, occupancy increased 180 basis points, leading to an increase in annualized revenues of $10 million for the same period. Our acquisition portfolio NOI increased by $900,000 or 22% on a sequential quarter basis. When removing the combined NOI loss from the recently opened North Bank Crossing Vista acquisition and the September Mansfield acquisition, this increase jumps to $1.1 million, or 28%. Expanding more on the acquisition portfolio performance, we've now owned our 2024 acquisitions for roughly a year.

As a reminder, more than half of these communities were distressed at the time of purchase. As Brandon mentioned earlier, these communities have grown occupancy by 740 basis points since November 2024. This occupancy expansion, coupled with a strong operating expense flex over that same 1-year period has resulted in a 10% yield on cost, as seen on Slide 28. This 12-month achievement has exceeded our initial expectation of 18 to 24 months and is driving our belief that there is significant remaining upside in this portfolio through full occupancy stabilization and ongoing rate growth.

Moving to total portfolio highlights on Slide 19. The company grew its year-over-year total portfolio NOI at share by 20% and or $14 million on an annualized basis. Note that the overall year-over-year occupancy and margin percentage for the total portfolio at share is unfavorably impacted due to the acquisitions coming in at lower starting average occupancy and margin levels.

Over to Slide 20, where we will review the same-store occupancy in more depth. On last quarter's call, we touched on historically high levels of [indiscernible] that impacted our occupancy despite our progress on absolute movements. This quarter, I'm pleased to report that we have continued our same-store movement acceleration with move-outs due to retreating back to normal operating levels. This net trend provided for the 90 basis point increase in occupancy from the second quarter with continued momentum heading into the last quarter of the year, including a solid net gain of 30 basis points of occupancy for October.

Moving ahead to the rate discussion on Slide 21. As a reminder, on a same-store basis, the average annual rent renewal rate on March 1 was 6.9%, which was applicable to 71% of the total same-store residents. Comparing the rate profile to Q3 2024, the company continues to drive private pay increases with a near 5% increase across quarters. Over the past year, the company has invested in its on-site clinical resources and clinical technology platforms, both contributing to an increase in level of care fees by 14% year-over-year.

Additionally, the migration away from premium and contract labor to more permanent upskilled clinical functions further support the overall resident experience. Diving into margin drivers and NOI more broadly, we will move ahead to Slide 22 to discuss same-store operating expense trends. As a percentage of revenue, total labor, excluding benefits increased 70 basis points from the previous quarter. This was driven by a rapid spike in occupancy in several communities during the front part of the quarter, where labor was not flexed timely and appropriately. Using our proprietary labor tools, we identified the drivers of the labor misses and implemented more stringent labor controls and close monitoring oversight from our corporate support center.

Because of this, the trending of labor in the back half of the quarter improved, with hours relative to occupancy decreasing 2.5% or approximately $500,000 on an annualized basis. We expect this trend to continue through the fourth quarter based on preliminary results for October. On the nonlabor expense front, absolute costs increased $600,000 from Q2 2025 to Q3 2025, half of which is attributed to one extra expense day in the quarter. The remaining half was attributed to increases in utilities, primarily electricity due to a prolonged summer in Texas and our southern states.

Speaking to the company's overall same-store margin profile in more depth, our communities grew year-to-date NOI by 10% or more as compared to 2024. The bottom cohort of underperforming communities is almost directly correlated to the Texas communities that were part of the organizational restructure this summer, which were impacted primarily from weaker sales resources that we're addressing through our enhanced marketing platform.

The remaining communities are ones that the company expects to evaluate for potential pruning out of its core portfolio. Closing out the P&L for this quarter's earnings, our G&A continues to show stabilization following 2024 onetime build-out of our business development and operational excellence functions to support overall growth initiatives. G&A levels for the year remained slightly below normalized run rate Q4 levels due to a slight reduction in total FTEs over those periods as well as focused spending controls tied into our revised operating cadence implemented in the second half of 2024. All 3 of 2025 community acquisitions were onboarded without adding FTEs at the above community level.

Moving to the balance sheet on Slide 23. As mentioned in last quarter's earnings, we successfully closed on a restated finance agreement with Ally Bank that provides for an additional 5 years of term, which includes 2 1-year extensions and a variable interest rate of SOFR plus 265 with a step down to SOFR plus 245 subject to achievement of certain performance thresholds. The initial proceeds of $122 million were used to pay off the current Allied term loan of $113 million with the remaining borrowings collateralizing the additional Alpharetta community acquired in June. The revised Allied term loan provides for an additional $15 million in delayed draws as certain financial covenants are attained.

With the December 2024 amendment of our Fannie loans and the restated Allied term loan, approximately 80% of our debt has an effective maturity date of early 2029 or later with our credit facility representing 11% and expiring in mid-2027. Our total debt at shares comprised of 57% fixed rate debt. With the inclusion of the credit facility, the weighted average interest rate is 5.5% for the portfolio, with the variable rate debt nearly fully hedged. Currently, the company has $64 million of capacity remaining under its facility with approximately $41 million immediately available at the end of the third quarter.

The company continues to expand its availability as the underlying borrowing base assets, securing the facility continue to expand their NOI profile each quarter.

Finally, as of today, the company is in compliance with all financial covenants required under its mortgages and credit facility. Back to you, Brandon.

Thanks, Kevin. As we close out the year, our team remains dedicated to achieving results on 2 primary fronts. The operations team continues to focus entirely on the in-place portfolio with specific emphasis on improving performance at communities with weak or negative year-over-year NOI growth. Our M&A and operational excellence teams will work hand in hand with senior leadership to continue building our integration plans while engaging in strategic discussions with CHP's current operators to identify a clear path forward post closing. We are extremely excited about the opportunity ahead and thankful for the consistent support from our investors. The announcement last week generated incredible excitement and interest, both inside and outside of Sonida, and our team remains fully dedicated to the successful execution of organic and inorganic growth objectives. This concludes our prepared remarks. Operator, please open the line for any questions.

[Operator Instructions] And your first question comes from the line of Ronald Kamdem with Morgan Stanley.

This is Derrick Metzler on for Ron. Congrats on the merger announcement. Before Great. Just maybe before we get into the merger, just touch on operations in the quarter quickly. I guess one of our questions was about the same-store occupancy trend, which is just growing below the industry average, I guess, of about 200 basis points year-over-year. So maybe just touch a little more on the move-in, move-out trends you saw during the quarter and what might be impacting that and kind of what you're seeing going forward?

Certainly. Yes, I'd say that specifically in the back half of the quarter and then here in the early part of Q4, we've been pleased with the accelerated same-store occupancy improvement up to that kind of 89% spot level and 88% in October. So -- while earlier in the summer, our numbers might have been a little bit kind of below peers, we have seen good movement. And I'd say that it's been driven by a handful of communities that were kind of trailing or lagging in terms of their performance in the portfolio and move-in trends have picked up significantly. I think the other piece that's really important that Kevin referenced was the move-ins are coming from nonpaid referral sources. And so as we've seen the combination of a reduction in move-outs through death and then an increase in move-ins that we're generating through our own internal mechanisms, that ultimately is helpful from just an overall margin and growth perspective. as we look to continue that in Q4. So I'd say that we're pleased to be knocking on the doorstep of 90%, but we know that continued growth and then also margin flow-through are absolute areas of emphasis for us here as we close the year.

Great. That's helpful. And then I guess just as you're preparing for the merger, clearly, there was an expense related to that in the transaction costs this quarter of about $6.2 million. I guess as you -- as we go through the next couple of quarters before the merger closes, is that kind of a recurring cost that we can expect? Or was there anything else in that number we should think about? And just anything else kind of going into the merger preparation?

Yes. So the total transaction costs were $75 million that were in the merger deck that we released. So obviously, that's a fluid number, but that's what we've pegged right now and $6 billion of that goes towards that $75 million. So we should continue to see each month and then with the end of the quarter, at the end of the year and into next year, those transactions costs being incurred as part of the cost to do the deal.

Your next question comes from the line of Ben Hendricks with RBC.

Congratulations again on the acquisition. I appreciate the color also on kind of the same-store labor costs that were related to some of the occupancy ramp early in the quarter. I just wanted to get your thoughts on kind of how you see RevPOR versus export trending over kind of the longer term on a run rate basis. And if we expect that spread to be a little bit compressed in the near term, due to some of the investments you're talking about specifically into labor management. Just any indication about how you're seeing long-term RevPOR versus export.

Thanks so much, Ben. Yes, I'd say that on the RevPOR front, we recognize that it's the higher occupancy levels on a portfolio-wide and then also with the the specific acquisition we brought on board and the same store being up close to 90%, that continuing to push rate consistent with what we've achieved and even really consistent with what we've achieved in prior years, but with the opportunity to expand in certain communities as well in 2026 and beyond.

So we recognize that rate is super key, especially on the same-store side to expanding the margins up to where we believe we can get to in that 30-plus percent range. And then on the labor front, we've kind of seen the trends that hit us in July and August start to really kind of come back in line, but we know there is more upside and work to do on that front, and that's where our entire leadership team is continuing to spend a fair amount of time. So we feel like the relationship being able to expand margin based on the relationship in 2026, is how margin expansion will really be able to be achieved.

Great. [indiscernible] acquired portfolio, including the new acquisition, how is agency labor or contract labor kind of trending versus -- or where does that stand kind of versus your targets? And how much opportunity can we effect on the labor front, getting that back down to normal levels.

Yes. So we have hardly any contract labor to speak of in the acquisition portfolio. or the whole company as a total where we're seeing the initial challenges from the first year that we think we've largely pushed past on the acquisition portfolio is the premium labor with respect to over time and getting permanent employees and associates at our communities. But now we're seeing that. So I think that's creating a little bit of the NOI boost that you saw quarter-to-quarter going back to Q2. .

There are no further questions at this time. I will now turn the call back over to Brandon Ribar for closing remarks.

Thank you all for joining our Q3 conference call. We'll be speaking with you soon. Take care. .

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.