Senior Housing Senior Living Corporation

Senior Living Community
If you are a senior you may be resigned to the fact that the busiest years of your life are over, but you can still do many things to ensure active ….. Capital Senior Living Corporation is a leading operator of residential communities for seniors, primarily aged 75 and over. It runs more than 40 communities (39 company owned and 15 managed for third parties) in 20 states with a capacity of about 7,000 residents, most of whom live independently. Meals, housekeeping, and transportation are available. The company also offers assisted living services, making it possible for residents to “age in place” as their needs change without having to move to different facilities.

Origins

Dallas-based Capital Senior Living Corporation has been involved (through its precursors) in the senior housing industry since 1990. Independent living and assisted living developments bridged a gap between traditional housing and nursing homes. Beyond mere residences, these communities provided meals and transportation. Capital originally focused on the younger, more active seniors of the independent living market. Annual revenues were about $20 million in the mid-1990s.
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Jeffrey L. Beck and James A. Stroud were the group’s cofounders and cochairmen. Beck also served as CEO while Stroud was chief operating officer. Each would head an industry trade group.

Another investor in one of the companies that would make up Capital Senior Living Corporation, Quality Home Care, Inc., was Lawrence A. Cohen, who would be vice-chairman, CFO, and later CEO of the corporation. Other entities that were part of the formation transactions that created Capital Senior Living Corporation were Capital Senior Living, Inc.; Capital Senior Management 1, Inc.; Capital Senior Management 2, Inc.; and Capital Senior Development, Inc., which were each owned by Beck and Stroud. Capital Senior Living Corporation was incorporated in October 1996 in preparation for its initial public offering.

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1997 IPO

The company listed on the New York Stock Exchange on October 31, 1997, raising $130 million. The initial public offering (IPO) was carried out in spite of a 554-point dip in the market just days before. The company’s track record, profitability, and niche were key selling points, Beck told the Dallas Business Journal .

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At the time of the IPO, Capital had 5,000 residents in its communities, which were 95 percent full. Most paid an average of $1,500 a month for independent living quarters and about $600 more for assisted living. Capital did not provide specialized services such as dialysis, and more than 90 percent of residents paid out of private funds, freeing the company of the hassle of dealing with Medicare and Medicaid. Capital was said to be the second largest supplier of senior living services in the United States.

Proceeds from the IPO were earmarked to fund two years of expansion plans, including consolidating partnerships in which the company had an interest. In October 1998 Capital bought out four retirement communities it had been managing from NHP Retirement Housing Partners I. Capital paid $40.6 million for the properties in California, Florida, and Michigan, which together had a capacity of 706 residents.

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Late 1990s Shake-Up

The senior housing industry had a banner year in 1997 followed by a crash the next year. Still, Capital was able to provide shareholders a return of more than 33 percent in 1998, according to one source. With large numbers of the population entering retirement, many expected the industry to grow in the long term. As one of the best capitalized companies in the industry, Capital was able to finance its developments as capital became scarce. Smaller operators in the fragmented industry had difficulty finding bank financing and the state of the capital markets dissuaded them from going public for a few years, an industry insider told National Real Estate Investor . Capital took advantage of the industry shakeup to acquire companies and bring in management talent. Another factor in Capital’s favor was the general decline of the nursing home industry.

While there would be justifiable concerns about overbuilding in certain segments of the senior housing market, Capital was focusing on affordable, independent living, which it felt to be an underserved niche. Capital had been expanding its offerings to provide more services to those who required more assistance. This allowed the company to promote an “age in place” philosophy wherein aging residents could remain in the same setting as their needs changed. Capital’s focus remained on private pay residents; nursing services providers who relied on Medicare had been hammered by the 1997 Balanced Budget Act.senior housing

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