14160 Dallas Parkway
Company Perspectives:
Capital Senior Living Corporation is committed to providing quality h ousing and services based on the highest standards of excellence in t he industry. Our goal is to enrich the daily lives of our senior resi dents by providing an environment that stimulates them physically, me ntally, and emotionally. Therefore, each community offers a relaxed a tmosphere of warmth and caring that promotes companionship among resi dents and staff. Each community's employees are personally committed to serving residents and treating them with dignity and respect.
Capital Senior Living Corporation is a leading operator of residentia l communities for seniors, primarily aged 75 and over. It runs more t han 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 avai lable. The company also offers assisted living services, making it po ssible 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 (thr ough its precursors) in the senior housing industry since 1990. Indep endent 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 foc used on the younger, more active seniors of the independent living ma rket. Annual revenues were about $20 million in the mid-1990s.
Jeffrey L. Beck and James A. Stroud were the group's cofounders and c ochairmen. Beck also served as CEO while Stroud was chief operating o fficer. Each would head an industry trade group.
Another investor in one of the companies that would make up Capital S enior Living Corporation, Quality Home Care, Inc., was Lawrence A. Co hen, who would be vice-chairman, CFO, and later CEO of the corporatio n. Other entities that were part of the formation transactions that c reated 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.
1997 IPO
The company listed on the New York Stock Exchange on October 31, 1997 , raising $130 million. The initial public offering (IPO) was car ried 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.
At the time of the IPO, Capital had 5,000 residents in its communitie s, which were 95 percent full. Most paid an average of $1,500 a m onth for independent living quarters and about $600 more for assi sted living. Capital did not provide specialized services such as dia lysis, and more than 90 percent of residents paid out of private fund s, freeing the company of the hassle of dealing with Medicare and Med icaid. Capital was said to be the second largest supplier of senior l iving services in the United States.
Proceeds from the IPO were earmarked to fund two years of expansion p lans, including consolidating partnerships in which the company had a n interest. In October 1998 Capital bought out four retirement commun ities it had been managing from NHP Retirement Housing Partners I. Ca pital paid $40.6 million for the properties in California, Florid a, and Michigan, which together had a capacity of 706 residents.
The company was also buying communities in Nebraska and Missouri. At the time, Capital was expanding nine other facilities and building ab out 30 new ones. The company typically located them in large urban ce nters, and preferred large developments of more than 100 units. The c ompany's target demographic, according to the Dallas Business Jour nal, was those age 75 and above with $25,000 in disposable in come.
Late 1990s Shake-Up
The senior housing industry had a banner year in 1997 followed by a c rash the next year. Still, Capital was able to provide shareholders a return of more than 33 percent in 1998, according to one source. Wit h 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 developme nts as capital became scarce. Smaller operators in the fragmented ind ustry had difficulty finding bank financing and the state of the capi tal markets dissuaded them from going public for a few years, an indu stry insider told National Real Estate Investor. Capital took advantage of the industry shakeup to acquire companies and bring in m anagement talent. Another factor in Capital's favor was the general d ecline of the nursing home industry.
While there would be justifiable concerns about overbuilding in certa in segments of the senior housing market, Capital was focusing on aff ordable, independent living, which it felt to be an underserved niche . Capital had been expanding its offerings to provide more services t o those who required more assistance. This allowed the company to pro mote an "age in place" philosophy wherein aging residents could remai n in the same setting as their needs changed. Capital's focus remaine d on private pay residents; nursing services providers who relied on Medicare had been hammered by the 1997 Balanced Budget Act.
Lawrence A. Cohen became Capital's president and CEO in 1999 after se rving as vice-chairman and chief financial officer for about three ye ars. Prior to that, he had been CEO of PaineWebber Properties Incorpo rated.
2000 and Beyond
Capital acquired ILM I Senior Living Inc., a Virginia REIT, in August 2000. The deal included eight communities in Omaha, Nebraska; East L ansing, Michigan; Peoria, Illinois; Raleigh, North Carolina; Wichita Kansas; Hot Springs, Arkansas; Winston-Salem, North Carolina, and one in Santa Barbara, California, that was co-owned by ILM II Senior Liv ing Inc. The acquisition added capacity for 1,300 residents and incre ased revenues by $22 million a year. Capital had been managing th e properties since 1996. A planned merger with the ILM II fund was te rminated over a tax issue.
Capital had total revenues of $59.7 million in 2000. The senior p opulation in Texas was booming, putting it third behind Florida and C alifornia as a choice of retirement area.
Capital formed a joint venture with Blackstone Real Estate Advisors i n late 2001 to increase its involvement in the housing market for sen iors. Blackstone owned 90 percent of the venture and provided signifi cant financial resources from its $1.5 billion Blackstone Real Es tate Partners III fund. Capital's role was to manage the properties. The partnership intended to acquire $200 million of senior housin g communities, Cohen told the Wall Street Transcript.
The purchase of a dozen communities under the Triad name was announce d in 2003. They had a capacity of 1,670 residents and were owned by f ive partnerships, in which Capital had previously held a 1 percent in terest. However, according to the Dallas Morning News, as the industry dealt with lingering overcapacity, Capital was looking for n ew growth by gaining more management contracts and keeping existing c ommunities full.
Capital was also making some divestments as its share price slipped t o a fraction of its 1998 peak. It sold a community in Sacramento, Cal ifornia, to an investment group, raising $11.7 million. The compa ny sold a 90 percent holding in a Cottonwood, Arizona development to the Blackstone joint venture.
In 2004 Capital acquired CGI Management Inc. (CGIM) from The Covenant Group of Texas Inc. (TCG) for $2 million, plus up to another  6;1.6 million in performance-linked consideration. CGIM operated 16 s enior communities, seven of them owned by TCG. The company expected m anagement contracts to continue at 13 properties in four states (Arka nsas, Mississippi, Oklahoma, and Texas), which had a capacity of 1,60 0 residents.
Stroud told the Dallas Business Journal the senior housing ind ustry was seeing more emphasis on affordability in a lethargic econom y. Operators were allowing residents to save money by unbundling such services as meals and transportation. By this time Capital had 2,500 employees and about 8,500 residents.
Capital and other operators were also adding new amenities to attract residents in a competitive market. Some communities featured gyms, h ealth centers, beauty salons, and libraries. At least one site even s ported an aviary stocked with finches.
There were projections for the number of 65- to 74-year-olds to reach 37 million by 2030, more than twice as many as in 1990, when Capital started out in the senior housing market. The over-75 bracket was gr owing even faster, outpacing any other segment of the population.
Principal Subsidiaries: Capital Senior Living, Inc.; Capital S enior Development, Inc.; Capital Senior Management 1, Inc.; Capital S enior Management 2, Inc.; Capital Senior Living Properties, Inc.; Cap ital Senior Living Properties 2, Inc.; Capital Senior Living Properti es 2, - Atrium of Carmichael, Inc.; Capital Senior Living Properties 2, - Crossword Oaks, Inc.; Capital Senior Living Properties 2 - Grame rcy, Inc.; Capital Senior Living Properties 2, - Heatherwood, Inc.; C apital Senior Living Properties 2 - NHPT, Inc.; Capital Senior Living Properties 2, - Tesson Heights, Inc.; Capital Senior Living Properti es 2 - Veranda Club, Inc.; Capital Senior Living Properties 3, Inc.; Capital Senior Living Properties 4, Inc.; Capital Senior Living Prope rties 5, Inc.; Capital Senior Living Properties 6, Inc.; Capital Seni or Living A, Inc.; Capital Senior Living, ILM-A, Inc.; Capital Senior Living P-B, Inc.; Capital Senior Living ILM-B, Inc.; Capital Senior Living P-C, Inc.; Capital Senior Living ILM-C, Inc.; Capital Senior L iving Acquisition, LLC; CGI Management, Inc.; HealthCare Properties, L.P. (57%); Quality Home Care, Inc.
Principal Operating Units: Owned: Canton Regency (4), Canton, Ohio; Crosswood Oaks, Sacramento, California; Gramercy Hill, Lincoln, Nebraska; Heatherwood, Detroit, Michigan; Independence Village, East Lansing, Michigan; Independence Village, Peoria, Illinois; Independe nce Village, Raleigh, North Carolina; Independence Village, Winston-S alem, North Carolina; Sedgwick Plaza, Wichita, Kansas; Tesson Heights , St. Louis, Missouri; Towne Centre (4), Merrillville, Indiana; Veran da Club, Boca Raton, Florida; Waterford at Columbia, South Carolina; Waterford at Deer Park, Texas; Waterford at Edison Lakes, South Bend, Indiana; Waterford at Fairfield, Ohio; Waterford at Fort Worth, Texa s; Waterford at Highland Colony, Jackson, Mississippi; Waterford at H uebner, San Antonio, Texas; Waterford at Ironbridge; Springfield, Mis souri; Waterford at Mansfield, Ohio; Waterford at Mesquite, Texas; Wa terford at Pantego, Texas; Waterford at Plano, Texas; Waterford at Sh reveport, Louisiana; Waterford at Thousand Oaks, San Antonio, Texas; Wellington at Arapaho, Richardson, Texas; Wellington at North Richlan d Hills, Texas; Wellington at Oklahoma City, Oklahoma; Affiliates: BR E/CSL; SHPII/CSL; Managed: Atrium of Carmichael, Sacramento, Californ ia; Covenant Place of Burleson, Texas; Covenant Place of Waxahachie, Texas; Covenant Place of Abilene, Texas; Crescent Point, Cedar Hill, Texas; Good Place, North Richland Hills, Texas; Harding Place, Searcy , Arkansas; Meadow Lakes, North Richland Hills, Texas; Mountain Creek , Grand Prairie, Texas; Meadow View, Arlington, Texas; Saint Ann, Okl ahoma City, Oklahoma; Southern Plaza, Bethany, Oklahoma; Sunnybrook E states, Madison, Mississippi; Tealridge Manor, Edmond, Oklahoma; The Arbrook, Arlington, Texas.
Principal Competitors: American Retirement Corporation; Brookd ale Living Communities; Emeritus Corporation; Holiday Retirement Corp oration; Sunrise Senior Living, Inc.
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