Capital Senior Living Rebounds from Costly Winter, Eyes $84 Million of Acquisitions

Capital Senior Living (NYSE:CSU) is looking to bounce back from a costly winter that adversely impacted operating results as it sets sight on $84 million of acquisitions planned for the second quarter.

During the first quarter ended March 31, 2014, Capital Senior Living reported a net loss of $4.6 million, or $0.16 per share, as higher costs associated with utilities, notably heating costs, and snow removal took their tolls on operating expenses.

“Margins were negatively impacted by a particularly harsh winter, including higher costs for utilities and snow removal,” the company stated in its first quarter earnings release.

Advertisement

Higher than expected costs associated with utilities, snow removal—as well as higher real estate taxes and referral fees stemming from greater move-ins during the quarter—amounted to approximately $1.6 million and operating expenses by 1.8% of revenue.

Despite this impact, Capital Senior Living managed to post revenue growth of 5.6% year-over-year during the quarter to $91.9 million.

“We are pleased to report positive results for the first quarter as we continue to recover from high levels of attrition in 2013, with growth in revenue, EBITDAR and occupancy,” said CEO Larry Cohen. “These improvements were achieved despite harsh winter weather, however, winter related expenses negatively impacted first quarter financial results.”

Advertisement

Looking ahead, the company is aiming to strengthen its operating strategy of providing senior housing in geographically concentrated areas with its $84 million worth of planned acquisitions for the second quarter.

Though Capital Senior Living did not disclose any specifics during the earnings call regarding particular sellers, it did note that the properties are “high-quality” senior living communities located in regions with “extensive operations.”

The senior living provider emphasized this strategy during the first quarter when is completed the acquisition of a community for a purchase price of $14.6 million. The community comprises 78 units offering assisted living and memory care and “enhances the company’s geographic concentration around Ohio,” Cohen said during the earnings call.

Capital Senior Living also looks to continue its focus on repositioning communities in its efforts to reduce attrition rates and increase occupancy, which averaged 87.1% for the company’s consolidated portfolio.

Currently, Capital Senior Living is in the process of converting approximately 360 vacant independent living units to assisted living and memory care units. Following the completion and stabilization of this conversion, the company expects overall occupancy to increase by approximately 300 basis points, to 90%.

During 2013, Capital Senior Living decided to close the skilled nursing units in two continuing care retirement communities (CCRCs) and convert the space to private-pay use.

Excluding these two CCRCs being repositioned, average monthly rent for the company’s consolidated communities was $3,126 per occupied unit in the first quarter of 2014, an increase of $64, or 2.1%, when compared to the same period a year ago.

“We differentiate Capital Senior Living as the value leader in providing quality seniors housing and care at reasonable prices,” Cohen said. “We believe that we are well positioned to make meaningful gains in shareholder value as a substantially private-pay business in an industry that benefits from need-driven demand, limited new supply, and an improving economy and housing market.”

Written by Jason Oliva

Companies featured in this article: