Capital Senior Living Strikes Deal with Shareholder Pushing for Sale

After an ongoing fight between a disgruntled shareholder and one of the largest senior living operators, the parties have reached an agreement that involves the appointment of a new, independent board member.

Capital Senior Living (NYSE: CSU) has seemingly settled its differences in an agreement with Lucus Advisors LLS, an investment management firm that publicly pressured CSU to boost shareholder value in a sale of the company or other strategic act last December. Lucus called on CSU to hire a financial advisor to explore these options.

Along with other publicly traded senior housing owners and operators, CSU has seen its share prices suffer. CSU is uniquely positioned among its peers as an operator that owns the majority of its real estate, but that value has failed to be reflected in its stock price. The company operates more than 120 communities and has continued to focus on its expanding acquisition pipeline.

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Schuster B. Tanger, a managing member of Lucus Advisors, has been urging CSU to seek strategies to recapture this value for shareholders. Lucus Advisors oversees the funds of Red Alder Mstaer Fund, LP, which followed up on Tanger’s public letter with more pressure on CSU in a presentation to stockholders in late January 2016. Even as CSU has continued to see improving occupancy rates and healthy margins, the stock price remains low and has dropped since Tanger’s initial public letter late last year.

Under the terms of the agreement, CSU will consult with Lucus on the appointment of a new independent director. Lucus will also propose up to two candidates for the inclusion in CSU’s selection process. Tanger is directly named as a consultant in the process.

“The nominating committee will consult with Mr. Tanger and keep him reasonably updated throughout the search process,” a filing with the Securities and Exchange Commission (SEC) reads.

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“We are pleased to have reached an agreement with Capital Senior Living Corporation and believe this agreement is a clear step in the right direction,” Tanger told Senior Housing News. “We look forward to continuing to work productively with CSU to maximize value for all of CSU’s shareholders.”

Tanger noted CSU’s high performance in a statement.

“The company’s cash flow growth, EBITDAR margins and occupancy, and other key metrics, are among the best in the industry, and we look forward to continuing to work with the company to enhance value for all of the company’s stockholders,” he said.

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CSU announced the agreement in connection with its 2016 annual meeting of stockholders. The company’s board of directors will present its recommendations for new director nominees in CSU’s definitive proxy statement, to be filed with the SEC and mailed to eligible voting stockholders of the company. These stockholders will vote on the new director at the 2016 annual meeting, which has not yet been scheduled. Lucus Advisor and affiliates agreed to certain customary standstill and voting provisions.

“We are confident that a new, independent director will be a valuable addition to our highly qualified and engaged Board of Directors as we continue to successfully execute our differentiated business strategy and substantial grow in all of our key metrics,” Lawrence A. Cohen, chief executive officer and a director of the company, said in a statement. “We share Lucus’ desire to maximize shareholder value and look forward to working productively with Lucus and our other shareholders to do so.”

CSU declined Senior Housing News’ request for comment. On the heels of the announcement of the agreement, CSU’s stock dropped more than 4% by Monday afternoon.

Written by Amy Baxter

Editor’s note: A previous version of this story stated a management change was needed. This article has been updated to reflect that the agreement specifically refers to the appointment of a new, independent board member.

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