A change in top leadership at Capital Senior Living (NYSE: CSU) has not silenced one of the Dallas-based senior housing operator’s shareholders. Cove Street Capital is calling for “commensurate change” in the Dallas-based company’s board of directors.
Capital Senior Living is one of the country’s 10 largest providers in the industry, and operates 129 communities in the U.S.
El Segundo, California-based Cove Street increased its stake in Capital to 8.5% last September, and are pushing for the company to explore strategic alternatives. In November, rumors surfaced that Capital Senior Living was exploring strategic alternatives and might be entertaining interest from private equity buyers.
In the letter dated January 11, Cove Street Principal Jeffrey Bronchick wrote that Capital Senior Living’s board “must take at least partial responsibility for the poor results and dismal price of the company’s equity.” Bronchick also suggested Capital’s board begin a process to “de-stagger” its members, starting with this year’s nominees, and continuing until all members are elected annually.
Finally, Bronchick noted that Cove Street provided a resume for an “extremely strong” board candidate it worked with in the past and who has corporate governance background in private and public finance.
“[T]his is firmly ‘good governance’ and further aligns all stakeholders,” Bronchick said. “It would also send a clear signal to the marketplace that all involved are putting their collective time and money towards the enhancement of shareholder value.”
Last week, Capital named Kimberly Lody as its new president and CEO. She seems “a perfectly reasonable candidate for this position,” Cove Street’s letter stated.
Lody, who succeeds Larry Cohen, told Senior Housing News her immediate objectives are improving operations and the balance sheet. Cohen is currently working with Capital Senior Living as a consultant.
The company logged a total Q3 2018 revenue of $115.7 million, a 1.4% decrease from the same period two years ago, according to its quarterly earnings report. Average occupancy was 85.6% for that period, a 130 basis points drop from the previous year.
Capital Senior Living did not immediately respond to a request from Senior Housing News for this story.