Capital Senior Living CEO Sees Recovery Starting, Looks for Occupancy and Margin Gains

Capital Senior Living (NYSE: CSU) President and CEO Kim Lody is optimistic that a recovery from the pandemic is soon at hand, as the operator’s leads, tours and move-ins are moving closer to pre-pandemic levels.

The company has pared down its senior housing portfolio from 129 communities to 68 communities that, historically, have been the Dallas-based operator’s highest performers. New community construction starts have also sharply fallen in the markets where Capital Senior Living operates, and nearly all of the pieces of the company’s three-year turnaround plan are now in place.

All of this has resulted in a belief among the company’s leaders that Capital Senior Living is now in a more favorable position than it has been at any point in the past year. And it led Lody to the conclusion that “the recovery is beginning to take hold.”

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“The work we’ve done over the last few years has reduced our liabilities, improved our cash flow and strengthened the company,” Lody said Thursday at the Barclay’s Global Healthcare Virtual Conference. “And with the rapidly improving operating environment, we are cautiously optimistic about 2021 occupancy recovery and growth.”

Despite that optimism, the company is still muted about when the recovery might arrive, and therefore hasn’t issued guidance for the full year. But, Lody said guidance will follow stabilization in operations and occupancy.

While Capital Senior Living shed 430 basis points of occupancy at its owned communities in 2020 — going from 84.4% in February of 2020 to 75.2% in February, 2021 — executives believe the company has performed better than some of its other publicly traded peers. The company analyzed public disclosures by Welltower (NYSE: WELL), Healthpeak (NYSE: PEAK), Ventas (NYSE: VTR), Brookdale Senior Living (NYSE: BKD), and New Senior Investment Group (NYSE: SNR) and found that their senior housing operating portfolio (SHOP) communities had lost an average of 658 basis points during the same period.

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Another bright spot is that Capital Senior Living currently has no active new cases of Covid-19 within its communities — something that Brookdale Senior Living also reported on Wednesday. That trend is fueled by the fact that the operator has made good progress vaccinating residents over the past two months.

And as Lody said, the company is seeing promising signs in new leads, tours and move-ins, signaling occupancy gains may lie ahead in the second half of this year. Capital Senior Living has set a goal to have move-ins exceed move-outs in March, according to COO Brandon Ribar.

Lody also believes conditions are set to steadily improve in the provider’s portfolio of 60 owned communities, which prior to the pandemic had consistent average occupancy rates above 85% and margins in excess of 30%.

“We expect this portfolio will return to those same levels of performance as the pandemic recovery evolves,” Lody said. “January and February move-ins in this portfolio were up nearly 13% over November and December … and move-outs, comparing that same period, were down about 4%.”

Capital Senior Living

All of the communities are located in markets where older adults’ average income is high enough to afford the company’s average monthly rate of $3,600, and 97% of them are in markets where the number of people over 75 is expected to grow by 10% or more in the coming years, Lody added.

The portfolio currently carries margins of 27%, but Lody believes that number will grow as Capital Senior Living rebuilds occupancy and further trims Covid-related expenses.

“I see no reason why we cannot get back to that same level of performance over the coming time period as the recovery takes place,” Lody said.

With a far leaner portfolio than in prior years, Capital Senior Living is entering its final turnaround stage, and the company is “ready for growth,” Lody said.

“We have performed extremely well over the last year … and I think we can leverage that operational expertise, on behalf of other owners and operators, with some additional management opportunities or management agreements,” she said. “So, we’re looking for growth, not only in the current portfolio, but we’re looking to expand that footprint as it makes sense over the coming couple of years.”

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