Seniors Housing Weekly Update - So Who's The Next Acquisition Target?
March 4, 2014
So Who's The Next Acquisition Target?
With the recent Brookdale deal for Emeritus, everyone is looking for the next target. While the pool is shrinking, the number one choice these days is Capital Senior Living, and it has been on everyone’s list for months. But here’s the problem. There usually is a reason to sell, often major investors who want out, or shareholders who are unhappy with their returns. Emeritus shareholders never really did well, especially in the past four years, and it had long been understood that the founder wanted to exit. Capital Senior Living, on the other hand, has posted annual returns from 19% in 2011 to 135% in 2012, and has been at the top of the leader board in two of the past four years. Shareholders who wanted to sell had plenty of opportunity to take their gains. The other problem is that Capital Senior Living has a lot more value to create, and it can do it at very little incremental cost. Whether it is increasing occupancy and rents or converting units, the financial profile will be better a year from now than today, and so should the value. The one caveat, of course, is the direction of interest rates. With values so high, management has to consider all options, including the one to remain independent.