Elderly housing consolidation could reach Capital Senior

REITs are thinking about the REITs are thinking about the "Silver Tsunami." (AP photo/Mark J. Terrill)

(Bloomberg) -- Capital Senior Living Corp., an operator of communities for the elderly, may be an attractive consolation prize for buyers that missed out on the industry’s latest takeover.

Brookdale Senior Living Inc.’s $1.4 billion purchase of Emeritus Corp. announced last week followed acquisitions of Sunrise Senior Living Inc. and Assisted Living Concepts Inc. in 2013.

While other suitors may emerge for Emeritus, the deal will likely close, Stephens Inc. said. That leaves Capital Senior, which jumped 7.4 percent after the Emeritus deal, as a takeover candidate, said Jeffrey Langbaum of Bloomberg Industries.

Private-equity firms and health-care real estate investment trusts (REITs) have been buying senior communities as a growing elderly population and improving economy lift demand. Capital Senior is forecast to boost revenue almost twice as fast as Emeritus in the next two years, according to data compiled by Bloomberg. The $713 million company could fetch at least a 21 percent premium from possible suitors Health Care REIT Inc. or Ventas Inc., eyeing the real estate Capital Senior owns, JMP Group Inc. said.

“The senior housing sector is pretty hot these days,” Rob Mains, a Saratoga Springs, New York-based analyst at Stifel Financial Corp., said in a phone interview. “Capital Senior is a well-run company that anyone wanting to get scale in senior housing would be interested in.”

Ralph Beattie, chief financial officer of Dallas-based Capital Senior, didn’t respond to requests for comment on whether his company would be open to a sale.

Brookdale deal

Brookdale agreed to buy Emeritus to add to its senior- living locations in California, New York, New Jersey and Massachusetts.

While it’s possible a REIT or a private-equity firm could emerge with a higher offer, Brookdale is offering a reasonable price and will probably take control of Emeritus without having to increase its bid, according to Dana Hambly, a Little Rock, Arkansas-based analyst at Stephens. Brookdale’s offer represents a 33 percent premium over Emeritus’ Feb. 20 closing price, data compiled by Bloomberg show.

After the deal is completed, Capital Senior will be one of the last remaining publicly traded acquisition candidates, according to Langbaum, a REIT analyst at Bloomberg Industries. Health Care REIT acquired Sunrise last January, and private- equity firm TPG Capital bought Assisted Living Concepts in July.

REITs have taken an increasing interest in senior residence communities as the baby boomer population--  those born in the U.S. from 1946 to 1964 -- ages and the pickup in the U.S. economy gives the elderly and their families more income to pay for housing.

By 2050, the number of people over 60 years old globally will exceed the number of people under 15 for the first time, according to a PricewaterhouseCoopers LLP report released this month. The average occupancy rate for senior housing properties last quarter was 89.7 percent, up from 89 percent a year earlier, according to the National Investment Center for the Seniors Housing & Care Industry.

That should help Capital Senior increase its revenue to $432 million in 2015, up from $350 million in 2013 that the company reported yesterday, according to analysts’ estimates compiled by Bloomberg. Emeritus is forecast to boost sales by about 13 percent over the same period.

--Editors: Whitney Kisling, Beth Williams

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