sc13da.htm

0001140361-08-001310.txt : 20080114 0001140361-08-001310.hdr.sgml : 20080114 20080114172251 ACCESSION NUMBER: 0001140361-08-001310 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20080114 DATE AS OF CHANGE: 20080114 GROUP MEMBERS: HARVEY HANERFELD GROUP MEMBERS: ROGER FELDMAN SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CAPITAL SENIOR LIVING CORP CENTRAL INDEX KEY: 0001043000 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-NURSING & PERSONAL CARE FACILITIES [8050] IRS NUMBER: 752678809 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-53101 FILM NUMBER: 08529266 BUSINESS ADDRESS: STREET 1: 14160 DALLAS PARKWAY STREET 2: SUITE 300 CITY: DALLAS STATE: TX ZIP: 75254 BUSINESS PHONE: 9727705600 MAIL ADDRESS: STREET 1: 14160 DALLAS PARKWAY STREET 2: SUITE 300 CITY: DALLAS STATE: TX ZIP: 75254 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: West Creek Capital, LLC CENTRAL INDEX KEY: 0001409863 IRS NUMBER: 522241494 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 1919 PENNSYLVANIA AVE., N.W. STREET 2: STE. 725 CITY: WASHINGTON STATE: DC ZIP: 20006 BUSINESS PHONE: 202 416 4738 MAIL ADDRESS: STREET 1: 1919 PENNSYLVANIA AVE., N.W. STREET 2: STE. 725 CITY: WASHINGTON STATE: DC ZIP: 20006 FORMER COMPANY: FORMER CONFORMED NAME: West Creek Capital, L.P. DATE OF NAME CHANGE: 20070815 SC 13D/A 1 sc13da.htm WEST CREEK CAPITAL SC 13DA 1-14-2008 sc13da.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 01 )*

Capital Senior Living Corp.

(Name of Issuer)

Common Stock, par value $.01 per share

(Title of Class of Securities)

140475104

(CUSIP Number)

Mr. Scott Zimmerman, Esq.

Dechert LLP

30 Rockefeller Plaza

New York, NY 10112

(212) 698-3500

(Name, Address and Telephone Number of Person Authorized to

Receive Notices and Communications)

January 14, 2008

(Date of Event which Requires Filling of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ·· 240.13d-1(e), 240.13d-1 (f) or 240.13d-1(g), check the following box. ( X )

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See · 240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

SCHEDULE 13D
CUSIP No. 140475104

	1.	Names of Reporting Persons. West Creek Capital, LLC

	2.	Check the Appropriate Box if a Member of a Group* (a.) ( ) (b.) ( )

	3.	SEC USE ONLY

	4.	Source of Funds* AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to items 2(d) or 2(e) ( )

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power 0

		8.	Shared Voting Power 1,706,650

		9.	Sole Dispositive Power 0

		10.	Shared Dispositive Power 1,706,650

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,706,650

	12.	Check if the Aggregate Amount Represented by Amount in Row (11) Excludes Certain Shares (See Instructions) ( )

	13.	Percent of Class Represented by Amount in Row (11) 6.4%

	14.	Type of Reporting Person IA

SCHEDULE 13D
CUSIP No. 140475104

	1.	Names of Reporting Persons. Roger Feldman

	2.	Check the Appropriate Box if a Member of a Group* (a.) ( ) (b.) ( )

	3.	SEC USE ONLY

	4.	Source of Funds* AF PF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to items 2(d) or 2(e) ( )

	6.	Citizenship or Place of Organization United States Citizen

Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power 28,000

		8.	Shared Voting Power 1,706,650

		9.	Sole Dispositive Power 28,000

		10.	Shared Dispositive Power 1,706,650

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,734,650

	12.	Check if the Aggregate Amount Represented by Amount in Row (11) Excludes Certain Shares (See Instructions) ( )

	13.	Percent of Class Represented by Amount in Row (11) 6.5%

	14.	Type of Reporting Person IN

SCHEDULE 13D
CUSIP No. 140475104

	1.	Names of Reporting Persons. Harvey Hanerfeld

	2.	Check the Appropriate Box if a Member of a Group* (a.) ( ) (b.) ( )

	3.	SEC USE ONLY

	4.	Source of Funds* AF PF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to items 2(d) or 2(e) ( )

	6.	Citizenship or Place of Organization United States Citizen

Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power 50,000

		8.	Shared Voting Power 1,706,650

		9.	Sole Dispositive Power 50,000

		10.	Shared Dispositive Power 1,706,650

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,756,650

	12.	Check if the Aggregate Amount Represented by Amount in Row (11) Excludes Certain Shares (See Instructions) ( )

	13.	Percent of Class Represented by Amount in Row (11) 6.6%

	14.	Type of Reporting Person IN

Item 1. Security and Issuer

This Schedule 13D relates to the shares of common stock, par value $0.01 per share (the "Shares"), of Capital Senior Living Corp. (the "Issuer"). The principal executive offices of the Issuer are located at 14160 Dallas Parkway, Suite 300, Dallas, TX 75254

Item 2. Identity and Background.

(a)

Name: This Schedule 13D is being filed jointly by (i) West Creek Capital, LLC, a Delaware limited liability company, (ii) Roger Feldman and (iii) Harvey Hanerfeld (collectively the "Reporting Persons" and each individually a "Reporting Person"). Roger Feldman and Harvey Hanerfeld are the sole owners and managing members of West Creek Capital, LLC. Each of the Reporting Persons either individually and/or collectively is deemed to be the beneficial owner of Shares held by (i) WC Select LP, a Delaware limited partnership ("Select"), (ii) West Creek Partners Fund LP, a Delaware limited partnership ("Partners Fund"), (iii) Cumberland Investment Partners, LLC, a Delaware limited liability company ("Cumberland"), (iv) Roger Feldman, (v) Harvey Hanerfeld and (vi) certain private accounts (the "Accounts") with respect to which West Creek Capital, LLC is an investment advisor pursuant to investment advisory agreements (together, the "Holders"). The Reporting Persons disclaim that they and/or the Holders are members of a group as defined in Regulation 13D.

(b)	Residence or business address: The principal business address of the Reporting Persons is 1919 Pennsylvania Ave., NW, Ste. 725, Washington, DC 20006.

(c)

Present Principal Occupation or Employment: The principal business of West Creek Capital, LLC is providing investment management services to investment partnerships and other entities. The principal occupation or employment of Roger Feldman is serving as owner and managing member of West Creek Capital, LLC. The principal occupation or employment of Harvey Hanerfeld is serving as owner and managing member of West Creek Capital,LLC.

(d)	Criminal Conviction: None of the Reporting Persons has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e)

Court or Administrative Proceedings: None of the Reporting Persons has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)	Citizenship: Roger Feldman and Harvey Hanerfeld are each a citizen of the United States of America.

Item 3. Source and Amount of Funds or Other Consideration:

Funds for the purchase of the Shares reported herein were derived from available capital of the Holders. A total of approximately $11,609,202 was paid to acquire the Shares.

Item 4. Purpose of Transaction

The Reporting Persons purchased the Shares for the purpose of investment and subject to the statements in this Item 4, have no present plans or proposals which relate to or would result in a transaction with the purpose or effects enumerated in clauses (a) through (j) of Item 4 of Schedule D.

The Reporting Persons have sent a letter, dated January 14, 2008, to Mr. James Moore, Director, reflecting concerns about the proposed Hearthstone Transaction.

Representatives of the Reporting Persons have had conversations with members of the Issuer's operating management and with members of the Board. The Reporting Persons reserve the right to communicate further with the Issuer's operating management and with members of the Board, among others, about these and other matters. Such communications may result in proposing one or more of the actions described in subsections (a) through (j) of Item 4 of Schedule 13D.

The Reporting Persons also reserve the right to purchase or otherwise acquire additional Shares, or to sell or otherwise dispose of Shares beneficially owned by them, in each case in open market or privately negotiated transactions or otherwise.

Item 5. Interest in Securities of the Issuer.

(a)(b)

West Creek Capital, LLC, as the investment adviser to Select, Partners Fund, Cumberland, and the Accounts, and Mr. Feldman and Mr. Hanerfeld as sole owners and managing members of West Creek Capital,LLC may be deemed to have the shared power to direct the voting and disposition of a total of 1,706,650 total Shares held by Select, Partners Fund, Cumberland and the Accounts, such shares constituting approximately 6.4% of the Shares of the Issuer. Mr. Feldman has the sole power to vote or direct the voting of and to dispose and to direct the disposition of the 28,000 shares beneficially owned by him as an individual, and together with the 1,706,650 Shares referenced above, such shares constitute approximately 6.5% of the Shares of the Issuer. Mr. Hanerfeld has the sole power to vote or direct the voting of and to dispose and to direct the disposition of the 50,000 shares beneficially owned by him as an individual, and together with the 1,706,650 Shares referenced above, such shares constitute approximately 6.6% of the Shares of the Issuer. All percentage holdings described herein are based upon the 26,579,357 Shares outstanding as of November 5, 2007, according to the Issuer's most recent Form 10-Q filed November 7, 2007, for the period ending September 30, 2007.

(c)	No transactions in the Shares were effected by the Reporting Persons during the past 60 days.

(d) No person other than the Reporting Persons and the Holders is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such Shares.

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

Except as otherwise set forth herein, the Reporting Persons do not have any contract, arrangement, understanding or relationship with any person with respect to the securities of the Issuer.

Item 7. Material to be Filed as Exhibits.

Exhibit 1: Letter, dated January 14, 2008, to James Moore, Director, Capital Senior Living Corp.

Signature After reasonable inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

Date: January 14, 2008
	West Creek Capital, LLC,

	By:	/s/ Roger Feldman Roger Feldman
	Title:		Managing Member

	Roger Feldman

	By:	/s/ Roger Feldman Roger Feldman

	Harvey Hanerfeld

	By:	/s/ Harvey Hanerfeld Harvey Hanerfeld

EX-1 2 ex1.htm EXHIBIT 1 ex1.htm

EXHIBIT 1

WEST CREEK CAPITAL

1919 Pennsylvania Avenue NW

Suite 725

Washington, D.C. 20006

(202) 416-4738

January 14, 2007

Mr. James A. Moore

Director

Capital Senior Living Corp.

14160 Dallas Parkway, Suite 300

Dallas, TX 75254

Capital Senior Living

Dear Mr. Moore:

Recently, Capital Senior Living (the “Company”) announced plans to acquire the 32 leasehold interests owned by Hearthstone Senior Services, L.P. (the “Hearthstone Transaction”). When announced, we hoped the deal was a step toward addressing the issues raised in our letter, dated December 3, 2007. We have now completed our initial diligence with respect to the transaction. Based on our work, we believe the Hearthstone Transaction is overwhelmingly unattractive from the perspective of the Company’s shareholders. Therefore, we request that the transaction be abandoned immediately and that no further Company assets be wasted on it.

Among the motivations for our December letter was our concern that the lack of alignment between the interests of shareholders and Company decision-makers might lead to actions destructive of shareholder value. Sadly, the Hearthstone Transaction appears to confirm that our concern was well founded. As a result, we reiterate our request that once the Hearthstone Transaction has been abandoned, the Board promptly retain an independent investment bank to review strategic alternatives to maximize shareholder value, including the sale or liquidation of the Company.

We have set out below our concerns about the Hearthstone Transaction:

The Company plans to spend $37 million (or roughly 16% of its market capitalization) on an interest that we believe has little, if any, economic value. In March, 2006, Nationwide Health Properties (“NHP”), a New York Stock Exchange listed REIT, and the private equity firms that owned Hearthstone, completed a $431 million sale/leaseback of the 32 properties the Company intends to purchase. As you know, it is industry practice for sale/leaseback pricing to allow the sellers to monetize 100% of the value of their properties. Everything we’ve learned about the NHP/Hearthstone deal suggests the sellers received full value for their assets. It is also REIT industry practice to have sellers retain a “stub equity” position. The “stub equity” has a claim on cash-flow, if any, once the obligations under the REIT’s 100% leverage have been paid. It is this highly leveraged “stub” that the Company proposes to purchase. Given the ebullient nature of the market in 2006, and the current financial turmoil, we do not believe NHP could recoup its entire investment in Hearthstone today. It is as though the Company proposes to pay a premium for the junior tranche of a mortgage securitization, when the senior tranche is “underwater”. It is difficult to imagine anyone entering such a transaction for purely economic reasons.

Mr. James Moore, Capital Senior Living

Page 2 of 5

January 14, 2008

We believe that assuming the Hearthstone/NHP leases could, over time, bankrupt the Company. As part of the transaction, we understand the Company will assume the NHP leases. Based on the Company’s press release, these leases require the Company to pay NHP over $35 million per annum (with annual step-ups). We understand that these obligations will be recourse to the Company’s credit, and that one of the prime benefits to NHP for participating in the deal is to improve the credit quality of its tenant. Based on the NHP press release describing the sale/leaseback, at the time of the deal, the lease coverage ratio was 1.0x. Although coverage was expected to grow, The SeniorCare Investor, a noted industry publication, wrote that “starting off any lease with a 1.0x coverage ratio is aggressive and risky”. The referenced risk was all borne by NHP, as Hearthstone had fully cashed-out the value of the properties and appears to have left a creditless shell as a tenant. Staggeringly, the Company now plans to pay for the right to step into the shoes of the shell. Operating at such a thin coverage margin, any operating or market problems will require the Company to service the NHP leases from other cash-flows. Looking at the Company’s financial statements, it is hard to see where this money would come from, and easy to imagine the Company getting into serious financial peril.

The Hearthstone Transaction offers no meaningful upside for the Company. Based on the Company press release and conference call, it appears that the pre-tax cash-flow attributable to the “stub” position is expected to be approximately $4 million, generating a return to the Company of roughly 10%. On the conference call, management indicated that they did not hope for substantial occupancy growth above the current 89%. Given step-ups in the NHP lease, it appears possible that this starting yield is close to the maximum the Company can hope to earn. Of course, as the “stub” receives cash-flow only after all senior obligations have been paid, it is also possible that the Company will earn nothing. To earn 10% on a highly leveraged “stub” position, particularly when providing “credit-enhancement” for an “underwater” senior position, is surprisingly little compensation for the risk. We believe that in other markets, a Company willing to “bet” on the residual piece of a highly leveraged transaction, while wrapping its credit around the senior claims, would at least have a hope of substantial profit for suffering such long odds against success.

Mr. James Moore, Capital Senior Living

Page 3 of 5

January 14, 2008

We do not believe the Company has the expertise to manage the Hearthstone assets. While the Company’s line management receives high marks for operating its Independent Living assets, the Company has limited experience with Assisted Living properties. This lack of experience is compounded by the unique management challenges associated with the dual occupancy nature of much of the Hearthstone portfolio. Our diligence suggests that Hearthstone’s senior management, who are leaving, are uniquely talented, and that at best there will be a steep learning curve before the Company is able to manage the portfolio. The Hearthstone Transaction appears to marry extraordinary financial risk with tremendous operating uncertainty.

The Company is paying a big premiumto replacement cost and Net Asset Value, while its stock has persistently traded at a significant discountto replacement cost and NAV. The full enterprise value of the Hearthstone Transaction (the $431 million senior position held by NHP plus the $37 million “stub”) is roughly $470 million. Based on the 2,200 units to be purchased, the price per unit is roughly $215,000. The SeniorCare Investor called the roughly $200,000 per unit paid by NHP “an eye popping number, even in this market”. The price per unit the Company intends to pay is obviously higher still, while financial markets have certainly weakened. From an operating perspective, paying a significant premium to replacement cost exposes the Company to competitors who can build new assets at far lower cost, and therefore profit at far lower rents. From a shareholder’s perspective, we struggle to understand the decision to buy another company’s assets at a multiple of replacement cost, rather than buying our own (through share repurchases) at a fraction of replacement cost.

The Company indicated it may sell stock to finance the Hearthstone Transaction, selling its own assets below NAV (and replacement cost), to buy the highly leveraged “stub equity” in a portfolio priced above NAV. By selling a fractional interest in the existing portfolio at current prices, and using the proceeds to complete the Hearthstone Transaction, the Company appears to be “selling low” in order to “buy high”. It is hard to imagine how this creates shareholder value.

The Hearthstone Transaction may act as a “poison pill”, making the Company less attractive to prospective purchasers. We believe, and our diligence confirms, that the principal attraction of the Company to potential purchasers is its cheap stock price (even assuming a takeover premium) relative to the value of the underlying assets. Encumbering the Company with a large lease liability eliminates the discount, as a purchaser would have to consider NHP’s senior claim before ascribing value to the common stock. In effect, the Hearthstone Transaction is a wealth transfer from the Company’s shareholders to NHP’s shareholders (and of course to Hearthstone’s owners, who in the midst of financial turmoil are selling a highly leveraged “stub” for an extraordinary price).

Mr. James Moore, Capital Senior Living

Page 4 of 5

January 14, 2008

The timing of the transaction raises questions about management’s motivations. Since our December letter, we have spoken with nearly every one of the Company’s institutional shareholders. If publicly filed information is correct, these shareholders own a majority of the outstanding stock. We believe there is a high level of dissatisfaction with the existing senior management and Board. We have advised management of these conversations in the hope that they would act in accordance with shareholders’ wishes. For the three years we have been involved with the Company, little has been acquired. In the thirty days since our letter, management has decided to “bet the Company”. Given what we know of the Hearthstone Transaction, it is hard to imagine that this highly leveraged “stub” is the opportunity management has waited for.

Our December letter criticized senior management for many things, but not for being reckless. While public competitors spent the last three years creating large enterprises, or merging into them, the Company was cautious. We feel compelled to note that during this time Chairman Jim Stroud also sold the bulk of his holdings in the Company. Now, with greatly reduced personal exposure, and in the face of substantial financial turmoil, Mr. Stroud has decided to pay an extraordinary price for an interest in a highly leveraged “stub equity” involving assets the Company has little experience managing. In the Company press release, management states that “we believe this transaction is very strategic and will create tremendous value for our shareholders”. The Company’s stock has declined nearly 15% since the date of that press release. If management believes their words, we invite them, and the independent directors, to purchase stock in the Company. Absent such an investment, we believe shareholders should place little faith in what management says.

As you and the other independent directors currently own little stock in the Company, we understand there is no economic urgency for you to stand against management to protect shareholder interests. That said, we remind you that economics aside, you have a fiduciary obligation to do exactly that. Based on what we know, we do not believe thatany “reasonable person” would consider the Hearthstone Transaction to be in the best interests of the Company’s shareholders. Try as we might, our diligence revealed no reasonable economic basis for buying the Hearthstone “stub”. We encourage you and the other independent directors to complete your own diligence with respect to the transaction. We also caution that if the Company moves forward with the Hearthstone Transaction, and our fears about the deal prove out, we believe shareholders may be justified in holding you and your colleagues personally responsible for the lost value.

Mr. James Moore, Capital Senior Living

Page 5 of 5

January 14, 2008

Finally, no shareholder we’ve spoken to has received a call from any independent director. We ask again, particularly in light of the pending material transaction, that you or one of your colleagues reach out to shareholders to hear their views. We believe you will hear a powerful vote of “no confidence” in existing management and a strong desire to see the Company sold.

Sincerely,		Sincerely,
/s/ Roger Feldman		/s/ Harvey Hanerfeld

Roger Feldman		Harvey Hanerfeld
Principal		Principal