Slide 1: Save Capital Senior Living Corp.
SAVE CAPITAL SENIOR LIVING CORP. PRESENTATION PREPARED BY ORTELIUS ADVISORS, L.P. SEPTEMBER 2021
Slide 2: Disclaimer
DISCLAIMER The materials contained herein (the “Materials”) represent the opinions of Ortelius Advisors, L.P. and certain of its affiliates (collectively, “Ortelius Advisors” or “Ortelius”) and are based on publicly available information with respect to Capital Senior Living Corporation (“CSU”, “Cap
Slide 3: Table of Contents
TABLE OF CONTENTS Executive Summary (Page 4) The Board’s Flawed Strategic Review (Page 19) The Costly, Dilutive and Oversized Conversant Capital Deal (Page 29) Accessible and Affordable Alternatives (Page 37)
Slide 4: Executive Summary
EXECUTIVE SUMMARY
Slide 5: Why We Are Here
WHY WE ARE HERE CSU’s Board, which has presided over years of value destruction, ran a deeply flawed review of the Company’s capital needs and financing options during the first half of 2021 The Board conducted its review without a Chief Financial Officer, without accounting for the pandemic recover
Slide 6: About Ortelius
ABOUT ORTELIUS Ortelius is one of CSU’s largest stockholders, owning 12.7% of the Company’s shares Firm Overview • Ortelius is a research-intensive, fundamental-based alternative investment firm founded by Peter DeSorcy and H.R.H. Prince Pavlos in 2015 • The firm’s principals collectively possess de
Slide 7: About CSU
ABOUT CSU CSU is a historically mismanaged business with attractive assets, operations and long-term potential Business Summary Financial Snapshot* • CSU is a national owner-operator of senior living communities • Founded: 1990 • CSU operates 68 communities, 60 of which are wholly-owned, serving • H
Slide 8: CSU Does Not Face Financial Ruin Without the $152.5 Million
CSU DOES NOT FACE FINANCIAL RUIN WITHOUT THE $152.5 MILLION LINKED TO THE PROPOSED TRANSACTIONS Focus on the Facts ✓ The Company has less than $50 million of debt coming due in the next 6 months ✓ The Company’s debt maturities are overcollateralized by the value of its substantial real estate holdin
Slide 9: CSU Has Manageable Near-Term Debt Maturities
CSU HAS MANAGEABLE NEAR-TERM DEBT MATURITIES Although the Board claims CSU faces financial ruin without Conversant Capital, the Company has modest near-term maturities and substantial real estate value backing its debt Debt Maturity Schedule as of 8/12/20211 $296.9M $283.5M Net Book Value Bridge Loa
Slide 10: $70 Million in New Capital Is More Than Sufficient
OUR ANALYSIS SUGGESTS $70 MILLION IN NEW CAPITAL IS MORE THAN SUFFICIENT TO ADDRESS CSU’S NEAR-TERM NEEDS CSU states the investment Unnecessary at this point, will address “near- to and certainly not accretive Working capital needs are medium-term maturities, given the high cost of already funded by
Slide 11: CSU's Fundamentals and Capital Position Are Improving
CSU’S FUNDAMENTALS AND CAPITAL POSITION ARE IMPROVING The Company’s fundamentals and capital position are steadily improving as the effects from the pandemic abate and following the early extension of the BBVA loan Resident occupancy is trending CSU received an extension of its Working capital needs
Slide 12: CSU's Long-Term Outlook Is Bright
CSU’S LONG-TERM OUTLOOK IS BRIGHT Ortelius has demonstrated its significant confidence in CSU’s assets, operations and long- term potential by recently increasing its stockholdings from 7.2% to 12.7% 1 Significant and Growing Market Opportunity • Sharply accelerating growth of 80+ cohort: 4.1% popul
Slide 13: The Board's Strategic Review Was Flawed and Lacked Foresight
THE BOARD’S STRATEGIC REVIEW WAS FLAWED AND LACKED FORESIGHT We believe the Board ran a flawed process and is now promoting a deal that does not serve the best interests of CSU’s stockholders x The Board did not attempt to engage with a cross-section of large stockholders about their willingness to
Slide 14: The Board's Flawed Review Led to Costly, Dilutive Transactions
THE BOARD’S FLAWED REVIEW LED TO THE COSTLY, DILUTIVE AND OUTSIZED TRANSACTIONS WITH CONVERSANT CAPITAL Ortelius believes the oversized transactions and their governance terms will irreversibly impair value for existing stockholders and would hand control of CSU to Conversant Capital The transaction
Slide 15: The Market Shares Our Concerns With the Conversant Deal
THE MARKET APPEARS TO SHARE OUR SIGNIFICANT CONCERNS WITH THE CONVERSANT CAPITAL DEAL The Company’s stock plunged an incredible 41% following the transactions’ announcement1 CSU’s Closing Stock Price Movement Since the Transactions Were Announced on July 22nd $40 July 22, 2021: CSU announces the pro
Slide 16: Stock Price Rebounded Once Ortelius Began Its Campaign
CSU’S STOCK PRICE ONLY REBOUNDED ONCE ORTELIUS INITIATED ITS PUBLIC CAMPAIGN TO REJECT THE TRANSACTIONS The Company’s stock price is up approximately 44% since Ortelius went public with its opposition to the proposed deal1 CSU’s Closing Stock Price Movement Since Ortelius Publicly Opposed The Transa
Slide 17: We Believe Superior Financing Alternatives Exist
WE BELIEVE SUPERIOR FINANCING ALTERNATIVES EXIST If stockholders vote down the proposed transactions, we are confident CSU will be able to readily access more affordable alternatives to sufficiently address near-term capital needs We believe CSU could raise up to $70 million We believe CSU could rai
Slide 18: The Add Up
THE ADD UP: The Board’s flawed review resulted in costly, dilutive and outsized proposed transactions that would effectively hand control of the Company to Conversant Capital Since the review was initiated in January 2021, the industry’s outlook has improved dramatically, making the proposed transac
Slide 19: The Board's Flawed Strategic Review
THE BOARD’S FLAWED STRATEGIC REVIEW
Slide 20: The Board Failed to Publicly Explore All Alternatives
THE BOARD FAILED TO PUBLICLY EXPLORE ALL ALTERNATIVES We contend that the Board botched the key aspects of its review The Board did not attempt to engage with a cross-section of large stockholders about their willingness to provide fresh capital to the Company o The process it ran appears to have re
Slide 21: The Board Failed to Engage With Major Equity Holders
THE BOARD FAILED TO ENGAGE SUFFICIENTLY WITH MAJOR EQUITY HOLDERS IN THE COMPANY Despite having a base of committed and well-capitalized stockholders, the Board opted not to engage with investors such as Ortelius • We believe existing stockholders, such as Ortelius, would have been interested in bac
Slide 22: The Terms of the Conversant Capital Deal Are Egregious
THE TERMS OF THE CONVERSANT CAPITAL DEAL ARE SO EGREGIOUS THE DEAL CAN ONLY BE JUSTIFIED AS A LAST AVAILABLE OPTION We question how these transactions with Conversant Capital could ever end up being accretive The exceedingly costly interim debt It appears that the interim financing Adding insult to
Slide 23: Board's Understanding of Its Bridge Loans
WE QUESTION WHETHER THE BOARD UNDERSTOOD THE NUANCES OF ITS BRIDGE LOANS The substantial real estate value of collateral and limited corporate guarantees provide the Company flexibility in addressing its bridge loans Interest Rate L+ 4.50%, Interest-only L + 3.25%, Interest-only Maturity Date Decemb
Slide 24: The 2022 Mortgage Debt Is Non-Recourse to the Corporate Parent
THE 2022 MORTGAGE DEBT IS NON-RECOURSE TO THE CORPORATE PARENT These mortgages are readily able to be refinanced, as they are backed by significant real estate value Interest Rate 4.69% 4.97% 4.48% 4.85% Maturity Date April 2022 April 2022 May 2022 May 2022 2019 YE Balance $22.6M $2.0M $10.2M $3.6M
Slide 25: Board's Understanding of CSU's Improving Fundamentals
WE QUESTION WHETHER THE BOARD UNDERSTOOD THE IMPLICATIONS OF CSU’S IMPROVING FUNDAMENTALS Monthly Resident Occupancy Steadily Improving1 Quarterly - Pre-Pandemic Quarterly - Pandemic Monthly - Post-Pandemic 85.7% 85.0% 84.5% 84.4% 83.7% 81.8% 82.9% 80.9% 80.4% 81.5% 80.6% 79.3% 79.1% 78.5% 79.3% 78.
Slide 26: The Board Sought a Large Quantum of Capital From the Beginning
THE BOARD APPARENTLY SOUGHT OUT A LARGE QUANTUM OF CAPITAL FROM THE BEGINNING Had the Board been willing to be more flexible in addressing its liquidity profile and accepting smaller and more tactical tranches of capital, its process may have yielded far better results Ortelius suspects the private
Slide 27: Boardroom and Management Deficiencies Resulted in a Bad Decision
BOARDROOM AND MANAGEMENT DEFICIENCIES RESULTED IN A BAD DECISION FOR STOCKHOLDERS The Conversant Capital deal rewards the Company’s management and advisors and Conversant Capital – everyone but existing stockholders • Rather than hire a Chief Financial Officer and follow best practices requisite for
Slide 28: The Board's Desired Use of Funds Goes Beyond Avoiding Distress
THE BOARD’S DESIRED USE OF FUNDS GOES FAR BEYOND AVOIDING FINANCIAL DISTRESS If CSU is in such dire straits and needs capital for ongoing operations and the repayment of debt, why is it planning to allocate proceeds from a usurious financing arrangement to a new “pipeline of identified potential inv
Slide 29: The Costly, Dilutive and Oversized Conversant Capital Deal
THE COSTLY, DILUTIVE AND OVERSIZED CONVERSANT CAPITAL DEAL
Slide 30: Conversant Capital Transactions' Terms Are Riddled With Issues
THE CONVERSANT CAPITAL TRANSACTIONS’ TERMS ARE RIDDLED WITH ISSUES Ortelius takes exception to the troubling terms associated with the proposed transactions and the de facto handover of CSU to Conversant Capital The transactions Conversant Capital would have the right to designate The transactions w
Slide 31: Issue #1: $82.5 Million Private Placement Hands Control to Conversant
ISSUE #1: $82.5 MILLION PRIVATE PLACEMENT EFFECTIVELY HANDS CONTROL OF CSU TO CONVERSANT CAPITAL AT A STEEP DISCOUNT The transactions demonstrably fail to maximize the value of the Company, which is now trading at a significant discount to its underlying assets Implied Volatility (40%)* • The highly
Slide 32: Issue #2: Oversized Transactions Amount to a Sale of the Company
ISSUE #2: THE OVERSIZED TRANSACTIONS AND THEIR EGREGIOUS TERMS WILL EFFECTIVELY AMOUNT TO A SALE OF THE COMPANY Conversant Capital is offering exceedingly costly interim debt financing The financing would include a headline interest rate of 15% and approximately $2.3 million earmarked to pay Convers
Slide 33: Issue #3: Additional Preferred Stock to Fund Commitments
ISSUE #3: CSU IS ISSUING ADDITIONAL PREFERRED STOCK TO FUND COSTLY COMMITMENTS TO CONVERSANT CAPITAL Stockholders now face the grim prospect of costly and unnecessary preferred stock in the capital structure • Conversant Capital’s commitment to backstop $42.5 million of a ~$70 million Common Stock R
Slide 34: Issue #4: Conversant Can Designate Directors and Control CSU
ISSUE #4: CONVERSANT CAPITAL IS GRANTED THE ABILITY TO DESIGNATE DIRECTORS AND EFFECTIVELY CONTROL CSU’S BUSINESS DECISIONS If completed, the transactions would give Conversant Capital significant control of CSU, even creating a “controlled company,” per NYSE listing standards under certain scenario
Slide 35: Issue #5: Senior Management Bonuses Upon Closing
ISSUE #5: CSU IS AWARDING SENIOR MANAGEMENT BONUSES UPON THE CLOSING Ortelius finds it appalling that the Board wants to grant certain CSU employees a sizable amount of stock without subjecting those individuals to the same dilution as current stockholders 797,699 $4.2M Shares Cash • The Board has p
Slide 36: Conversant Transactions Expensive Compared to COVID-19 Rescue Financings
CONVERSANT CAPITAL TRANSACTIONS ARE GROSSLY EXPENSIVE COMPARED TO RESCUE FINANCINGS DONE IN THE MIDST OF COVID-19 Mortgage REITs faced imminent liquidation and margin calls during the pandemic, but were able to successfully raise sufficient capital on significantly better terms than CSU 36
Slide 37: Accessible and Affordable Alternatives
ACCESSIBLE AND AFFORDABLE ALTERNATIVES
Slide 38: We Believe Superior Financing Alternatives Exist
WE BELIEVE SUPERIOR FINANCING ALTERNATIVES EXIST If stockholders vote down the proposed transactions, we are confident CSU will be able to readily access more affordable alternatives to sufficiently address near-term capital needs We believe CSU could raise up to $70 million We believe CSU could rai
Slide 39: Proposed Transactions' Issues vs. Benefits of Alternatives
THE PROPOSED TRANSACTIONS ARE RIDDLED WITH ISSUES, WHEREAS POTENTIAL ALTERNATIVES ARE MORE AFFORDABLE AND EQUITABLE THE PROPOSED TRANSACTIONS’ ISSUES BENEFITS OF POTENTIAL ALTERNATIVES ✓ We are confident that voting down the proposed transactions X A flawed review process ignored possible financing
Slide 40: A ~17% Stockholder Supports Our View on an Alternative Rights Offering
A ~17% STOCKHOLDER APPEARS TO SUPPORT OUR VIEW REGARDING THE VIABILITY OF AN ALTERNATIVE EQUITY RIGHTS OFFERING On September 13th, Silk Partners LP and its affiliates came out in support of an alternative underwritten rights offering Source: 13D filed by Silk Partners and its affiliates on September
Slide 41: What Ortelius Is Asking of CSU Stockholders
WHAT ORTELIUS IS ASKING OF CSU STOCKHOLDERS We urge you to vote AGAINST the transactions on our GOLD PROXY CARD to protect the value of your investment and position the Board to assess other financing options Visit www.SaveCSU.com for more information 41
Slide 42: Thank You
THANK YOU