For Immediate Release Contact: Ralph A. Beattie
972/770-5600
CAPITAL SENIOR LIVING CORPORATION
TERMINATES MERGER WITH ILM II SENIOR LIVING, INC.
DALLAS - (BUSINESS WIRE) -February 9, 2001 - Capital Senior Living Corporation
(NYSE:CSU), one of the country's largest operators and developers of senior
living communities, announced today that it has terminated its agreement to
merge with ILM II Senior Living, Inc. ("ILM II"). A tax issue disclosed in ILM
II's Form 10-K filed on January 31, 2001 could cause a material adverse change
under the merger agreement with ILM II, and has put the Company in the position
of having to terminate the merger agreement. The Company continues to manage the
five ILM II communities pursuant to the existing management agreement.
The issue relates to the so-called "built-in gain tax" to which ILM II is
subject. This issue is described in the Form 10-K Annual Report of ILM II filed
with the Securities and Exchange Commission on January 31, 2001. Footnote 2 to
the audited financial statements of ILM II filed as part of its Form 10-K states
in pertinent part as follows:
"Based upon advice from the Company's financial advisors, commencing in
1996, the Company has acted as though it had made an election in its
1996 tax return to allow the Company to avoid a corporate level tax
upon its conversion from a C-Corporation to a Real Estate Investment
Trust. Because proof of a formal election has not been obtained, the
Company is pursuing administrative relief with the Internal Revenue
Service to ensure the availability of the benefits of this election.
Although the Company believes that it had a legitimate basis to make
this election, in part, based upon the advice of its financial
advisors, ultimate resolution of this matter is at the discretion of
the Internal Revenue Service. If unsuccessful, the Company could be
liable for up to $2.7 million of additional penalties and interest."
"We are extremely concerned with the tax issue which has now been disclosed in
ILM II's Form 10-K," James A. Stroud, Chairman of the Company said. "With this
issue unresolved, we cannot proceed with the merger."
"In ordinary circumstances, we would put our financing on hold and would await
the resolution from the IRS of this issue," added Lawrence A. Cohen, Chief
Executive Officer. "However, awaiting the IRS resolution would certainly make
completion of our financing impossible by March 31, 2001, the termination date
under the merger agreement with ILM II. Thus, we believe we have no other choice
than to terminate the merger agreement."
(MORE)
CAPITAL/Page 2
ABOUT THE COMPANY
Capital Senior Living Corporation is one of the nation's largest operators of
residential communities for senior adults. The Company's operating philosophy
emphasizes a continuum of care, which integrates independent living, assisted
living and home care services, to provide residents the opportunity to age in
place.
The Company currently owns and/or operates 51 communities in 21 states with a
total capacity of approximately 8,300 residents. In the communities operated by
the Company, 82 percent of residents live independently and 18 percent of
residents require assistance with activities of daily living.
The forward-looking statements in this release are subject to certain risks and
uncertainties that could cause results to differ materially, including, but not
without limitation to, the Company's ability to find suitable acquisition
properties at favorable terms, financing, licensing, business conditions, risks
of downturns in economic condition generally, and satisfaction of closing
conditions such as those pertaining to licensure. These and other risks are
detailed in the Company's reports filed with the Securities and Exchange
Commission.
Contact Ralph A. Beattie, Chief Financial Officer, at 972/770-5600 for more
information.
(###)