Sunrise To Acquire Marriott Senior Living Services


Monday, December 30, 2002 8:08 am EST



Public Company Information:

"We have a healthy respect for the challenge of integrating these two large, industry leading companies"

Sunrise Assisted Living, Inc. ("Sunrise") (NYSE: SRZ) announced it has signed a definitive purchase agreement with Marriott International, Inc. ("Marriott") (NYSE: MAR) to acquire all of the outstanding stock of Marriott's wholly owned subsidiary, Marriott Senior Living Services, Inc., which owns and operates senior independent full-service and assisted living communities. Prior to the closing of Sunrise's purchase of Marriott Senior Living, CNL Retirement Properties, Inc. ("CNL") will acquire nine Marriott-owned senior living properties. (On December 20, 2002, CNL acquired 12 senior living properties from Marriott Senior Living Services.)

In acquiring Marriott Senior Living, Sunrise will assume management of 126 operating properties, including the properties acquired by CNL, with a resident capacity of 23,157, which is expected to consist of 120 management contracts and six operating leases. Sunrise will also acquire 12 land parcels as well as certain other assets of Marriott Senior Living. At closing, Marriott Senior Living's approximately 15,000 employees will become Sunrise employees.

Sunrise will pay approximately $89 million in cash, subject to various adjustments set forth in the purchase agreement, to acquire all of the outstanding stock of Marriott Senior Living. Sunrise will also assume approximately $38 million of working capital liabilities and other funding obligations as well as approximately $23 million of life care endowment obligations, the majority of which will be repaid with proceeds from the issuance of new endowment obligations as new residents enter the communities. In addition, Sunrise will guaranty lease payments which are now guaranteed by Marriott International. These leased properties currently have operating cash flow in excess of 1.5x rent payments.

The stock purchase is expected to close late in the first quarter of 2003, subject to receipt of required regulatory approvals and other closing conditions. Sunrise will use cash on hand, including proceeds from its recently completed sale/long-term manage back transactions, and capacity under its various credit facilities to acquire Marriott Senior Living. Banc of America Securities LLC acted as exclusive financial advisor to Sunrise in regards to this transaction.

"Sunrise Assisted Living and Marriott Senior Living Services hold in common many shared values and a passion for service to seniors. Our new combined organization will remain committed to a resident-centered approach to service excellence across the entire spectrum of senior care -- from independent and assisted living through Alzheimer's and skilled nursing care," said Paul Klaassen, chairman and CEO of Sunrise Assisted Living.

To reflect the substantial expansion of its senior living business and the broad scope of services the new organization will offer, Sunrise also announced that the company intends to change its name to Sunrise Senior Living. In addition, Sunrise is pleased to announce that J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, will join Sunrise's Board of Directors upon closing of the transaction.

The Marriott Senior Living portfolio includes 126 properties located in 29 states with a resident capacity of 23,157. The majority of the properties are clustered in major metropolitan markets, which is consistent with Sunrise's operating strategy. (A map that shows Sunrise's and Marriott Senior Living's geographic locations is available on Sunrise Assisted Living's Web site at Approximately 50 percent (11,605 resident capacity) of the portfolio is assisted living, 34 percent (7,846 resident capacity) is independent living and 16 percent (3,706 resident capacity) is skilled nursing. At closing, the properties will be owned by eight major owner groups with the two largest owners comprising 66 percent of the portfolio. The two largest owners are CNL (38 properties) and Senior Housing Properties Trust ("SHPT") (NYSE: SNH) (45 properties).

Sunrise is aware of pending litigation between SHPT and Marriott. The definitive purchase agreement between Sunrise and Marriott provides protection for Sunrise regarding certain management contracts, including the contracts for the SHPT properties.

Sunrise believes the acquisition of Marriott Senior Living will accelerate Sunrise's transition to a management services company, resulting in a more predictable and stable revenue and earnings stream from long-term management contracts. The addition of the Marriott Senior Living portfolio will also provide geographic and brand diversification by substantially expanding Sunrise's independent living and skilled nursing services. By entering new metropolitan markets, expanding in existing markets and offering a wider array of services to a larger and growing customer base, Sunrise will be a leading senior living provider in the top 30 markets in the United States.

Sunrise believes the two organizations share many similarities that will foster a successful integration upon closing the transaction. These similarities include experienced, strong management and operational teams, communities clustered in top major metropolitan markets, a caring service oriented team member culture and a commitment to excellence -- specifically with regard to care and service to seniors. Sunrise also believes the two organizations possess complementary strengths that will make the combined company a more complete and well-rounded senior living provider.

"We have a healthy respect for the challenge of integrating these two large, industry leading companies," said Sunrise President Thomas Newell. "We have budgeted approximately $26 million in the next two years for information technology and other capital expenses and transition expenses to facilitate the integration and transition. We will be patient and careful through this process to ensure the transition is as smooth as possible and especially to eliminate any disruption to residents and their families. We are optimistic our integration plan will be successful and will benefit our residents, family members, team members and shareholders."

Sunrise estimates that the transaction will be accretive on a cash basis in 2003 and 2004. Sunrise anticipates non-recurring transition expenses (which are expensed as incurred) of approximately $11 million or $0.26 per share in 2003. As a result of the transition expenses, the transaction is expected to be dilutive to 2003 GAAP (generally accepted accounting principles) earnings by approximately $0.10 per share. In order to further accelerate Sunrise's management services transformation, Sunrise expects to expand its sale/long-term manage back program in 2003. As a result, Sunrise is maintaining its 2003 EPS guidance of $2.57 per share to $2.65 per share. Given the non-recurring nature of the 2003 transition expenses and contractual revenue increases built into the management contracts, Sunrise expects the transaction to be GAAP accretive in 2004. Additional guidance will be provided upon closing of the transaction.

Sunrise will host a conference call on Monday December 30, 2002, at 9:00 a.m. EST when Paul Klaassen, chairman and chief executive officer; David Faeder, vice chairman; Thomas Newell, president; Chris Slavin, president Sunrise Properties; Tiffany Tomasso, president Sunrise Management Services, and Larry Hulse, chief financial officer, will discuss the announced transaction. The call-in number is (703) 871-3096 or (888) 747-3526 (no password required). Those interested may also go to the Company's Web site at and click on the broadcast icon to listen to the call. Those unable to participate in the live call may hear a rebroadcast by dialing (703) 925-2533 (pass code: 6367823). The call will be available from 12:00 p.m. EST, December 30 through 11:59 p.m. EST, January 6. A recording of the call will be available on Sunrise's Web site through January 13 (click on the broadcast icon). Finally, Sunrise Chairman and CEO, Paul Klaassen and President Tom Newell will host a separate conference call for members of the media on December 30, 2002, at 11:30 a.m. EST. Members of the media may participate by calling 703-871-3085 or 888-747-3510 (no password required).

Sunrise Assisted Living is one of the nation's oldest and largest providers of senior living services. The McLean, Va.-based Company, which employs more than 13,000 people, has over 220 senior living communities either open or under construction in the United States, U.K. and Canada with a combined resident capacity in excess of 17,000. Sunrise communities offer a full range of personalized senior living services, from help with activities such as eating, bathing, dressing and medication management, to a specially designed program for residents with Alzheimer's disease and other forms of memory impairment. Sunrise's senior living services are delivered by staff trained to encourage the independence, preserve the dignity, enable freedom of choice and protect the privacy of residents.

CNL Retirement Properties, Inc., a real estate investment trust, is an affiliate of CNL Financial Group, Inc., and specializes in the acquisition of premium independent and assisted living communities and continuing care retirement communities. Headquartered in Orlando, Florida, CNL Financial Group, Inc. is one of the nation's largest privately held real estate investment and finance companies. CNL Financial Group, Inc., and the entities it has formed or acquired have more than $5.3 billion in assets, representing more than 2,850 properties in 49 states. The company and those entities focus on properties in the retirement, hospitality, corporate facility, community development, retail and restaurant sectors.

Marriott International, Inc. (NYSE: MAR), a leading worldwide hospitality company celebrating its 75th Anniversary in 2002, has over 2,600 operating units in the United States and 64 other countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, Renaissance, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn, SpringHill Suites and Ramada International brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club International, Horizons, The Ritz-Carlton Club and Marriott Grand Residence Club brands; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. The company is headquartered in Washington, D.C., and has approximately 145,000 employees. In fiscal year 2001, Marriott International reported system wide sales of $20 billion. For more information or reservations, please visit the web site at .

Estimates of future earnings are by definition, and certain other matters discussed in this press release may be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Sunrise believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurances that its expectations will be realized. Sunrise's actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, development and construction risks, acquisition risks, licensing risks, business conditions, competition, changes in interest rates, the Company's ability to execute on its sale/long-term manage back program, market factors that could affect the value of the Company's properties, the risks of downturns in economic conditions generally, satisfaction of closing conditions and availability of financing for development and acquisitions. These and other risks are detailed in the Company's reports filed with the Securities and Exchange Commission. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.


Sunrise Assisted Living Supplemental Information

I. Resident Capacity
Property Type   Sunrise*   Marriott Senior   Combined  
Assisted Living 15,309 11,605 26,914
Independent Living 1,016 7,846 8,862
Skilled Nursing 66 3,706 3,772
Total 16,391 23,157 39,548
Property Type Sunrise* Marriott Senior Combined
Assisted Living 93.4% 50.1% 68.1%
Independent Living 6.2% 33.9% 22.4%
Skilled Nursing 0.4% 16.0% 9.5%
Total 100.0% 100.0% 100.0%
Property Type Sunrise* Marriott Senior Combined %
Managed 2,322 20,625 26,947 58.0%
Owned*** 13,024 0 13,024 32.9%
Leased 1,045 2,532 3,577 9.0%
Total 16,391 23,157 39,548 100.0%
* Sunrise numbers as of 9/30/02
** Marriott Senior Living numbers based on proposed transaction
*** Includes consolidated and joint venture homes
II. Revenues Under Management (millions)
Company   2003E
Sunrise $656

Marriott Senior Living

Total $1,502
III. Revenue Mix*
Type   Sunrise   Marriott Senior   Combined
Private Pay 99.9% 89.5% 93.4%
Medicare 0.1% 8.0% 5.1%
Medicaid 0.0% 2.4% 1.5%
Total 100.0% 100.0% 100.0%
* Based on 2001 revenues
IV. Marriott Senior Living Operating Statistics
Type   Resident Capacity   ADR*   Occupancy*
Brighton Gardens 9,012 $123.73 76.6%
Independent/CCRCs 13,401 $113.03 91.7%
Maple Ridge 744 $101.65 74.0%
Total 23,157 $116.83 85.3%
* Based on 2001 results
V. Top Five States

Ranked by Properties (Sunrise and Marriott Senior Living Combined)*

Rank State Properties
1 California 37
2 Virginia 27
3 Ohio 24
4 New Jersey 23
5 Illinois 19
Total 130

Ranked by Resident Capacity (Sunrise and Marriott Senior Living Combined)*

Rank State Properties
1 California 4,689
2 Florida 3,915
3 Virginia 3,139
4 New Jersey 2,550
5 Illinois 2,224
Total 16,517

 *  Sunrise numbers as of 9/30/02, Marriott Senior Living numbers based on proposed transaction

VI. Marriott Senior Living Financial Statistics
Type   2003E*

Marriott Senior Living Revenues Under Management (managed) (millions)

$ 749

Marriott Senior Living Revenues Under Management (leased) (millions)

$ 97
Total (millions) $ 846
Average revenue per property (millions) $ 6.7
Average management contract length (years) 19
Management fee % 5.9%
Leased properties operating margin 26.5%
Rent expense (millions) $ 19
G&A as a percentage of revenues under management 3.8%
Capitalized value (millions) $ 85
Blended amortization period (years) 14
Debt @ 6.0% (millions) $ 115
Transition expenses (millions) $ 11
* Annual estimates
VII. Top Five Senior Housing Operators*
Rank   Name   Properties




Sunrise/Marriott Senior Living

332 39,548

Colson & Colson/Holiday Retirement Corp.

256 30,376
3 Life Care Services, LLC 107 24,100

Professional Community Management

8 21,963
5 Alterra Healthcare Corp. 406 18,995
Total 1,109 134,982

Estimated Share of National Seniors Housing Market



 *  As of July 1, 2002, according to the American Senior Housing Association 2002 Top 50 Managers, adjusted for the proposed transaction


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Sunrise Assisted Living
Charles A. Post, Senior Vice President, Corporate Strategy and Capital Markets
Sarah Evers, vice president, External Communications

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