Sunrise Senior Living Shrinks, Again

June 19, 2009

June 19, 2009
Although not a surprise, HCP Inc. announced late yesterday that it had terminated the management contracts, effective October 1, 2009, on the 15-property "EdenCare" portfolio that has been managed by Sunrise Senior Living. The reason for the termination was Sunrise's failure to achieve certain performance thresholds, and HCP is not required to pay any termination fees. HCP will be transitioning the management of these 15 facilities to other operators in the second half of the year. We have estimated that Sunrise will lose approximately $3 million of annual management fee revenue.

HCP has now reduced the number of Sunrise-managed properties to 75 from 101 in 2006 when HCP purchased CNL Retirement Properties. The management of the other 11 properties was also terminated because of failure to achieve certain performance thresholds. HCP believes that under new management the operating margins of these properties can be increased, which has apparently been the case with the first 11 that were transferred last December.

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