- The Washington Times - Monday, April 10, 2006

Sunrise Senior Living Inc., the McLean-based senior-residence company, is continuing its push for expansion after netting record fourth-quarter profits.

With 415 communities in the United States and abroad, the company had 50 communities under construction at the end of last year, including locations in the United Kingdom and Germany. This year, Sunrise plans to open 24 developments.

The company credited several nonrecurring factors for its fourth-quarter net income, which more than quadrupled to $50.3 million, or $1.01 per diluted share, from $12.7 million, or 28 cents, a year ago. Chief among them, Five Star Quality Care Inc. paid buyout fees for 12 canceled management contracts with the company.

In 2005, Sunrise profits surged 57 percent to $79.7 million, or $1.67, from $50.7 million, or $1.12, in 2004.

Frank Morgan, a financial analyst for Jefferies & Co. in Nashville, Tenn., praised what he said was “a very innovative company” for its diversified business strategy.

“The thing about the Sunrise strategy is it has several different components to it: improving performance of their managed portfolio as well as their own consolidated assets,” Mr. Morgan said. “They continue to develop new assets in the U.S. as well as in Europe and in the UK. … They’ll get good growth from really several different factors.”

The company, which has ownership interests in fewer than half of its communities, provides professional management services to other communities and is pursuing a joint venture, known as Sunrise at Home, that offers at-home assisted-living services.

Last week, Sunrise announced that Five Star plans to terminate an additional 10 management contracts, which it says will add more than $90 million in the third quarter.

“Certainly they have multiple uses for that cash,” Mr. Morgan said of the repeated contract buyouts. “That can certainly offset the impact of losing the actual management fees.”

However, Mr. Morgan, whose company does not have a banking relationship with Sunrise, rates the stock at hold because of what he describes as a temporarily weak health care services industry, which he credits in part to rising interest rates.

Shares of Sunrise closed yesterday at $36.56, compared with $38.66 a week ago. In the past year, shares have fluctuated between $23.15 and $39.68.

Jerry Doctrow, an analyst for Stifel, Nicolaus & Co. Inc. in Baltimore, rates the stock as a buy.

“Sunrise is the only publicly traded private-pay senior housing company with such a large development pipeline and the only one with an international development pipeline,” Mr. Doctrow said, noting that the company’s rate of construction is double that of 2004 levels.

Stifel, Nicolaus has a business relationship with Sunrise.

Sunrise, which has a market cap of $1.8 billion and ranks third out of 16 publicly traded long-term care companies, is calling for first-quarter earnings per share between 28 cents and 34 cents.

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