HCP (NYSE:HCP) announced that the management agreements on 15 communities operated by Sunrise Senior Living (NYSE:SRZ), Inc. or its subsidiaries (“Sunrise”) have been terminated effective October 1, 2009, for Sunrise’s failure to achieve certain performance thresholds. HCP expects to transition these facilities to new operators during the second half of 2009, reducing the Sunrise-managed properties in its portfolio to 75 communities from the original 101 communities HCP acquired in the 2006 CNL Retirement Properties, Inc. transaction.
HCP intends to enter into new arrangements for the 15 communities that are expected to improve the operating margins of the communities in a manner similar to HCP’s successful transition of 11 former Sunrise communities to a new operator in December 2008. The management agreements for those 11 communities were also terminated for Sunrise’s failure to achieve certain performance thresholds.
In a statement released by Sunrise, Mark Ordan, Sunrise’s Chief Executive Officer stated, “While we regret the loss of these communities, it was not unexpected. Sunrise looks forward to continuing to manage 75 communities for HCP through its long-term management contracts.”
“This transaction highlights the most recent example of HCP’s active approach to asset management as we continue to find ways in this challenging environment to unlock value in our portfolio. Discussions with new senior housing operators for the 15 communities are at an advanced stage and we look forward to closing these transactions in the near future,” said HCP Chairman and Chief Executive Officer, Jay Flaherty.