Sunrise Tumbles to a Net Loss of $8.7 Million, Revenue Down 11%

Sunrise Senior Living, Inc. (NYSE:SRZ) reported a net loss of $8.7 million, or $0.15 per fully diluted share, in the third quarter ended Sept. 30, 2011, a dramatic drop from last year’s net income of $18.7 million, or $0.33 per fully diluted share. These results include $40 million in buyout fees relating to the buyout of 27 management contracts.

Total operating revenues decreased nearly 11% to $340 million, while operating expenses rose 3.7% to $342.3 million, for a $2.3 million net loss from operations.

Stabilized property net operating income (NOI) increased 4.3% to $133.7 million in the third quarter, up from $128.2 million in the same period of 2010. Overall, NOI including lease up properties increased 9.2% from the third quarter of 2010 to the third quarter of 2011.

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Occupancy in stabilized properties for the quarter was up 10 basis points to 87.9%.

“We are pleased to report very solid third quarter performance where occupancy, rates, and NOI increased while our recurring overhead run rate was significantly reduced,” said Mark Ordan, Sunrise’s CEO, in a statement.

During the third quarter, on Aug. 2, Sunrise and its venture partner in a portfolio of six communities transferred ownership of the portfolio to a new joint venture, owned 70% by a wholly-owned subsidiary of CNL Lifestyle Properties, Inc., and 30% by Sunrise. As part of the new venture agreement, from the start of year four to the end of year six, Sunrise will have a buyout option to purchase CNL Lifestyle Properties’ 70% interest in the venture for a purchasing price that provides a 16% internal rate of return to them. Sunrise’s contribution to the new venture for the transaction was $8.1 million, with CNL Lifestyle Properties contributing $19 million.

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Since the third quarter ended, Sunrise and its venture partner in a portfolio of seven communities transferred ownership of the portfolio to a new joint venture owned approximately 68% by CNL Income Partners, LP, a subsidiary of CNL Lifestyle Properties, and approximately 32% by Sunrise. Sunrise transferred its interest in the previous joint venture valued at approximately $16.7 million, with CNL Lifestyle Properties contributing approximately $35.4 million; the purchase was also funded by $120 million of new debt financing in the venture. Similar to its August joint venture, Sunrise has the option to buy out CNL Lifestyle Properties’ interest from the start of year for to the end of year six for a purchase price that provides a 13% rate of return to them.

View Sunrise’s third quarter earnings report here.

Written by Alyssa Gerace

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