As this tumultuous year comes to a close, we’re digesting some more big industry news: the departure of Sunrise Senior Living CEO Chris Winkle.
Sunrise quietly announced his exit in a press release posted to the company website, and did not offer information about his reasons for leaving or whether his exit indicates any change in direction for the company. This is not surprising — in my experience, Sunrise has always played it close to the vest, being very selective about when to speak with the press and how much to disclose publicly.
That’s why I was surprised at how forthcoming Chris was when I interviewed him for our Leadership Series back in 2018. I looked over that interview in light of his exit. Some points stand out to me, including some comments that didn’t make it into the published version, because they highlight ways in which Sunrise is a misunderstood and quietly innovative company.
Misperceptions and multiple brands
In one example of his frankness, Chris shared this tidbit: “We had a team meeting and the question we posed was, ‘If you had to do it all over again, in every community that we now brand as Sunrise, would you keep [the brand] Sunrise?’ I had not one person say yes.”
I think this anecdote highlights a misperception that some people have about Sunrise, which is that the company has a largely uniform portfolio because it has stuck to its well-known — and groundbreaking — “mansion” model, which dates back to the first community, opened in 1987.
This is how analyst Dan Bernstein, now with Capital One, put it: “Unlike many other senior housing operators their size, it was not a cobbled up roll-up of assets. They designed and built a very homogenous portfolio in urban, high barrier-to-entry locations. In our view, they may still be the only true, homogenous brand in the industry on a national basis.”
I’ve heard other people say similar things. But when Bernstein said that — in 2015 — Sunrise had already been moving in new directions, including through the acquisition of the Gracewell portfolio in the United Kingdom. In fact, Sunrise evolved over the years in ways that even industry insiders did not perceive, including shifting toward almost a pure-play management model.
“I’ve even gone to industry conferences and said, ‘Hey, out of 326 communities, how many do you think we own, lease and manage?’ And I’ll [hear], like, 50%, 25%, 25%. And it’s basically we have one operating lease for three communities and the rest is managed,” Chris told me.
In that way, he likened Sunrise to a hotel operator like Marriott. And he believes that brand segmentation — common in the hotel industry, where Marriott manages about 30 brands — is the future for senior living and for Sunrise. He led the way toward that, including through the creation of the Sunrise Villa brand for a group of seven communities acquired in 2017.
Even the “mansion” prototype has changed over the years — he told me, perhaps a bit jokingly, they were on version 16.0 — and so there are brand distinctions to potentially be made even within that core portfolio. He asserted that the senior living industry would need to move toward multiple brands to operate at scale.
“If I have four or five different product offerings that I’ve branded all Sunrise, that’s going to be confusing in the marketplace,” he said. “And so then I might not be successful in that market; it doesn’t mean I was too big, it might have been a branding mistake.”
Another big play that Chris helped lead was Sunrise’s launch of a Medicare Advantage plan. His reasons for doing so will be familiar to anyone who has been following this trend; namely, being able to better coordinate care for residents while realizing financial upside (and maintaining operational control) that otherwise might be ceded to large insurance companies as more residents join their managed care plans. But, he also linked Medicare Advantage to the multi-brand strategy: “If you think of having four or five brands in a market, this allows us then to have that commonality to link through all those brands as well.”
All of this is to say that Sunrise is a more innovative and eclectic company than some may realize. Maybe that’s because Sunrise doesn’t often trumpet what it is doing publicly.
That might be a good strategy. Perhaps Chris deserves credit for taking the organization in new directions largely under the radar, which has the effect of safeguarding its strong, long-standing brand identity while avoiding negative press as some experiments and challenging plays, like Medicare Advantage, inevitably falter or go through growing pains. But I fundamentally believe that greater transparency benefits the industry, and I would love to be able to tell more of Sunrise’s story going forward.
Naming a successor
The timing of Chris’ departure does seem tricky, given that Covid-19 is still raging and logistics for vaccine distribution likely will be complicated.
Also, investors might raise an eyebrow at the fact that Sunrise is changing CEOs at the same time that a new chief executive has just taken the reins at Welltower (NYSE: WELL), which is a 34% owner of Sunrise and in 2019 derived 35% of its senior housing operating revenue from the 165 Sunrise communities in its portfolio.
REITs and other ownership groups have been supportive of operators in a variety of ways during Covid-19, but I have heard rumblings of a widening gulf between owner expectations and priorities and what operators believe they can deliver and need to focus on.
This is concerning, and reinforces that alignment between the new CEOs at Sunrise and Welltower will be important to the future of both organizations, which have each been focused on health care-focused innovations; Sunrise’s Medicare Advantage strategy under Winkle, and former Welltower CEO Tom DeRosa’s big moves to integrate health systems and senior living. Driving the success of these plays is more important than ever, given that the industry needs to increase its appeal for a new generation of consumers while also strengthening its value proposition in light of Covid-19.
Considering these challenges, now does not seem like a good time for a leadership void, and Chris’ replacement has not been named. Tom Wellner, the CEO of Revera — Sunrise’s majority owner — did tell me in an email that they’re making “good progress” on choosing Chris’ successor and “hope to announce in the very near term.”
Of course, the most important consideration must be getting the right person for the job. But personally, I see this as another chance for the industry to move toward greater diversity in leadership. As recently as 2016, 9 out of the 10 largest providers were led by men. But that has shifted. Now, if a woman takes the top spot at Sunrise, 5 of the 10 largest providers will be led by a woman. That would be a milestone to celebrate, but I see any choice that makes the top industry leadership more diverse as a step in the right direction.