Sunrise Takes Assisted Living to Europe

Sunrise Senior Living Inc., the McLean operator of senior living communities, has a growth strategy that crosses the Atlantic Ocean, with seven complexes already operating in Britain and Germany, and 10 more under construction.

The company's European invasion might surprise those who think of senior living as a distinctly American industry, where younger generations go out on their own and leave their elders to the care of others, while families in the old country care for their elderly relatives in the family home.

Sunrise chairman and chief executive Paul J. Klaassen knew that wasn't always true -- his grandparents lived in Holland in senior communities he used as models for his business. Now he expects 30 percent of the company's growth to come from outside the United States. As of June 30, the company operated 402 communities throughout the United States, Canada, Britain and Germany, housing approximately 50,000 residents.

Yesterday the company announced its second-quarter earnings, which executives said were down because of property sales a year ago. Sunrise reported a profit of $10.3 million (46 cents a share) for the three months ended June 30, down from $15.1 million (66 cents) in the corresponding period of 2004. Operating revenue was $412.9 million, up from $354 million.

Aside from its European ambitions, Sunrise has been shifting its business plan from property ownership to management of senior facilities, which includes independent living apartment and condominium complexes, assisted living communities in which seniors receive support and medical care, as well as facilities focused on hospice services and caring for patients with Alzheimer's disease. The company follows a model already established by the hotel industry, in which prominent hoteliers have sold their real estate portfolios yet continued to operate and manage the facilities. "Since the beginning of 2003, we have increased our revenue under management from approximately $600 million to $2 billion," Klaassen said yesterday morning in a conference call.

"They had a really good second quarter," said Frank G. Morgan, an analyst with Jefferies Group Inc.

Sunrise had 38 communities under construction in the second quarter of this year, compared with 21 at the same time last year.

Sunrise also announced a change in its leadership team yesterday. Chief Investment Officer Bradley B. Rush will add chief financial officer to his management portfolio. Larry Hulse, former chief financial officer, will be in charge of risk management and insurance programs.

Sunrise stock closed at $60.39, up $5.68, or 10.4 percent.