Sunrise Senior Living, Inc. (NYSE:SRZ.DL)

CAPS Rating: No stars

A provider of senior living services, with operations in the United States, Canada, United Kingdom & Germany. Offers a full range of personalized senior living services from independent living, to assisted living, to care for individuals with Alzheimer's.

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Player Avatar TMF10KChallenge (< 20) Submitted: 4/23/2010 12:23:35 PM : Underperform Start Price: $5.21 SRZ.DL Score: -157.67

The 10-K Challenge: Senior Living (SRZ)
Name: Connor Haley
Date: 3/29/2010
Company: Senior Living (SRZ)
Market Cap: 295.49 M
Price: $5.30

A brief overview of the company:

We are a provider of senior living services in the United States, Canada, the United Kingdom and Germany. Founded in 1981 and incorporated in Delaware in 1994, Sunrise began with a simple but innovative vision — to create an alternative senior living option that would emphasize quality of life and quality of care. We offer a full range of personalized senior living services, including independent living, assisted living, care for individuals with Alzheimer’s and other forms of memory loss, nursing and rehabilitative care. In the past, we also developed senior living communities for ourselves, for ventures in which we retained an ownership interest and for third parties. Due to current economic conditions, we have suspended all new development.

At December 31, 2009, we operated 384 communities, including 335 communities in the United States, 15 communities in Canada, 27 communities in the United Kingdom and seven communities in Germany, with a total unit capacity of approximately 40,400. Of the 384 communities that we operated at December 31, 2009, 20 were wholly owned, 27 were under operating leases, one was consolidated as a variable interest entity, 201 were owned in unconsolidated ventures and 135 were owned by third parties. During 2009, we opened 23 new communities, with a combined unit capacity of approximately 2,100.

What is the competitive landscape?

The Senior Living Industry

The senior living industry encompasses a broad spectrum of senior living service and care options, which include independent living, assisted living and skilled nursing care.

      
   •    Independent living is designed to meet the needs of seniors who choose to live in an environment surrounded by their peers where they receive services such as housekeeping, meals and activities, but are not reliant on assistance with activities of daily living (for example, bathing, eating and dressing), although some residents may contract out for those services.
      
   •    Assisted living meets the needs of seniors who seek housing with supportive care and services including assistance with activities of daily living, Alzheimer’s care and other services (for example, housekeeping, meals and activities).
      
   •    Skilled nursing meets the needs of seniors whose care needs require 24-hour skilled nursing services or who are receiving rehabilitative services following an adverse event (for example, a broken hip or stroke).

The senior living industry is highly fragmented and characterized predominantly by numerous local and regional senior living operators. Senior living providers may operate freestanding independent living, assisted living or skilled nursing residences, or communities that feature a combination of senior living options such as continuing care retirement communities (“CCRCs”), which typically consist of large independent living campuses with assisted living and skilled nursing sections. The level of care and services offered by providers varies along with the size of communities, number of residents served and design of communities (for example, purpose-built communities or refurbished structures).

Is this a good long-term business?

Others in the industry, maybe, but definitely not this company. They have defaulted on their debt and have significant chunks due in 2010 and 2011. In addition, they have fired several key personnel, have suspended all development, and have been hurt by the economic crisis. It could potentially be a turnaround story, but this is a high-risk investment at this point. It seems to me like a well-run skilled nursing (most specialized) chain of nursing homes would be a much better business model, so I will have to explore for one.

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