Sunrise Senior Living(SRZ)

Ross PevitzDave Wetherell

RCMP PresentationApril 5, 2007

Position

Purchased on May 21, 2006 600 shares at $37.00 Original Value of $22,200

Current Stock Price at $40.65 Current Value of $24,390 $2,190 unrealized gain (9.86%)

7.4% of Portfolio

Sunrise Senior Living Mission: “Champion the quality of life for all seniors”

Full range of personalized senior living services

Independent Living

Assisted Living

Alzheimer’s Care

Skilled Nursing

Meals, Transportation, Hospice, Emergency Response, Monitoring, Rehab, Daily Activities, etc….

Company History 1981- Founded by Paul and Terry Klaassen 1996- Initial Public Stock Offering (IPO) 1999- Expand International (UK), launch Frognal 2000- Canada 2004- Established Sunrise REIT 2005- Germany 2007- Pending Sale of Sunrise REIT (Ventas vs HCP)

Acquired companies, Participated in JV’s

Company Background Headquartered in McLean, Va. Largest global senior living provider 440 communities open, 50 more under construction

5 in UK, 2 in Germany, 16 under construction in EU 176 have ownership interest

Over 52,000 seniors $2.3 billion in revenues under management 40,000 team members

Ownership Style Consolidated Communities

Wholly Owned

Joint Venture Communities Management Fees (5-8%) Equity (20-25%)

Managed Communities Management Fees (5-8%) Equity (0%) Over 60% of Portfolio

Leased Acquired and Leased to 3rd Party

176 communities have equity interest including consolidated and JV

Economic Factors

InflationInterest Rate

RiskSupply/Demand

of LTC

Variable Debt,Notes Receivable

Bonds

Revenues fromFee’s & Services

Expected Costs

Credit Risk Competition

Economic Forecast

Mixed Reviews Flat GDP Growth Flat Interest Rates Steady Inflation (2.5%)

Long-Term Care Industry

16.4 Billion Industry Existing supply is old, institutional, poor quality

Nursing homes, Hospitals

Source of Pay Medicare/Medicaid pays for 60% of LT care expenses 36% out of pocket, 4% Private LTCi (↑21% annually) Assisted Living market, 96% revenues are private funds

Regulation Training of Nurses, Licensing, Safety Precautions Benefit Big Firms

Long-Term Care Supply

Short of demand Highly fragmented market High barriers to entry

Capital and Time Management expertise Economies of scale Regulations

Escalating costs of care Healthcare costs growing 2× CPI, (5% annually)

Long-Term Care Demand

Attractive Demographics Baby Boomers Retiring Over 15 million 80+

population by 2020 Better Health Care 1/3 of 80+ require LTC Avg. Resident 80-85 yrs old

Seniors Increase Income ↑ Proportion of Women

Trend of Market

Consolidation Benefit big firms

Shift from Nursing Homes (NH) to ALF ALF charge 66% of nursing homes More autonomous lifestyle

Beginning separation between ALF and NH Improve ALF credit

Competitive Advantage

Market Leadership Strong Brand Name Operational Excellence and Innovation

39K community, 1K headquartered team members Quality Assurance, Sunrise University

Principles of Service and Environment Award winning architecture design Fresh cut flowers, “Yes” policy

Competitive Advantage

Strong Financial Position Sustainable Growth Strategic Partners Management Services Model

1 of the only in the industry Management Contracts Less Debt Reduce Risk Profile Stable Revenue Stream

Business Relationships JPMorgan Fleming MetLife Pramerica Prudential Public Pension Funds Sunrise Living REIT Investcorp Healthcare Properties GE Healthcare Financial Carlyle Group Arcapita HSH Nordbank AEW / CaIPERS

Management Services Model Enter into Management Contracts Professional fees from Development

Market feasibility analysis Site selection, zoning approvals

Management fees, Post-opening Training, HR, IT Resident Care, Dining, Facilities Service Sales, Accounting

Incentive Fees Equity of Earnings Recapitalization Potential

Growth Drivers

Metropolitan Focus Deep Markets Regional Infrastructure

Same Community Growth Occupancy (↑ 3.5%) Ancillary Services

Return on Invested Capital Interest Income Repurchase Shares

Communities with ownership interest

Growth Drivers New Construction

2,000 to 2,500 units per year (8-10 communities)

Joint Venture Acquisition and Development September ’06- Trinity Hospice, $73 million September ’06- 6 Aston Gardens communities, $460 million

Acquired Time Properties Property Type

The Fountains July, ’05 17, Joint Venture Senior Living

Greystone May, ‘05 14, 17 Construction,

Management

CCRC; not-for-profit

Eden Care November, ‘03 22, Management Senior Living

Marriot Senior Living

March, ‘03 129, Management and Leased

Senior Living

Growth Drivers New Management Contracts!!

Consolidated, JV, and 3rd party managed community revenues

Ratios Transferred Property to Sunrise REIT in ’04 Reduction in Working Capital Huge Reduction in Debt levels

99 00 01 02 03 04 05Current Ratio 2.34 0.80 1.49 2.22 1.43 1.31 1.22Quick Ratio 1.74 0.64 1.91 5.94 6.43 4.67 4.05Operating Margin 20.14% 23.35% 25.16% 22.09% 21.66% 14.51% 17.94%NWC/TA 0.11 (0.01) 0.05 0.18 0.18 0.24 0.24Interest Exp/TA 0.03 0.04 0.03 0.03 0.03 0.01 0.00Interest Coverage 1.58 1.61 2.80 3.57 4.30 9.94 30.24Rev/TA 0.22 0.28 0.31 0.39 0.42 0.41 0.44EBITDA/TA 0.23 0.30 0.36 0.45 0.50 0.44 0.45TA/E 3.29 3.20 2.87 2.40 2.06 2.11 2.10

will continue this trend going forward

Trends

Development Costs

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

900,000,000

2000 2001 2002 2003 2004 2005

Property & equipment, net:

Shift from Owned to Managed Communities

Trends

Strong & Increasing ROE

Operating Margin reflects shift to Management Model

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

2005 2006 2007 2008 2009 2010 2011

Oper. PM

TAT

ROE

Year Oper. PM TATInterest

Exp RateEquity Mult.

Tax Retention ROE

1999 20.14% 0.231 0.030 3.29 0.67 3.76%2000 23.35% 0.304 0.044 3.20 0.67 5.78%2001 25.16% 0.364 0.033 2.87 0.67 11.30%2002 22.09% 0.453 0.028 2.40 0.67 11.57%2003 21.66% 0.501 0.025 2.06 0.67 11.49%2004 14.51% 0.438 0.006 2.11 0.67 8.09%2005 17.94% 0.447 0.003 2.10 0.67 10.89%2006 22.54% 0.469 0.002 1.92 0.67 13.30%2007 27.93% 0.478 0.002 1.88 0.67 13.31%2008 30.55% 0.461 0.002 1.84 0.67 15.64%2009 31.81% 0.439 0.001 1.81 0.67 16.11%2010 33.28% 0.426 0.001 1.78 0.67 16.05%2011 34.68% 0.424 0.001 1.78 0.67 16.67%

Extended DuPont Equation

TrendsRevenue Trends

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

2003 2004 2005 2006

Management & professional services - operating communities

Management & professional services - preoperating communities

Resident fees

EBITDA

Reflects Shift to Management Model

Away from Wholly Owned

Flattening of Resident Fees

NPVFCF $2,274,086,321Shares Outstanding 50,385,000

Price/Share $45.13+ 10% $49.65- 10% $40.62

DCF & WACC

Terminal Growth Rate 4.00% Total Debt 200,828,000 200,828,000 200,828,000 Market Cap 1,990,000,000 1,990,000,000 1,990,000,000 Firm Value 2,190,828,000 2,190,828,000 2,190,828,000 Debt/Firm Value 9.17% 9.17% 9.17% Equity/Firm Value 90.83% 90.83% 90.83% Cost of Debt 6.40% 6.40% 6.40% Tax Rate 33.00% 33.00% 33.00% After-tax cost of debt 4.29% 4.29% 4.29% Cost of Equity: Risk Free rate 4.63% 4.63% 4.63% Beta 1.38 1.38 1.38 Average Annual Return, S&P 8.00% 10.40% 12.00% Market Risk Premium 3.37% 5.77% 7.37% Market Risk Premium*B 4.65% 7.96% 10.17% Cost of Equity 9.28% 12.59% 14.80% WACC 8.82% 11.83% 13.84% WACC in Percent 8.82% 11.83% 13.84%

NIDepr & AmortΔ NWCCapExFCF

2007 2008 2009 2010 2011 2012 TV113,053,765 163,032,848 191,849,263 207,006,707 225,621,231 244,671,436

42,998,766 42,783,772 42,569,853 42,357,004 42,145,219 41,934,49382,541,524 189,089,100 115,659,599 110,988,077 69,395,760 53,261,466(3,167,985) 433,796 (2,320,694) (4,170,398) (2,995,730) (2,342,441)76,678,992 16,293,724 121,080,211 142,546,031 201,366,420 235,686,903 3,009,535,947

Sensitivity Analysis Net Income to Operating Income and Operating Expenses

Two major inputs

Highly sensitive to both

604,252,900 625,000,000 650,000,000 675,000,000 700,000,000 725,000,000 750,000,000 775,000,000 800,000,000 825,000,000 850,000,000 875,000,000 900,000,000450,000,000 122,929,740 143,676,840 168,676,840 193,676,840 218,676,840 243,676,840 268,676,840 293,676,840 318,676,840 343,676,840 368,676,840 393,676,840 418,676,840492,573,655 80,356,085 101,103,185 126,103,185 151,103,185 176,103,185 201,103,185 226,103,185 251,103,185 276,103,185 301,103,185 326,103,185 351,103,185 376,103,185550,000,000 22,929,740 43,676,840 68,676,840 93,676,840 118,676,840 143,676,840 168,676,840 193,676,840 218,676,840 243,676,840 268,676,840 293,676,840 318,676,840600,000,000 (27,070,260) (6,323,160) 18,676,840 43,676,840 68,676,840 93,676,840 118,676,840 143,676,840 168,676,840 193,676,840 218,676,840 243,676,840 268,676,840650,000,000 (77,070,260) (56,323,160) (31,323,160) (6,323,160) 18,676,840 43,676,840 68,676,840 93,676,840 118,676,840 143,676,840 168,676,840 193,676,840 218,676,840700,000,000 (127,070,260) (106,323,160) (81,323,160) (56,323,160) (31,323,160) (6,323,160) 18,676,840 43,676,840 68,676,840 93,676,840 118,676,840 143,676,840 168,676,840750,000,000 (177,070,260) (156,323,160) (131,323,160) (106,323,160) (81,323,160) (56,323,160) (31,323,160) (6,323,160) 18,676,840 43,676,840 68,676,840 93,676,840 118,676,840800,000,000 (227,070,260) (206,323,160) (181,323,160) (156,323,160) (131,323,160) (106,323,160) (81,323,160) (56,323,160) (31,323,160) (6,323,160) 18,676,840 43,676,840 68,676,840850,000,000 (277,070,260) (256,323,160) (231,323,160) (206,323,160) (181,323,160) (156,323,160) (131,323,160) (106,323,160) (81,323,160) (56,323,160) (31,323,160) (6,323,160) 18,676,840900,000,000 (327,070,260) (306,323,160) (281,323,160) (256,323,160) (231,323,160) (206,323,160) (181,323,160) (156,323,160) (131,323,160) (106,323,160) (81,323,160) (56,323,160) (31,323,160)950,000,000 (377,070,260) (356,323,160) (331,323,160) (306,323,160) (281,323,160) (256,323,160) (231,323,160) (206,323,160) (181,323,160) (156,323,160) (131,323,160) (106,323,160) (81,323,160)

1,000,000,000 (427,070,260) (406,323,160) (381,323,160) (356,323,160) (331,323,160) (306,323,160) (281,323,160) (256,323,160) (231,323,160) (206,323,160) (181,323,160) (156,323,160) (131,323,160)1,050,000,000 (477,070,260) (456,323,160) (431,323,160) (406,323,160) (381,323,160) (356,323,160) (331,323,160) (306,323,160) (281,323,160) (256,323,160) (231,323,160) (206,323,160) (181,323,160)

EBITDA (Oper Inc)

OperEx

Share Price SensitivityCapEx minimal effect

WACC significant impact

8.00% 8.50% 9.00% 9.50% 10.00% 10.50% 11.00% 11.50% 12.00% 12.50% 13.00% 13.50% 14.00%5,000,000 $91.68 $81.04 $72.54 $65.59 $59.81 $54.92 $50.74 $47.11 $43.95 $41.16 $38.69 $36.48 $34.494,000,000 $91.70 $81.06 $72.56 $65.61 $59.83 $54.94 $50.76 $47.13 $43.97 $41.18 $38.71 $36.50 $34.513,000,000 $91.72 $81.08 $72.58 $65.63 $59.85 $54.96 $50.78 $47.15 $43.99 $41.20 $38.73 $36.52 $34.532,000,000 $91.74 $81.10 $72.60 $65.65 $59.87 $54.98 $50.80 $47.17 $44.01 $41.22 $38.75 $36.54 $34.551,000,000 $91.76 $81.12 $72.62 $65.67 $59.89 $55.00 $50.82 $47.19 $44.03 $41.24 $38.77 $36.56 $34.57

0 $91.78 $81.14 $72.64 $65.69 $59.91 $55.02 $50.84 $47.21 $44.05 $41.26 $38.79 $36.58 $34.59(1,000,000) $91.79 $81.16 $72.66 $65.71 $59.93 $55.04 $50.86 $47.23 $44.07 $41.28 $38.81 $36.60 $34.61(2,000,000) $91.81 $81.18 $72.68 $65.73 $59.95 $55.06 $50.87 $47.25 $44.09 $41.30 $38.83 $36.62 $34.63(4,000,000) $91.85 $81.22 $72.72 $65.77 $59.99 $55.10 $50.91 $47.29 $44.13 $41.34 $38.87 $36.66 $34.67(6,000,000) $91.89 $81.26 $72.76 $65.81 $60.03 $55.14 $50.95 $47.33 $44.17 $41.38 $38.91 $36.70 $34.71(8,000,000) $91.93 $81.30 $72.80 $65.85 $60.07 $55.18 $50.99 $47.37 $44.21 $41.42 $38.95 $36.74 $34.75

(10,000,000) $91.97 $81.34 $72.84 $65.89 $60.11 $55.22 $51.03 $47.41 $44.25 $41.46 $38.99 $36.78 $34.79(12,000,000) $92.01 $81.38 $72.88 $65.93 $60.15 $55.26 $51.07 $47.45 $44.29 $41.50 $39.03 $36.82 $34.83

CapEx

WACC

ComparablesRATIO COMPARISON (As of 03/29/2007)Valuation Ratios Price SRZ Average BKD HCR Industry Sector P/E Ratio (TTM) $40.95 $1.67 23.69 24.52 NA 24.99 22.32 26.25Price to Book (MRQ) $58.11 $12.56 2.72 4.6275 2.56 6.9 3.67 5.38

Growth Rates(%) SRZ BKD HCR Industry Sector Sales (TTM) vs TTM 1 Yr. Ago 25.79 NA 5.73 20.97 12.48

Financial Strength SRZ BKD HCR Industry Sector Current Ratio (MRQ) 1.22 0.53 1.18 1.72 2.49LT Debt to Equity (MRQ) 23.93 95.75 166.65 133.4 39.1Total Debt to Equity (MRQ) 32.05 96.93 173.36 140.1 47.8Interest Coverage (TTM) 30.24 -0.45 11.32 9.26 12.48

Profitability Ratios (%) SRZ BKD HCR Industry Sector Operating Margin (TTM) 5.85 -3.41 8.06 10.99 17.84Operating Margin - 5 Yr. Avg. 9.61 NA 7.9 12.28 17.5

Management Effectiveness (%) SRZ BKD HCR Industry Sector Return On Assets (TTM) 6.55 -3.34 7.16 4.79 6.96Return On Investment (TTM) 8.59 -3.73 9.07 5.72 9.78Return On Equity (TTM) 13.79 -9.03 25.18 13.64 14.96

Efficiency SRZ BKD HCR Industry Sector Receivable Turnover (TTM) 30.53 37.64 6.81 10.54 7.05Asset Turnover (TTM) 1.5 0.41 1.52 1.08 0.78

© 1983-2007 Reuters Research Inc. All Rights Reserved. Published by OneSource Information Services, Inc.

Shares Outstanding50,385,000

Outperform Competitors and Industry

Reflect DCF and current Market Evaluation

Lower margin due to inclusion of “reimbursable contracts/expenses”

• Netted line item with NO

effect on bottom line BUT

reduces perceived margin

Portfolio AnalysisAEE AEO CPRT FR JKHY JPM KMB MS MVSN SRCL SRZ WAG

SRZ 0.00118 0.00612 0.00448 0.00055 0.00551 (0.00047) (0.00048) 0.00128 0.00179 0.00094 0.01805 0.00083

AEE AEO CPRT FR JKHY JPM KMB MS MVSN SRCL SRZ WAGSRZ 0.188 0.221 0.209 0.075 0.318 (0.034) (0.057) 0.085 0.060 0.065 1.000 0.070

Correlation

Covariance Matrix

Portfolio Composition

AEE, 0.062072782

AEO, 0.178809236

CPRT, 0.08430163

FR, 0.138717268

JKHY, 0.029350358JPM, 0.136329797

KMB, 0.062961449

MS, 0.097436859

MVSN, 0.015454284

SRCL, 0.049881001

SRZ, 0.074246302

WAG, 0.070439034

Recommendation:

Strong Hold Fierce Demand Advantageous Supply Good Model and Growth Solid Financials Positive DCF Dominant Comparables

Marginal Benefit from Purchase Stock price at High, post-Sunrise REIT Sale

Citations Allan Coukell, Business is Booming for Assisted Living Industry, WBUR, (Feb. 15, 2007),

available at <http://www.wbur.org/news/2006/55876_20060215.asp> (last visited Apr. 1, 2007).

Assisted Living Rates Increase Slightly After Big Jump Last Year, Retirement Planning News, (Nov. 3, 2006), available at <http://www.seniorjournal.com/NEWS/Retirement/6-11-03-AssistedLiving.htm> (last visited Mar. 29, 2007).

Christine Bonney, ASSISTED LIVING RATES INCREASE SLIGHTLY, MetLife (Jan. 2007), available at <http://www.metlife.com/Applications/Corporate/WPS/CDA/PageGenerator/0,4132,P250%255ES883,00.html> (last visited Apr. 1, 2007).

Industry Performance and Statistics, National Investment Center, (2007), available at <http://www.nic.org/data/faq.asp> (last visited Mar. 28, 2007).

Karen Stevenson, Assisted Living Facilities, ElderWeb, (Dec., 2006), available at <http://www.elderweb.com/home/node/2699> (last visited Mar. 28, 2007).

Reuters Research Inc., Sunrise Senior Living – Competitors Report, OneSource Information Services, Inc., (Mar. 29, 2007), available at <http://businessbrowser.onesource.com/HomePage.asp> (last visited Mar. 29, 2007).

Sunrise Senior Living, Investor Relations, Investor Relations Home, (Mar. 25, 2007), available at <http://phx.corporate-ir.net/phoenix.zhtml?c=115860&p=irol-irhome> (last visited Mar. 28, 2007).